Australian Tax: It's not easy being a foreigner

August 2015

Australian Tax for Foreigners

If you are not an Australian resident for tax purposes, you are excluded from many of the tax breaks available to residents and increasingly a target of the Australian Taxation Office.

If you are not an Australian resident for tax purposes, then for the most part, you are excluded from many of the tax breaks available to residents and increasingly a target of the Australian Taxation Office.  Treasurer Joe Hockey has also turned up the heat, introducing new foreign investment rules to Parliament granting the ATO, Foreign Investment Review Board and the government greater power to act.

So is the gap widening between residents and non-residents? 

Scrutiny of Australian investments

With residential property prices soaring, foreign investment and ownership has been heavily in the spotlight. 

However, foreign residents and temporary visa holders cannot buy established residential property – they can only invest in property where that investment adds to the housing stock (including) vacant land for development.  

And, only foreign companies with a sizeable interest in Australia can buy residential real estate for Australian based staff. Temporary residents can buy one established property to live in (with approval) which they have to sell when they are no longer living in the property. And temporary residents leaving Australia no longer have the benefit of discounted capital gains tax. 

Investment in agricultural land

Foreign ownership of agricultural land has come under scrutiny, resulting in a number of changes.  From 1 July 2015, all new foreign interests in agricultural land must be registered with the Australian Tax Office (ATO) and all existing interests registered by 31 December 2015.  The threshold at which foreign investors must also get approval for an investment in agricultural land was dramatically reduced from $252 million to $15 million in March this year.

Tax rates and tax benefits

Tax rates

Unlike Australian resident taxpayers, non-resident taxpayers pay tax on every dollar of taxable income earned in Australia starting at 32.5%. There is no tax-free threshold. 

Tax on investments

The 50% general discount on capital gains tax that applies to Australian residents is no longer available to non-residents; meaning that non-residents pay the full amount of CGT on any gains made.  Impending new laws also seek to apply a 10% withholding tax on the sale of real property by foreign residents where the property is valued at $2.5 million or more. 


SMSFs have strict residency rules and must meet three separate tests to continue to be a complying fund and access the tax concessions that come with complying status:

  • The fund must be established in Australia or have an asset located in Australia;
  • The management and control of the fund must ordinarily be in Australia  - generally this means that trusteeship should be in Australia; and
  • Contributions to the SMSF should only be made by members residing in Australia. If overseas members want to contribute to the fund then at least half the fund's assets need to be held by members who reside in Australia and also make contributions. 

Therefore critical planning needs to be carried out before you become a non-resident for your SMSF.

If you plan to change your residency or invest in Australia as non-resident,  it is worth speaking to an expert advisor to discuss any concerns you may have. Contact our team on 02 9957 4033 if you have any concerns about your residency status. 

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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