Foreign/non-residents are taxed in Australia on Australian source income. This overview explains how to treat income from passive investments in Australia such as securities and rental properties, as well as interest and royalties. If on the other hand you are earning income from business activities in Australia, read Doing business in Australia – overview. If your investment activity is in the nature of a business, both overviews may be useful.
Have you received interest, unfranked dividends or royalties from Australia?
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If tax has been withheld at the correct rate you don’t need to lodge an Australian tax return unless you have other Australian source income.
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Have you received rental income from an Australian property?
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You may be liable to pay tax in Australia and need to declare the income in an Australian tax return.
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Have you made a capital gain or loss from the disposal of an Australian asset?
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You may be liable to pay tax in Australia and need to declare the gain or loss in an Australian tax return.
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Interest, unfranked dividends and royalties
Tax is generally withheld in Australia from interest, unfranked dividends and royalties paid to foreign/non-residents.
You don’t need to lodge an Australian income tax return if the only Australian-source income you receive is interest, dividends or royalties on which non-resident withholding tax has been correctly withheld. Such income does not need to be included in an Australian income tax return.
Tax should be withheld by the payer at the following rates:
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Treaty countries
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Non-treaty countries
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Interest
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Some agreements provide an exemption from withholding tax in certain circumstances.
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10%
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Unfranked dividends
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Most agreements reduce the rate to 15%.
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30%
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Royalties
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Most agreements reduce the rate to 15%.
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30%
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You need to advise your Australian payer of your current overseas address so that the above rate of tax can be withheld, otherwise it may be withheld at the higher rate of 48.5%.
No tax is withheld from franked dividends, as the Australian company has already paid tax on the profit represented by the dividends.
For more information, read PAYG withholding from interest, dividends and royalties to non-residents.
Certificates of payment
If you are a foreign/non-resident who needs proof of payment of withholding tax to comply with the tax requirements of your own country, you can ask your payer to request a certificate of payment from the Tax Office.
For more information, read PAYG withholding from interest, dividends and royalties to non-residents.
If you are an Australian resident for tax purposes, read Investment essentials.
Rental income from Australian property
If you are a foreign/non-resident and receive rental income on a property in Australia you may have to lodge an Australian income tax return.
Read Investing in Australian property.
Capital gains on disposal of Australian assets
If you are a foreign/non-resident and you make a capital gain on the disposal of an asset that has the necessary connection with Australia or that is taxable Australian property, then the capital gain may be taxed – read Capital gains in Australia and Capital Gains Tax and Foreign Residents.
Lodging an Australian tax return
To lodge an income tax return you will need a tax file number (TFN).
If you are an individual, read How to apply for a tax file number (TFN) – individuals.
If your entity is a company, partnership or trust, read Registering your business.
More information
Australia’s opportunities as a centre for financial services in the region have been enhanced by changes to section 128F of the Income Tax Assessment Act 1936. The legislation removes tax impediments and reduces compliance costs.
For information about changes to withholding tax provisions for the associates tests and interest on qualifying securities please read the fact sheet.
For information for individuals on tax matters relating to investments refer to Investment essentials.
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Proposed measures
The Government is continually reviewing international tax arrangements. For information on how potential international legislative changes may affect you, see New legislation.
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If you need help in applying this information to your own situation, contact us by phone.
Last Modified: Thursday, 10 September 2009
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