Non-residents of Australia have special tax requirements. Anyone intending to live, work, or invest in Australia, whether an Australian expat living overseas or a foreign investor looking to buy real estate in Australia, must be aware of the tax implications.

 

Here we discuss the various tax implications for Australian non-residents. We’ll go over the top nine tax implications, ranging from income tax to capital gains tax, that you should be aware of in order to remain compliant.

 

1. Income subject to taxation

 

Only income earned in Australia is considered taxable income for foreigners purchasing real estate in Australia.

 

Typically, this includes profits from Australian businesses, gains from the sale of taxable Australian property, income from Australian businesses and investments, and rental income from Australian real estate. Expenses are deducted from assessable income to calculate taxable income.

 

2. Tax Rates for Foreign Residents in 2024–2025

 

Foreign resident tax rates apply to non-residents. You do not meet the tax-free status threshold. Rather, foreigners purchasing real estate in Australia pay a flat tax on the first dollar of income produced in Australia, with increasing rates applied at higher income levels.

 

The primary reason why Australia’s foreign resident tax rates differ from resident tax rates is that the tax system is designed to account for the different levels of access to infrastructure and public services that residents and non-residents have.

 

3. Tax on Capital Gains

 

In Australia, capital gains tax (CGT) is applied to net ordinary income on tax returns rather than as a separate tax. Any Australian property you own, including residential, commercial, and rental properties, is subject to CGT when sold.

 

If you are a non-resident at the time of sale, you will be taxed on the total capital gain and will not be eligible for the 50% main residence exemption if you sell a property that was your principal residence in Australia.

 

Are Foreigners Able to Buy Real Estate in Australia?

 

Yes, foreigners can purchase real estate in Australia. Foreigners who purchase properties in Australia, on the other hand, face unique legislation and restrictions.

 

There are restrictions on the types of real estate that foreigners can buy, and they must often obtain approval from the Foreign Investment Review Board (FIRB) before doing so.

 

The foreigner buying property in Australia guide includes additional key guidelines for non-residents looking to purchase real estate in Australia.

 

4.The Land Tax

 

Land tax may be owed by non-residents who own property in Australia, such as foreign investors and expatriates. States have varying land tax rates and thresholds; the majority have a tax-free level. However, there are often additional fees for non-residents.

 

The unimproved value of the land is commonly used to compute land tax, thus it is vital to understand the specific rules in the state or territory where your property is located.

 

5. Income from rentals

 

As a foreign investor or expat, you must record rental income on your Australian tax return. Nonetheless, you can maximise your savings by claiming tax deductions for rental property expenses such as depreciation, maintenance, and property management fees.

 

Rent is taxed at the same rate as your taxable income if it is your sole source of income in Australia. If you have rental income in addition to other Australian sources of income, the amount of your taxable income is used to calculate your tax liability.

 

6. Stamp Duty

 

When buying real estate in Australia, non-residents must pay stamp duty. Stamp duty rates and legislation vary by state and region. The price, location, and intended use of the property are usually taken into account while calculating it.

 

Stamp duty normally amounts between 4% and 5% of the transaction price. Foreign nationals are subject to an extra surcharge of 7%-8%. This does not apply to real estate acquisitions in Tasmania, the ACT, or the Northern Territory.

 

7. Negative Gearing

 

Negative gearing allows non-residents to deduct costs related to their investment property, such as loan interest, property management fees, council taxes, and depreciation, from their Australian taxable income.

 

In Australia, for example, you can deduct expenses such as mortgage interest, property management fees, maintenance charges, and depreciation from your taxable income if you own a rental property. This could potentially reduce your tax obligation. In the coming fiscal year, you can also use these losses to offset capital gains.

 

8. Tax deductions

 

As a non-resident owner of Australian real estate, you can increase your savings and lower your taxable income by claiming a range of tax deductions. In general, these deductions include expenditures connected with generating rental revenue, such as property management fees, upkeep and repair charges, loan interest, and asset and property depreciation.

 

Expenses such as travel, tools and equipment, presents, and working from home might be claimed for other small businesses, jobs, or investment income. Nevertheless, the Australian Taxation Office does not accept private expenditure claims.

 

9. Requirements for filing tax returns

 

As a non-resident, you must record all income derived from Australian sources on your tax return. It is critical to file your tax return correctly and on time to avoid fines and interest. Furthermore, precise filing is necessary to avoid the hassle of audits.

 

To avoid increased withholding tax rates, obtain a Tax File Number (TFN). If you do not have a TFN in Australia, you may be required to pay higher withholding tax rates on your income.

 

If you do not provide your employer or financial institution with a TFN, they are required by law to withhold tax from your payments at the highest marginal rate, which may be significantly higher than the regular rates.

 

How does non-resident tax affect my mortgage?

 

Your non-resident status in Australia has an impact on your mortgage and real estate investments. You do not qualify for the CGT exemption on your primary residence, and you may be liable to higher withholding tax rates on interest and rental income.

 

Australian banks use the current tax rate, which is often higher than in other countries, to calculate your borrowing capacity. Higher interest rates, fewer credit options, and maybe stricter lending regulations are all things to expect.

 

For example, an Australian expat residing in the United Arab Emirates earning $100,000 per year and paying 0% Emirati income tax would have a 30% Australian tax rate applied on their borrowing power. This suggests that, rather than the total amount, his borrowing power would be valued at $70,000.

Please feel free to speak with the Bates Cosgrave team if you are a non-resident of Australia and considering purchasing or selling properties in Australia. Our team could help you navigate through the complex tax tax scenarios related to properties.