Rufous Fantails are migratory, arriving in most of coastal eastern and southern Australia in Sept-Oct to breed and spend the summer. In March they head north to their winter quarters, even as far as New Guinea and possibly some of the outlying islands. They have been seen crossing Torres Strait, no mean feat for such a little bird that appears to have relatively limited powers of flight.

When breeding they occur in pairs and inhabit humid places, dense creekside vegetation, moist fern gullies and rainforest mostly on or east of the dividing range and in the south, occasionally reaching far SE South Australia. They feed almost entirely in the air on small insects, flitting here and there in zig-zag fashion and constantly fanning the beautiful tail. They prefer places with a dense understorey where they spend most of their time, only occasionally venturing out into the upper levels of the forest. A few odd birds have been recorded in the south-east in winter, usually in more open habitats such as open forest, and sometimes a little further inland.