Rental Income Tax for Foreign Property Owners

Owning an investment property in Australia as a foreign investor means you’ll likely be earning rental income — and that income is fully taxable in Australia, regardless of where you live or whether you’re an Australian tax resident.

Australia follows a source-based taxation system for non-residents. This means any income derived from Australian sources — including rent — must be declared and taxed in Australia, even if the income is paid into an overseas bank account and not repatriated.

Tax Residency vs. Source-Based Taxation

Even though you may not be considered an Australian tax resident, you’re still subject to tax on Australian-sourced income, including:

• Rental income from property located in Australia

• Capital gains on Australian real estate

• Interest or dividends from Australian investments (withholding tax rules apply separately)

For non-resident landlords:

• Rental income is 100% assessable in Australia

• You must lodge an Australian tax return each year

• You’re taxed at non-resident individual rates (no tax-free threshold)

Note: You may also be liable for tax on that rental income in your home country, but a double tax agreement (DTA) may allow a foreign tax credit.

Tax Rates for Non-Residents (FY2025)

Taxable Income (AUD)	Tax Rate
$0 – $120,000	32.5%
$120,001 – $180,000	37%
$180,001+	45%

No tax-free threshold

No Medicare levy (non-residents are exempt)

No access to Australian tax offsets or rebates

Deductible Rental Property Expenses

As a landlord, you're entitled to claim a wide range of rental property expenses, provided they are:

• Incurred in the process of earning income

• Not of a private or capital nature

• Properly substantiated with receipts or records

Common Deductible Expenses:

• Council rates & water rates

• Property management fees

• Land tax & insurance

• Interest on investment loan

• Repairs and maintenance

• Legal/accounting fees

• Advertising for tenants

• Bank charges, pest control

• Travel costs (if you’re in Australia inspecting the property)

Important: Travel expenses for inspecting or managing the property are not deductible for foreign investors since 1 July 2017, unless you're operating as a business (e.g., owning multiple properties in a property business structure).

Depreciation Schedules & QS Reports

One of the most under-utilised deductions by foreign investors is property depreciation, especially on newer or renovated properties.

There are two categories of depreciation you can claim:

1. Capital Works Deductions (Division 43)

• Applies to the building structure: walls, roof, flooring, etc.

• Rate: 2.5% per year over 40 years (from construction date)

• Available for properties built after 16 September 1987

2. Plant & Equipment (Division 40)

• Applies to fixtures and fittings: appliances, air conditioners, carpets

• Claimable only if you purchased the property new

• Second-hand property: Plant & equipment not deductible for post-2017 buyers

To claim these:

• You must obtain a Quantity Surveyor (QS) Report — a tax depreciation schedule

• QS reports estimate the construction cost and asset values (ATO does not accept real estate agent valuations)

Foreign landlords must:

• Register for a Tax File Number (TFN)

• Lodge a Non-Resident Individual Tax Return

  
  

Tip: Work with a registered Australian tax agent to ensure all deductions are claimed and rental schedules are accurately completed. Many overseas investors underclaim, especially on depreciation and land tax.