Top 10 Foreign Investor Tax Mistakes (and How to Avoid Them)
- adrian8311
- Jun 30
- 4 min read
Foreign investors buying or owning Australian property face a complex web of tax obligations, across federal, state, and local levels. Many investors fall into traps simply because they didn’t know what they didn’t know.
Avoiding these mistakes can save you tens of thousands of dollars in unnecessary tax, penalties, or compliance headaches.
1. Forgetting FIRB Approval
Mistake: Buying residential property in Australia without obtaining Foreign Investment Review Board (FIRB) approval when required.
Why it matters:
All non-resident foreign persons must obtain FIRB approval before entering into a binding contract.
Failing to do so can lead to forced sale orders, fines up to $3.3 million, and criminal penalties.
How to avoid:
Always check whether your visa status or investment structure requires FIRB approval.
Apply early — fees are based on property value and must be paid upfront.
2. Buying Under the Wrong Entity or Structure
Mistake: Purchasing property under a personal name, company, or trust without considering the tax and surcharge implications.
Why it matters:
Buying through a foreign trust or company can trigger stamp duty and land tax surcharges.
Companies don’t qualify for CGT discounts.
Personal ownership lacks asset protection or succession flexibility.
How to avoid:
Get structuring advice before signing the contract.
Consider long-term goals (CGT, estate planning, tax rates, liability).
3. Not Registering for Land Tax
Mistake: Assuming land tax will be automatically assessed, or being unaware of the foreign owner surcharge.
Why it matters:
Land tax is assessed annually on investment property.
Many states apply a surcharge to foreign owners (up to 5% in NSW from 2025).
Failing to register can lead to interest, penalties, and backdated assessments.
How to avoid:
Register with your state’s revenue office after settlement.
Keep your mailing address updated, even if overseas.
4. Missing the FIRB Vacancy Return
Mistake: Not lodging the Annual Vacancy Return for residential property purchased under FIRB approval.
Why it matters:
All FIRB-approved residential property acquisitions since 9 May 2017 require an annual occupancy declaration.
If the property is not rented/occupied for at least 6 months, you may owe a vacancy fee (equal to your FIRB fee).
Not lodging = automatic fee + penalties.
How to avoid:
Set calendar reminders tied to the anniversary of settlement.
Keep leasing records, utility bills, or evidence of occupancy.
5. Failing to Lodge an Annual Australian Tax Return
Mistake: Assuming that being a non-resident means no filing obligations, especially when renting the property.
Why it matters:
Rental income and capital gains from Australian property are always taxable in Australia.
Non-lodgement can lead to ATO penalties, denial of refund entitlements, and delays in selling.
How to avoid:
Lodge your return each year via myTax or a registered tax agent.
Keep expense records, depreciation schedules, and rental statements.
6. Overlooking CGT on Inherited Property
Mistake: Selling an inherited Australian property as a non-resident without understanding the capital gains tax consequences.
Why it matters:
Inheritance doesn’t exempt you from CGT when you later sell.
The cost base may be reset to date of death, or the original purchase price, depending on when the deceased acquired it.
CGT withholding may still apply to the sale.
How to avoid:
Get advice on calculating the correct cost base and acquisition date.
Consider variation applications to reduce withholding if the gain is low.
7. Believing They Qualify for the Main Residence Exemption
Mistake: Assuming they’re eligible for the main residence CGT exemption simply because they once lived in the property.
Why it matters:
Since 1 July 2020, non-residents cannot claim the main residence exemption unless they meet very narrow life-event exemptions.
Living in the property before moving overseas doesn’t matter if you’re a non-resident at the time of sale.
How to avoid:
If considering sale while overseas, review your tax residency.
In some cases, selling before becoming a non-resident may preserve the exemption.
8. Not Withholding CGT When Required
Mistake: Selling Australian property and failing to notify the buyer of withholding obligations, resulting in full 12.5%–15% CGT withheld unnecessarily.
Why it matters:
The buyer must withhold unless the seller provides a Clearance Certificate (residents only), or a Variation Certificate (non-residents).
Without it, the ATO automatically takes 12.5% (rising to 15%) of the sale price at settlement.
How to avoid:
If you’re a foreign seller, apply early for a Variation Certificate if your CGT is lower than the withholding.
Keep communication open with the conveyancer and buyer pre-settlement.
9. Double Paying Tax in Home Country
Mistake: Reporting Australian property income or capital gain in their home country without claiming a foreign tax credit for the Australian tax paid.
Why it matters:
You may end up paying tax twice — in Australia and again in your home country.
This often happens when investors use domestic accountants unfamiliar with Australia’s Double Tax Agreements (DTAs).
How to avoid:
Work with an accountant familiar with both jurisdictions.
Use Australia’s tax return as a foreign tax credit on your home country’s return (if DTA applies).
10. Not Engaging a Tax Agent Early
Mistake: Trying to self-manage tax affairs or only seeking advice after buying or selling, when options are limited.
Why it matters:
Early tax advice helps you choose the right structure, understand FIRB and state-based surcharges, and plan for deductions or future CGT.
Delays in appointing an agent can cause missed deadlines, overpaid tax, or withheld refunds.
How to avoid:
Engage a registered Australian tax agent with experience in non-resident tax before you purchase, lease, or sell property.
A good agent will also manage vacancy returns, land tax, CGT calculations, and lodgements on your behalf.
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