Written by

Pau Lam

Tax Director, ODIN Mortgage & Tax

10+ years advising expats and overseas investors on Australian tax

Last reviewed

Updated on: September 29, 2026 View profile →

About the Author: ODIN Mortgage is Australia’s specialist mortgage brokerage exclusively serving Australian expats and foreign investors. Led by Mortgage Director Steven Lee with over 10 years of non-resident lending experience, ODIN Mortgage has guided 2,300+ clients across 40+ countries through the intersecting demands of expat mortgage finance and Australian tax obligations.

1. What Tax Rate Applies to Non-Residents Earning Rental Income in Australia?

Foreign resident tax rates are one of the most misunderstood issues for non-resident property owners, and getting this wrong creates real cash-flow problems. Unlike Australian residents, foreign residents pay tax on their Australian income starting from the first dollar, with no tax-free threshold available ^[4]. For the 2025-26 financial year, income up to AUD 135,000 is taxed at 30% for foreign residents, with higher marginal rates applying above that threshold ^[7].

• There is no tax-free threshold for foreign residents on Australian-sourced income ^[4].
• Rental income from Australian property forms part of your Australian taxable income ^[8].
• Allowable deductions (interest, property management fees, repairs, depreciation) can reduce your taxable rental income before these rates apply ^[8].

2. Which Deductions Can Non-Resident Landlords Claim Against Rental Income?

Building on the tax rate picture above, the deductions available to non-resident landlords directly determine whether your investment property is positively or negatively geared, and whether that gearing is structured efficiently. Non-residents can generally claim the same rental deductions as Australian residents ^[8], including:

• Loan interest (the largest deduction for most leveraged investors)
• Property management and letting fees
• Council rates, water charges, and insurance
• Repairs and maintenance (versus capital improvements, which are treated differently)
• Depreciation on eligible plant and equipment and building allowances
• Accounting fees for preparing your Australian tax return

How your loan is structured has a direct bearing on the interest deductions you can claim. This is precisely why ODIN Mortgage coordinates mortgage structuring with ODIN Tax from the outset rather than leaving these as separate conversations handled by firms that never speak to each other.

3. How Does Capital Gains Tax Work for Non-Residents Selling Australian Property?

A related but distinct concern is capital gains tax (CGT). For non-residents, CGT applies to taxable Australian property, which includes direct interests in Australian real estate ^[3]. Two critical points distinguish the non-resident position from that of an Australian resident:

• No 50% CGT discount: Non-residents are generally not entitled to the 50% CGT discount on gains from property acquired after 8 May 2012, though specific transitional rules may apply for properties held before that date.
• Main residence exemption restrictions: Australian expats who are foreign residents at the time of sale face significant restrictions on claiming the main residence exemption, even if the property was once their primary home ^[6].

These rules make the timing of a property sale and your residency status at that point highly material decisions that warrant specialist tax advice before you act.

4. What Is the FIRB Requirement and Who Needs Approval?

Stepping back from the tax mechanics, a separate compliance layer governs who is permitted to buy in the first place. The Foreign Investment Review Board (FIRB) regulates foreign investment in Australian residential real estate ^[5]. Foreign nationals generally require FIRB approval before purchasing residential property. Australian citizens living overseas are typically exempt from FIRB requirements on residential property, but temporary visa holders and foreign nationals are not ^[5].

• FIRB approval applications attract an application fee, which scales with the property value.
• Conditions imposed by FIRB can affect which properties you can buy (for example, some approvals are restricted to new dwellings).
• FIRB rules and thresholds are subject to change; always verify current requirements before proceeding.

5. Foreign Resident Capital Gains Withholding (FRCGW)

The withholding obligation is one of the most operationally surprising tax rules for non-resident sellers. As of 1 January 2025, Foreign Resident Capital Gains Withholding (FRCGW) applies to all property sales regardless of value. The purchaser is required to withhold 15% of the purchase price and remit it directly to the ATO ^[5]. This is not a final tax; it is a prepayment credited against the seller’s actual tax liability.

If you are an Australian citizen living overseas and considered an Australian tax resident, you can obtain a clearance certificate from the ATO to prevent the withholding from applying. If you are a non-resident for tax purposes, you will need to lodge an Australian tax return to reconcile the withheld amount against your actual liability.

6. How Do State-Level Stamp Duty Surcharges Affect Non-Residents?

All Australian states and territories impose stamp duty (also called transfer duty) on property purchases ^[3]. For non-residents and foreign purchasers, most states apply an additional surcharge on top of standard stamp duty rates. These surcharges vary by state and are subject to change, so the figures below are indicative only and must be verified against current state revenue office guidance at the time of purchase.

• Foreign purchaser duty surcharges apply in NSW, VIC, QLD, SA, and WA, among others.
• Some states also impose a land tax surcharge on foreign owners holding residential land.
• The definition of “foreign person” for state duty purposes can differ from the federal FIRB definition ^[3].

These costs need to be factored into your purchase budget upfront, as they affect your total acquisition cost and therefore your effective yield from day one.

7. Does Australian Tax Residency Status Change the Picture?

Tax residency is not the same as visa status or physical location, and this distinction matters enormously for expat property owners. Australian expats living overseas may still be considered Australian tax residents depending on their circumstances, which changes their tax obligations significantly ^[2].

• Australian tax residents are taxed on global income and may access the main residence CGT exemption and the 50% CGT discount ^[2].
• Foreign residents for tax purposes pay tax only on Australian-sourced income but lose access to those concessions ^[4].
• Residency status is determined by reference to domicile, the 183-day test, and other factors under Australian tax law. It is not a simple binary of “living overseas” ^[2].

Determining your residency status is not something to leave to assumption. It has direct consequences for how you structure an expat mortgage in Australia and how your returns are taxed.

8. What Are the Reporting Obligations for Non-Resident Property Owners?

Finally, building on all the obligations above, non-resident property owners must meet ongoing Australian reporting requirements regardless of where they live. These include:

• Lodging an Australian income tax return for any year in which you earn Australian rental income ^[8].
• Reporting capital gains in the year a disposal occurs.
• Where applicable, complying with FIRB conditions (such as reporting a property sale or notifying of a change in use).
• US persons holding Australian property may also have US reporting obligations under FBAR or FATCA rules, though this requires separate US tax advice ^[1].

Frequently Asked Questions

References

1. Tax Implications for Australian Expats and Foreign Investors in the US When Buying Property in Australia | America Josh (americajosh.com)
2. Dentons – International Tax Guide to Real Estate Investment in Australia (www.dentons.com)
3. Key considerations when buying a property in Australia as a non-resident – Experts for Expats (www.expertsforexpats.com)