TL;DR: If you're an Aussie expat holding (or planning to buy) an investment property back home, the Australian tax on it works differently for you than for a resident. Rental income is still taxable in Australia, but as a non-resident you generally lose the tax-free threshold, so you're taxed from the first dollar. When you sell, the 50% CGT discount is largely off the table for the non-resident period, the main residence exemption has been removed for most non-residents, and the buyer may withhold 15% of the sale price for the ATO. None of this is a reason to panic — it's a reason to plan. This is general information, not tax advice. The figures below are for the 2025–26 year and change regularly, so confirm everything with a registered tax agent before you act.
Start here: the property is in Australia, so Australia taxes it
This is the part most expats already half-know but it's worth saying plainly. Income from Australian property is Australian-sourced income. Living in Singapore, Hong Kong, or Dubai doesn't change that — your rental income and any capital gain on sale stay within the Australian tax net, and you still lodge an Australian tax return.
What changes when you move overseas is your tax residency status. Once the ATO treats you as a non-resident for tax purposes, a different set of rules kicks in — and on an investment property, almost all of those differences cost you rather than help you. The good news is they're knowable in advance, which means you can factor them in before you buy or sell rather than discovering them at tax time.
We're a mortgage brokerage, not a tax practice. So treat everything here as a map of what to ask about — not as advice on your personal numbers. A registered tax agent is the person who works out what actually applies to you.
Rental income: no tax-free threshold for non-residents
An Australian resident gets the tax-free threshold — the first $18,200 of income is untaxed in the 2025–26 year. As a non-resident, you generally don't. That single difference is the one that catches people out.
It means your net rental income — rent received, minus allowable expenses like interest, property management, rates, and maintenance — is typically taxed from the very first dollar at the non-resident marginal rates. For the 2025–26 year, the non-resident rate starts at 30% on income up to $135,000. Residents, by contrast, ease in through the lower brackets after their tax-free threshold.
So the same property, producing the same net rental income, can generate a different tax outcome purely because of residency status. It's not a penalty aimed at expats — it's how the non-resident rate scale is built — but the effect is real and worth modelling before you buy.
One thing that does still work in your favour: the deductions are generally the same. Loan interest, agent fees, council rates, repairs, depreciation where it applies — these remain claimable against the rental income. That's the mechanism behind negative gearing, which we'll come to.
Capital gains tax on sale: the bigger differences
CGT is where the non-resident position diverges most from the resident one. Three differences matter for an investment property.
1. The 50% CGT discount is largely gone for non-residents
An Australian resident who has held an asset for more than 12 months generally gets a 50% discount on the capital gain before it's taxed. For gains accrued while you're a non-resident, that discount is generally not available. The practical result is that a larger share of your gain can be taxable than if you'd held the same property as a resident.
There are apportionment rules for people who were residents for part of the ownership period — which is exactly the situation many expats are in, having bought before they left. Working out the resident-versus-non-resident split of a gain is detailed and fact-specific. It's a registered-tax-agent calculation, not a back-of-the-napkin one.
2. The main residence exemption has been removed for most non-residents
If a property was once your home, you might assume the main residence exemption still shelters it. For non-residents, that assumption is now risky. Under rules applying since 30 June 2020, most people who are non-residents at the time they sell can no longer claim the main residence exemption — even for the period the property genuinely was their home. We cover this in more detail in our piece on capital gains tax for Australian expats.
This is one of the clearest cases where when you sell — and whether you've re-established Australian tax residency first — can change the outcome materially. It's also one where getting it wrong is expensive and hard to undo after settlement.
3. Foreign resident capital gains withholding
When you sell, the buyer may be legally required to withhold a slice of the sale price and remit it directly to the ATO, unless you provide a clearance certificate. From 1 January 2025, the withholding rate is 15% and it applies to all property sales — the previous $750,000 value threshold was removed, so smaller sales are now caught too.
This withholding isn't an extra tax. It's credited against the CGT you actually owe when you lodge your return, and any over-withholding comes back as a refund. But 15% of a sale price is a large amount of cash to have parked with the ATO until assessment. The way to manage it is to apply for a clearance certificate (or a variation, if a lower amount is appropriate) well ahead of settlement — again, a registered tax agent's job.
Negative gearing: still available, but it works differently
Negative gearing — where the costs of holding a property, especially loan interest, exceed the rental income, producing a loss that reduces taxable income — is generally still available to non-residents. The deductions don't disappear when you move overseas.
What changes is the value of it. Because there's no tax-free threshold, the maths sits on a different base. And the loss generally offsets your Australian assessable income, not your overseas salary — so the benefit shows up against other Australian income (like the property's own future profits or other Australian-sourced earnings), not against your SGD, HKD, or AED pay packet. Whether negative gearing helps your overall position, and by how much, depends entirely on your full picture across both countries. That's a conversation for your tax agent.
It's also worth knowing that negative gearing and CGT rules surface in the Budget cycle from time to time. We track the expat-specific angle of those changes in what the 2026 Budget means for Aussie expats.
The expat investment-property tax picture at a glance
Here's how the main items typically compare between a resident and a non-resident owner. Figures are for the 2025–26 year and are subject to change — treat this as orientation, not a personal calculation.
| Tax item | Australian resident | Non-resident expat (general position) |
|---|---|---|
| Tax-free threshold on income | First $18,200 untaxed (2025–26) | Generally none — taxed from the first dollar |
| Marginal rate on rental income | Resident scale (lower entry brackets) | Non-resident scale — starts at 30% up to $135,000 (2025–26) |
| Deductions (interest, agent fees, rates, repairs) | Allowable | Generally allowable on the same basis |
| 50% CGT discount on sale | Available after 12 months' ownership | Generally not available for the non-resident period |
| Main residence exemption | Available where conditions met | Removed for most who sell while non-resident (since 30 June 2020) |
| Withholding at sale | Clearance certificate avoids withholding | Buyer withholds 15% of sale price unless clearance certificate provided (from 1 Jan 2025) |
| Lodging an Australian tax return | Yes | Yes — on Australian-sourced income and gains |
This table is a general comparison and simplifies rules that have exceptions, apportionment, and state-level overlays. It's a starting point for the conversation with your tax agent, not a substitute for it.
Two more things that often get bundled in (but aren't income tax)
When expats ask about "tax on investment property," they're sometimes thinking of state-level costs rather than Commonwealth income tax. Two worth flagging so you don't conflate them:
- Stamp duty foreign buyer surcharge — a one-off state surcharge on residential purchases by foreign persons. Australian citizens are generally not foreign persons regardless of where they live; permanent residents living overseas may be assessed as foreign persons depending on the state. It's separate from income tax and from CGT.
- Annual land tax surcharge — an ongoing state-level cost on property held by foreign persons in many states. Easy to overlook because it's annual rather than upfront.
These are state taxes administered by each state's Revenue Office, and rates move with state Budgets. They sit alongside the income-tax picture above rather than inside it. Where they apply to you is, again, a question for a registered tax agent or property lawyer.
What to actually do with this
The point of laying all this out isn't to make Australian property look hard. Plenty of expats hold investment property back home and do well out of it. The point is that the tax treatment is knowable in advance — which means it belongs in your plan from the start, not as a surprise at sale.
A few questions worth taking to a registered tax agent:
- Am I a non-resident for Australian tax purposes right now, and what triggers a change either way?
- What's my expected net rental position after deductions, taxed on the non-resident scale?
- If I sell, how is the gain split between my resident and non-resident periods?
- Do I need a clearance certificate to avoid the 15% withholding at settlement?
- Would the timing of a future sale — or returning to Australian residency first — change the CGT outcome?
Get those answered before you buy or sell, not after. The tax outcome and the borrowing question usually come up together, and it helps to look at them side by side.
Where we fit in
We don't give tax advice — that's a registered tax agent's role, and a good one is worth having on your team if you hold or plan to hold Australian property from overseas. What we do is the financing side: working out what you can borrow as an expat, how your foreign income is assessed, and which lenders fit your situation.
The two questions tend to land at the same time. If you're weighing up an Australian investment property and want to understand the borrowing side while you sort the tax side with your accountant, check your borrowing capacity or give us a call. We'll handle the loan; your tax agent handles the tax; and you get to look at the whole picture before you commit.
Frequently Asked Questions
Do Australian expats pay tax on rental income from an Australian investment property?
Yes. Australian rental income is Australian-sourced and stays taxable in Australia regardless of where you live. As a non-resident you generally don't get the tax-free threshold, so net rental income is typically taxed from the first dollar at the non-resident rates, and you still lodge an Australian return. This is general information — confirm your position with a registered tax agent.
Is there a tax-free threshold for non-resident expats on Australian property income?
No. The tax-free threshold (the first $18,200 for residents in the 2025–26 year) is generally not available to non-residents. Non-residents are taxed from the first dollar, with the non-resident scale starting at 30% on income up to $135,000 for 2025–26. Rates and thresholds change — verify the current figures with a registered tax agent or on the ATO website.
How is capital gains tax treated when an expat sells an Australian investment property?
Non-residents generally can't access the 50% CGT discount for the non-resident period, so a larger share of the gain can be taxable. Australian property stays subject to Australian CGT while you're overseas, and you lodge a return for the year of sale. The main residence exemption was also removed for most non-residents selling while non-resident (rules since 30 June 2020). Outcomes are fact-specific — get advice from a registered tax agent before selling.
What is the foreign resident capital gains withholding on a property sale?
When you sell, the buyer may have to withhold part of the sale price and pay it to the ATO unless you supply a clearance certificate. From 1 January 2025 the rate is 15% and it applies to all property sales regardless of value. The amount is credited against your assessed tax, not an extra tax, but applying for a clearance certificate early matters. Confirm the current rules with a registered tax agent.
Can expats still claim negative gearing on an Australian investment property?
Generally yes — non-residents can still deduct allowable expenses, including loan interest, against Australian rental income, so a loss-making property can reduce Australian taxable income. The practical value differs because there's no tax-free threshold and because Australian losses generally offset Australian income rather than your overseas salary. How it fits your overall position is a question for a registered tax agent.
Aussie Expat Home Loans (AEXPHL) holds Australian Credit Licence 509125. This article is general information only and does not take into account your personal circumstances. It is not tax, financial, or legal advice. Tax rates, thresholds, and rules referenced are for the 2025–26 year and are subject to change. Always seek advice from a registered tax agent regarding your specific situation before making any decision.
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