Residency for tax purpose – Part 8
Investing in Australia
If you’re a foreign resident for tax purpose, you must declare on your tax return any income earned in Australia, including:
- employment income
- rental income
- Australian pensions and annuities
- capital gains on Australian assets.
- you have no tax-free threshold
- you do not pay the Medicare levy
- the capital gain on your Australian home may need to be included if you are a foreign resident at the time you sign the contract of sale.
Interest, unfranked dividends and royalties
For interest, unfranked dividends and royalties, tax is generally withheld in Australia at the time of payment.
A foreign resident needs to advise the Australian financial institution – your payer – that you are a foreign resident and they withhold tax in Australia at the time of payment.
You won’t need to declare this income in an Australian tax return.
Tell your Australian payer your current overseas address so they can withhold the right rate of tax. If you don’t, they may withhold tax at the higher rate of 47% (from 1 July 2017).
Owning real property in Australia
If you receive rental income from Australian properties or capital gains from selling Australian assets, you must declare these amounts in an Australian tax return.
Renting or leasing property
Any rental or lease payments for your Australian property must be declared as income in an Australian tax return, whether the payments are actually paid to you or your agent.
Disposing of Australian property
If you sell (or otherwise dispose of) an interest in taxable Australian property, you must report it in an Australian tax return and pay capital gains tax on any profit.
‘Taxable Australian property’ includes houses, apartments and commercial buildings.
Capital gains on Australian assets
A capital gain is the difference between what it cost you to get an asset and what you got when you sold or otherwise disposed of it.
If you’re a foreign or temporary resident and you make a capital gain when you dispose of ‘taxable Australian property’, you may have to pay capital gains tax (CGT).
Taxable Australian property includes:
- a direct interest in real property, or a mining, quarrying or prospecting right to minerals, petroleum or quarry materials
- a CGT asset that you have used at any time in carrying on a business through a permanent establishment in Australia