Foreign Investment Property Tax Return

If you hold real estate assets or any such assets outside of Australia you are required to notify the Australian Tax Office (ATO) by including this information in your tax return.Additionally, if you maintain an investment property overseas and receive rental income, then you are required to include the foreign rental income in your Australian Tax Return.  Foreign rental income includes the total rent collected and other incomes related to the renting out of the investment property.

As an Australian resident for tax purposes, it is important to be aware of your tax obligations to the ATO. While completing your tax return, you must ensure that all mandatory questions regarding Foreign Income Sources and Assets have been answered correctly, this is true for a Foreign investment property tax return too.

Foreign investment property tax returns are complex since you need to factor in different currency rates, financial year dates, taxation laws and languages of different countries. Records such as foreign income tax returns and source documents for the incomes must be retained at all times. Receipts related to the deductions towards foreign income must also be maintained.

Some Common Deductions for Foreign Investment Property Tax Returns include:

• Mortgage Interest
• Repairs and Maintenance costs to the property
• Insurances
• Government fees and charges
• Property management fees if applicable.

Foreign Investment property and CGT:

Many people are aware that their Australian based investment properties are subject to Capital Gains Tax when sold. However, many taxpayers neglect the fact that their foreign investment properties are also treated the same, meaning that both are assessed for Capital Gains Tax (CGT) purposes. This means that if you sell an overseas investment property, you could be liable for CGT in Australia. There is some good news however; presuming that all taxes are also paid overseas upon the sale of the real estate, the amount of tax paid overseas would offset any tax payable in Australia. The offsetting of overseas tax paid is a measure adopted by the ATO to avoid double taxation on foreign income for Australian tax payers.

Having an accountant who understands foreign investment property taxes in Australia is important for you to pay the right tax. We are here to assist you and simplify this process for you. Give us a call today on 03 8609 1889 or email us on info@a1accountants.com.au and one of our friendly staff will be able to assist you with your queries.

Foreign Resident Withholding Tax and Your Property

If you’re a foreign resident selling Australian property, the buyer is generally required to withhold a percentage of the sale price and remit it to the ATO, unless you obtain a clearance certificate or variation beforehand. We help foreign investors arrange the correct paperwork ahead of a sale so you’re not caught out by an unexpected withholding amount at settlement.

Land Tax and Surcharges for Foreign Owners

Foreign owners of Australian residential property are often subject to additional state-based surcharges on stamp duty and land tax, on top of the standard rates that apply to local buyers and owners. These surcharges vary by state and can change from year to year, so we check the current rules in the relevant state before you buy, and again each year your return is prepared.

Frequently Asked Questions

Do I need to lodge an Australian tax return if I own an investment property here but live overseas?

Yes – rental income from an Australian property is generally taxable in Australia regardless of where you live, so a tax return is required even if you’re a foreign resident for tax purposes.

What tax rate applies to my Australian rental income as a foreign resident?

Foreign residents are taxed on Australian-sourced income at different rates and thresholds to Australian residents, and generally aren’t entitled to the tax-free threshold. We calculate this correctly based on your residency status each year.

Can I still claim deductions like interest, depreciation and property management fees?

Yes – foreign resident property owners can generally claim the same types of deductions as resident owners, including loan interest, depreciation, property management fees, and repairs, provided the property is genuinely available for rent.

What happens with capital gains tax if I sell the property?

Foreign residents are subject to capital gains tax on Australian property, generally without access to the 50% CGT discount that residents can claim, and are subject to the foreign resident withholding rules at settlement. We help you plan for this before you list the property for sale.

Do I need a clearance certificate before selling?

Clearance certificates are for Australian residents to avoid withholding being applied – as a foreign resident you won’t be eligible for one, but we can help arrange a variation to reduce the withholding amount if appropriate to your circumstances.

Can you lodge my Australian tax return if I’m based overseas?

Yes – we regularly prepare and lodge Australian tax returns for foreign resident property owners based anywhere in the world, working by phone, email and video call.

How much does this service cost?

Fees depend on the complexity of your situation – a single rental property return costs less than one involving multiple properties, a sale, or withholding variations. We agree a fixed fee upfront.

Related Property Tax Guidance

If you’re an Australian resident who owns property overseas rather than a foreign resident with Australian property, see our overseas investment property tax page instead. For a general overview of capital gains tax on investment property, see CGT on investment property.