Investing in Australia - what you need to know

Foreign residents are taxed in Australia on their Australian sourced income. This introduction explains how tax applies to income you earn from your Australian investments. If you earn income from business activities in Australia, refer to Doing business in Australia - what you need to know.

Interest, unfranked dividends and royalties

If you are a foreign resident, tax is generally withheld in Australia from interest, unfranked dividends and royalties you earn in Australia.

You don't need to lodge an Australian income tax return if the only Australian-source income you earn is interest, dividends or royalties on which foreign 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:

	Treaty countries	Non-treaty countries
Interest	Some agreements provide an exemption from withholding tax in certain circumstances.	10%
Unfranked dividends	Most agreements reduce the rate to 15%.	30%
Royalties	Most agreements reduce the rate to 15%.	30%

You need to advise your Australian payer of your current overseas address so they can withhold the appropriate rate of tax, otherwise they may withhold tax at the higher rate of 45%.

Your Australian payer does not withhold tax from franked dividends, as they will have already paid tax on the profit represented by the dividends.

For more information, refer to PAYG withholding from interest, dividends and royalties paid to foreign residents.

Certificates of payment

If you are a foreign resident and you need 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 us.

For more information, refer to PAYG withholding from interest, dividends and royalties paid to foreign residents. If you are an Australian resident for tax purposes, refer to Investment essentials.

Rental income from Australian property

If you are a foreign resident and you receive rental income on a property in Australia, you may have to lodge an Australian income tax return.

For more information, refer to Investing in Australian property.

Capital gains on disposal of Australian assets

If you are a foreign resident and you make a capital gain on the disposal of an asset, the capital gain may be taxed in Australia if either of the following applies:

• the property has the necessary connection with Australia
• the property is taxable Australian property.

For more information, refer to: Capital gains in Australia Capital gains 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, refer to How to apply for a tax file number (TFN) - individuals. If your entity is a company, partnership or trust, refer to Tax file numbers.

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 more information:

• for individuals about how tax applies to investments, refer to Investment essentials.

The government is continually reviewing international tax arrangements. For information about how potential international legislative changes may affect you, refer to New legislation.

If you need help in applying this information to your own situation, contact us by phone.