What Australian Income Must a Foreign Resident Declare?

Foreign residency narrows Australia’s ordinary taxing jurisdiction, but it does not end Australian tax obligations. A foreign resident generally declares Australian-sourced assessable income and capital gains or losses from taxable Australian property.

The correct analysis begins with residency, source and the character of each amount. The location of the bank account or payer is relevant but is not always determinative.

Common Australian amounts requiring a return

Australian employment income, business income attributable to Australian activities, net rental income from Australian property and gains from taxable Australian property commonly require an Australian return. Some Australian pensions, annuities, superannuation benefits and trust distributions may also require reporting, subject to domestic law and any applicable treaty.

Employee share scheme income can straddle residence periods and work locations. It should not be allocated solely by the vesting date or the employer’s incorporation.

Income subject to non-resident withholding

Australian interest, unfranked dividends and royalties paid to a foreign resident are generally subject to withholding by the payer. Where the correct amount has been withheld and the statutory conditions are met, the income may not be included in an Australian return.

That result should not be assumed where the payer used the wrong residency status, no tax was withheld, the amount has another character or a treaty changes the rate. Fully franked dividends are generally exempt from withholding, while the treatment of trust distributions is more complex.

Capital gains

After becoming a foreign resident, Australia generally taxes gains only from taxable Australian property. That category includes Australian real property, indirect Australian real property interests, assets used in an Australian permanent establishment and certain assets retained under the CGT event I1 choice.

A share in an Australian company is not automatically taxable Australian property. The land-rich indirect-interest tests and ownership thresholds may need detailed analysis.

Treaties and foreign tax

A double tax agreement can allocate or limit taxing rights, but treaty outcomes depend on the particular country, article and facts. Relief from double taxation may arise through an exemption or foreign tax credit in one jurisdiction.

Australian tax agents do not automatically provide advice on the foreign country’s law. Coordinated advice may be needed.

Practical takeaway

Prepare an income-by-income schedule showing payer, activity, location, period, withholding and treaty country. That is safer than labelling every Australian payment taxable—or every overseas receipt exempt.

Official sources and further reading

• Australian Taxation Office: Foreign and temporary residents
• Australian Taxation Office: Interest, unfranked dividends and royalties
• Australian Taxation Office: Taxable Australian property
• Australian Taxation Office: Income tax treaties
• Australian Taxation Office: Foreign-sourced employee share scheme interests

FOREIGN RESIDENTS