The Australian tax guide to owning foreign property


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The ownership of overseas property is increasingly common in Australia.

Whether you acquired property before coming to Australia, inherited a property from a deceased relative or simply bought somewhere as a bolt-hole from Australian life, it's important to remember that foreign property carries with it a number of Australian tax consequences.

Failing to disclose the existence of your overseas property to the ATO carries stiff penalties, so here are my tax tips for an easy life.

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Tax treatment of rental income and deductions

As an Australian resident, you are taxed on all your worldwide income. Therefore, you must declare any rental income that you derive from your overseas property in your Australian tax return.

If you've paid tax overseas on your overseas rental income, you will often be able to claim a tax offset for the foreign tax paid against your Australian tax. This prevents so-called double taxation.

Deductions can be claimed for your overseas rental property in the same way that they can for an Australian property. That means that items like local rates, utility bills, repairs/maintenance and agency booking fees can all be deducted from your rental income.

In addition, you can also claim a deduction for the interest that you pay on a foreign mortgage.

However, it is important to note that if you are paying the foreign mortgage direct from Australia, you can only claim a deduction for the interest if you pay withholding tax to the ATO in relation to the interest that you pay.

Interest withholding tax is 10% irrespective of the country that the recipient is based in (though it can be reduced - sometimes to nil - if there is a double tax treaty in force with the overseas country) and is imposed when the interest is paid.

The costs of traveling to inspect an income-producing property (including flight and meal expenses) are NOT deductible.

Remember, you can only claim deductions for the periods the property is rented out or is genuinely available for rent. Periods of personal use can't be claimed. In addition, where the property is let at less than market rent - to friends or relatives for example, who might pay you a token amount - income tax deductions for that period will be restricted to the amount of rent received.

Where only part of the property is let, deductions are restricted to those expenses which relate either directly to the rented area or to a proportion of expenses which relate to shared areas which are available for both you and your guests to use (such as a communal lounge or kitchen).

Capital gains tax

Overseas properties are subject to Australian capital gains tax (CGT) when disposed of. If you have owned the property for more than 12 months you will receive the 50% CGT discount, which effectively halves the amount of tax that you pay.

If you are also subject to tax overseas on the disposal of your foreign property, you will get a credit for the overseas tax paid in the form of a foreign tax offset; this is also discounted by 50% if the property qualified for the CGT discount.

The capital gain is basically the difference between the original cost (translated to Australian dollars at the date of acquisition) and the sales proceeds (translated to Australian dollars at the date of sale). In addition, certain expenses of acquisition and sale (eg estate agent fees) can be added to the original cost.

Other obligations

When completing your tax return, you must ensure that all mandatory questions regarding foreign source income and assets have been answered fully and correctly.

Source documents such as foreign income tax returns, records of income and receipts or invoices for expenses must be retained at all times. You could be obliged to produce them to the ATO on request.

What if you are a temporary resident?

Temporary residents are those who reside in Australia on a temporary visa, such as a 457 employment related visa. Special rules apply to any foreign income earned by temporary residents.

Unlike other tax residents, temporary residents do not have to have to pay tax on their foreign income, with the exception of certain short term foreign employment income. Therefore, if you own an overseas investment property and are on a temporary visa, you won't be taxed on the rental income

In addition, temporary residents do not have to pay capital gains tax if they dispose of an asset whilst in Australia, unless the asset is Taxable Australian Property (such as an Australian investment property). Foreign property therefore doesn't need to be declared on your Australian tax return.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.
Nick Kumar
April 18, 2022 1.04pm

Hi Mark,

Thanks for an insightful article on capital gain tax.

Happy Easter greetings to you...!

I am local resident PR turned citizen since 2017.

My query is on overseas property in India which I had purchased in 2014. local value around 400K. When I moved to Australia as PR IN 2017, the based value was around 430k. The current value is around 500k.

The property is on home loan with indian bank ( i pay both principal /interest on same).I have put it on rent and I declare same to local tax authority though don't claim any tax benefits as the rental is minimal compared to the interest amount.

Wold be great if you can clarify and provide your inputs on below queries

- If i sell the property in India at present market rate which is around 500k i will be paying local tax TDS per norms based on current index value ie and tax rate . 20 % tax on local capital gain. My anticipated gain will be around will be around 80k post tax deduction in India

- Given that there is treaty between Aus /india on avoidance of double taxation, will i be further taxed here in Australia on the actual gain of 80k (as the property was purchased before I became PR/Citizen).

- I have declared here with ATO on having a property overseas but haven't claimed any negative gearing on same. (as the property was purchased before I became PR/Citizen). If eligible for negative gearing, how many years i can go back on amendment at ATO and claim negative gearing retrospectively ( ie last 5 financial years i read somewhere though not clear)

Appreciate your inputs..


Marlena Smit CPA
March 3, 2023 4.21am

Your foreign property may be depreciated according to Australian Div 40 and Div 43; however, you will need to determine whether the property was either constructed or renovated after 1985. If before, the property will not be eligible for depreciation.

A normal amendment period equals two (2) years following the date of assessment of the Notice of Assessment. If it relates to foreign income, the amendment period may be four (4) years, as per the Income Tax Assessment (1936 Act) Regulation 2015 (reg 14).

As for the tax treaty, India will have first right to tax property situated in India, but if you're a PR/Citizen in Australi and a tax resident, you will be assessed on worldwide income. Under the treaty (as well as Div 770 of ITAA 1997), you will be able to use a foreign tax credit to offset Australian tax liability.

The date you became PR and tax resident will be used to determine market value of the property, which can be used as the replacing cost base for the property upon sale. You may also consider whether other CGT concessions or exemptions apply, such as the 6-year absence rule on main residences, and of course the 50% CGT discount.

Alberto Varcado
June 27, 2022 9.40pm

Hi Mark and thanks for your explanation.

I have 2 years in Australia under a 482 Short Term Skilled Visa; and I own a property overseas that would be sold soon, which I got it 6 years ago. Do I have to pay CGT for that asset since I am not a Permanent Resident yet?

Marlena Smit CPA
March 3, 2023 4.26am

If you're on a temporary visa and you do not have an Australian resident spouse under the Social Securities Act 1991, then you will most likely meet be eligible for the foreign income exemption rule, which exempts temporary residents (as per the Migration Act 1958) from ta assessment on disposal of foreign assets, as well as passive foreign income. If you intend to become PR in Australia, the property will become Taxable Australian Property (TAP) on that date, and it will come within the realm of the Australian tax system. You should have the market value of the property assessed on/around that time as it may constitute the replacing cost base (as opposed to actual acquisition cost) in the event of a (deemed) disposal.

Be aware that if you become PR in Australia, and you decide to depart Australia, a deemed disposal will take place (I1 CGT Event). It is possible to defer this until the actual disposal (A1 CGT Event); however, in most cases the tax liability on an I1 CGT event is lower due to lower tax rates (resident vs non-resident rates), eligibility for 50% Capital Gains Discount (not avail for non-residents), and of course the increasing market value of properties, which may result in a higher capital gain = higher tax liability.

Rene Musters
September 13, 2022 7.08pm

Hi Mark. Bought a unit in NZ and after some reno, rented it out. Purchase funded by a mortgage at Australian bank (NAB). Can you let me know where in the tax form I have to lodge the gross rent, and where I can deduct depreciation, rates, BodyCorp, maintenance etc. I didn't get your 10% witholding tax for interest deduction. Is that still applicable if the mortgage as well as interest payments are an Australian bank ?

Thanks in advance

Marlena Smit CPA
March 3, 2023 4.33am

You will need to prepare a foreign rental schedule on the income tax return. If you have any questions in relation to the preparation of your income tax return, you should consider engaging a TPB registered tax agent to assist you. You should in particular look for a professional with experience in foreign property ownership.

As for the interest income, this is subject to the treaty withholding tax (WHT), which is usually 10%. This means that banks are required to withhold the WHT if you report to them you're a non-resident. If this occurs, the interest income is not reported in your income tax return as sufficient WHT is deemed to have been withheld. In the case where no WHT was withheld, the Commissioner of Taxation will apply the 10% WHT, and you will receive a Notice of Withholding Tax alongside your Notice of Assessment. This will constitute a tax payable.

If you're paying interest as part of your mortgage of your investment property, you can use this as a deduction against rental income. Please be advised that NZ has removed the availability of interest deductions against rental income, but Australia hasn't. The NZ deductions available are far more limited than Australia, but in Australia the record keeping requirement is far more onerous.

As per the tax treaty, as the property is situated in NZ, NZ will have first right to tax income derived from the property. Australia allows a foreign tax credit under the treaty, as well as Div 770 of ITAA 1997. It is unclear whether you're an Aus tax resident or not. If you're not an Aus tax resident, and the property is situated in NZ, then foreign income for a non-resident = exempt from tax.

Martin Relton
November 15, 2022 2.42pm

I read with interest your comments regarding owning a foreign property as a temporary resident.

I am working in Australia on a 482 Temporary Skills shortage Visa in Australia. I have a property in the UK which is netting a small income (under the UK tax threshold of 12,750 GBP) and I have been married to my Australian partner for 4 years.

The UK government does not tax me on this income (none of which is transferred to my Australian bank account), but the ATO will, because I am married to an Australian citizen. I find this hard to accept, but assume at this stage the advice is correct.

Is there any information available as a reference in my specific case you could point me towards?

Best Regards

Marlena Smit CPA
March 3, 2023 4.35am

As you have an Australian partner who will be a resident under the Social Securities Act 1991, you're not exempt from foreign passive income and capital gains. You will be tax assessed on worldwide income instead. Whether your income is transferred to an Australian bank account or not is irrelevant.

John Jessen
February 13, 2023 10.22am

Hi Mark,

Does CGT also apply if one disposes of foreign property as a gift to someone else?

Emma Hyatt
March 6, 2023 9.10am

Hi there,

My parents own a house in the UK since the 1980s. There's no mortgage and it's rented out. They would like to sell it but are unsure about how to go about it and also the tax implications.

Kuldeep Augustine
March 11, 2023 12.18am

Hi Mark, I am Australian citizen, recently sold a farm in India. The farm land was inherited. I also have some money sitting in my account their which was gifted. Please advise how can I bring the money here in AUS in most legitimate way. Will I be paying any tax on it? Thanks

Alan Wong
April 5, 2023 6.14pm

Hi there,

I'm currently on the 482 Visa and my company has submitted the application for the 186 Visa for my family a few months ago (still pending approval)

I'm originally from Malaysia but was previously based in the middle east - I purchased a property in Dubai in 2017 - The property was purchased from a developer off the plan and is still being built - the original target completion date was 2021 - however, this has been delayed due to COVID and is due to be completed in Q2 2023

If everything goes according to plan, I'm expecting my PR to be granted within the next couple of months - I have the following questions:

1) Once I become PR and I decide to sell my property in Dubai (say within Q2 203), will I be taxed by the ATO? - and how much will the property gain tax likely to be? (I should also mention that Dubai is a tax-free country)

2) As the property is still under construction, how will the ATO view this in terms of ownership? - i.e. have I owned the property since 2017 or only after completion?

3) Will the property gain tax be much less if I decide to sell the property after at least 12 months of ownership?

I would really appreciate your input


David King
April 14, 2023 9.26am

To avoid probate hassle in a far away land, our parents transferred ownership of their home to us 4 children. The condition was they could live until death.

So we were non-beneficial owners until then. What date should be used to determine initial cost for capital gains?

Easy / safe answer is transfer date, but it wasn't a true asset until it we could do something with it. Any ideas / suggestions?

Tele Cain
May 18, 2023 11.24pm

I will be Australian Citizen this year. My father wants to give an apartament overseas wich had a fire. I have to pay repairs to make it livable, and then pay to transfer the ownership. Then I will like to sell it and buy something in Australia. This burned place wich one day will be my home, it will be my only house, since in Australia I live in a shared house. Would I have a main residence exception for that ?

Money magazine
May 19, 2023 8.49am


The Money team is unable to give tax advice.

Please contact a registered tax agent for advice on your situation.

January 7, 2024 3.29pm

HI Mark:

what if someone has a share of a residential property overseas and it is not earning any income coz it is used by someone's relatives as residential ever since there a need to declare on your tax return? and any penalties for not delcaring coz it is not earning any income at all, it is only used for residential purposes ... a gift from his grandparents....b4...

Would certainly appreciate a reply