Tax on Australian rental income when you live overseas

Michael Murray Managing Director, Murray Property · 22+ years in property management across Darlinghurst & Surry Hills

Owners who move from London to Sydney often ask us the same question in reverse, and it reveals the thing most people get wrong about Australian rental tax.
In the UK, if you own property and move abroad, your letting agent is legally required to withhold 20% of your rent and send it to HMRC. It happens automatically. You feel the tax every month.

Australia has no equivalent. No withholding on rent, no deduction at source, nothing taken out along the way. Your full rent lands in your account every month for a year, and then a tax bill arrives for the lot at once.

That is the single most common financial shock for expats with an Australian rental. Not the rate. The timing.

The rule underneath it: source, not residence

Australia taxes income by where it comes from, not where you are. Rent from a Darlinghurst apartment is Australian-sourced, so it is taxable in Australia whether you are in Sydney, Singapore or Stockholm.

You cannot opt out of this by paying tax elsewhere. A double tax agreement may stop the same income being taxed twice, but Australia has the first claim on income from Australian real estate.

What changes when you become a foreign resident

Your tax-free threshold disappears. Australian residents pay nothing on the first $18,200. Foreign residents pay from the first dollar.

Foreign resident rates for 2026-27:

Taxable income	Rate
$0 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and above	45%

The resident bracket cut that took effect on 1 July 2026 does not apply to you, it changed the rate on income between $18,201 and $45,000, a band foreign residents never reach.

You stop paying the Medicare levy. A 2% saving, and the only part of this that moves in your favour.

You lose most tax offsets, including the low income tax offset.

If you have not established whether you are actually a foreign resident, start there, it is a question of fact rather than paperwork, and everything below depends on it.

What does not change , your deductions

This is the part people underestimate. Foreign residents keep essentially every rental deduction an Australian resident gets:

The distinction between a repair and an improvement catches people. Replacing a broken tap is a repair and deductible now. Replacing the entire bathroom is a capital improvement, claimed over time or added to your cost base. Getting this wrong in either direction is one of the more common amendments the ATO makes.

Two things you can no longer claim

Travel to inspect your property. Since 1 July 2017, individuals cannot deduct travel costs for inspecting, maintaining or collecting rent on a residential rental property. Flying Singapore to Sydney to check on your apartment is not deductible, however genuine the reason. This one bites overseas owners specifically, and people still assume it works.

Second-hand plant and equipment. For residential properties acquired after 9 May 2017, you generally cannot depreciate previously used assets, the existing dishwasher, carpets, blinds and air conditioning that came with the place.

What survives is capital works, the Division 43 deduction at 2.5% a year on eligible construction costs. That is often the larger figure anyway, and it is exactly what a quantity surveyor’s depreciation schedule quantifies. Worth arranging while you still have access to the property, because owners who leave it until they are overseas rarely get around to it.

Negative gearing works, with a catch

Foreign residents can negatively gear. If your deductions exceed your rent, you make a rental loss.

The catch is what you can do with it. A rental loss offsets other Australian income. If your Australian income is nothing but the rent from this property, which is true of most expats, there is nothing to offset it against.

The loss does not vanish. It carries forward and can be used against Australian income in a later year, including the year you sell. But it does not produce the annual refund an Australian-resident investor gets from offsetting against salary, and it certainly cannot be set against your Singapore or London earnings.

Owners who negatively geared happily while living in Sydney are often surprised that the same structure does very little for them once they leave.

A worked example

A Darlinghurst apartment renting at $800 a week, held without a mortgage, owned by an Australian citizen living in Singapore with no other Australian income.

Gross rent	$41,600
Strata levies	$6,000
Council rates	$1,200
Water rates	$800
Landlord insurance	$600
Management fees	$2,912
Repairs and maintenance	$1,500
Land tax	$2,100
Capital works (2.5%)	$3,500
Total deductions	$18,612
Net rental income	$22,988

Tax as a foreign resident: about $6,896. Tax as an Australian resident with no other income: about $718.

A difference of roughly $6,200 on the same property, driven entirely by the loss of the tax-free threshold.

Figures are illustrative. Add a mortgage and the picture changes substantially, usually into a carried-forward loss.

Nobody is withholding this for you

Back to where we started, because it is the practical point that matters most.

There is no withholding on rental income paid to foreign residents. Your agent does not deduct tax. Your tenant does not. The full rent arrives, and the liability accumulates quietly in the background.

Two consequences:

Set money aside monthly. Roughly 30% of your net rental income, moved to a separate account as it comes in. Owners who do this find tax time uneventful. Owners who do not find it expensive.

Expect PAYG instalments eventually. Once you have lodged a return showing tax payable above the ATO threshold, they will generally put you into quarterly instalments. This is the system correcting for the absence of withholding, and it smooths the burden, but it arrives as a surprise if nobody warned you.

Lodging your return

You must lodge an Australian tax return. Rental income does not disappear because you live elsewhere, and the ATO receives data from land registries, rental bond boards and state revenue offices.

• You need an Australian tax file number. If you have lost track of yours, sort it out early — you will also need it for a clearance certificate if you ever sell
• The deadline is 31 October for self-lodgement, generally later if you use a registered tax agent
• Keep records for five years, including statements, invoices, loan documents and your depreciation schedule
• Your annual statement makes this straightforward. We provide an income and expenditure summary at 30 June set out the way a tax agent wants to receive it, rather than a year of PDFs

Will you be taxed twice?

Usually not. Australia has double tax agreements with most places our owners live, including Singapore, the United Kingdom, Hong Kong and the United Arab Emirates.

The mechanism varies, but the general shape is that Australia taxes the Australian rental income first, and your country of residence either exempts it or gives you a credit for the Australian tax paid.

Singapore is a common case worth knowing about: it generally taxes on a territorial basis, so foreign-sourced rental income received there is often not taxed at all. That does not remove the Australian liability, but it usually means the Australian tax is the only tax.

This is genuinely specialist territory and depends on your circumstances. It is a conversation for a tax agent who works across both jurisdictions, not a website.

What to do about it

Find a tax agent who handles expat returns. Not a generalist. The residency question alone justifies it, and the cost is deductible.

Set aside roughly 30% of net rent as it arrives. The simplest thing on this page and the one that prevents the most pain.

Get a depreciation schedule if you do not have one, ideally before you leave.

Keep your Australian bank account and your TFN. Both are far harder to arrange from overseas than to maintain.

Understand the other costs. Income tax is one of three. Land tax and the vacancy fee are annual; capital gains tax arrives once and is usually the largest number of the three.

We are licensed real estate agents, not tax agents. We will not tell you what you owe. What we will do is keep records your accountant can actually use, and flag the dates. Managing from overseas covers the operational side.

Frequently asked questions

Do I pay Australian tax on rent if I live overseas?

Yes. Rental income from Australian property is Australian-sourced and taxable here regardless of where you live. As a foreign resident you receive no tax-free threshold, so tax applies from the first dollar at 30%.

Does my agent withhold tax from my rent like a UK letting agent would?

No. Australia has no equivalent of the UK Non-Resident Landlord Scheme. Nothing is deducted at source, so the full amount arrives and the tax is paid when you lodge. Set money aside as rent comes in.

Can I still claim my deductions as a foreign resident?

Yes, essentially all of them, interest, strata levies, rates, insurance, management fees, repairs, capital works and land tax. Two exceptions: travel to inspect the property, and depreciation on second-hand plant and equipment for properties acquired after 9 May 2017.

Can I claim flights to Australia to check on my property?

No. Travel expenses for inspecting or maintaining a residential rental property have not been deductible for individuals since 1 July 2017.

Does negative gearing still work if I live overseas?

It works, but only against other Australian income. If the rental is your only Australian income there is nothing to offset the loss against, so it carries forward to a later year instead of producing an annual benefit.

Will I be taxed twice, once here and once where I live?

Generally not. Australia has double tax agreements with most countries our owners live in, which typically give you an exemption or a credit in your country of residence for the Australian tax paid.

Do I have to lodge an Australian tax return?

Yes, if you have Australian rental income. You will need an Australian tax file number, and the deadline is 31 October for self-lodgement or later through a registered tax agent.

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Disclaimer

The data, figures, and market statistics referenced in this article were current at the time of publication and are sourced from third-party providers including CoreLogic/Cotality, Domain, realestate.com.au, HtAG Analytics, PropTrack, and NSW Fair Trading, among others. Property market data changes frequently, median prices, rental yields, vacancy rates, clearance rates, and days on market figures are updated regularly by their respective providers and may have changed since this article was published. Readers are encouraged to verify all figures directly with the cited sources before making any decisions.

This article is intended as general information only. It does not constitute financial, investment, legal, or taxation advice. The information provided does not take into account your individual circumstances, objectives, financial situation, or needs. Before making any property investment, purchase, sale, or management decision, you should seek independent advice from a qualified financial adviser, solicitor, or property professional licensed in your state.

Murray Property is a licensed real estate agency operating in NSW. We are not financial advisers. References to rental yields, capital growth, or investment returns are based on publicly available market data and historical performance, which is not a reliable indicator of future results.

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