Tougher Australian tax rules imposed on non-resident property investors

Here is an article that appeared in the Singapore Business Review that featured TJD Accounting Services on the topic of taxation for Non-Resident Property Investors. 

For the reading purpose of our clients from all over the world, we have re-written the article to address all overseas and non-resident property investors, not just Singaporen investors. If you prefer to read the original article for Singaporean property investors, please visit: https://sbr.com.sg/markets-investing/news/singaporean-property-investors-face-tougher-tax-rules-in-australia

Australian taxes concerning all non-resident property investors:

Various tax updates for non-reisdent property investors could lead to penalties and reassessments potentially reaching tens of thousands of dollars.

Non-resident property investors with assets in Australia must brace for tougher tax rules following recent changes in the Australian Federal Budget. 

Australia’s Treasurer, Jim Chalmers, recently announced a key adjustment to the Foreign Resident Capital Gains Withholding (FRCGW) tax. The withholding rate will rise from 12.5% to 15% and the transaction threshold will drop from $750,000 to $0. 

Dominic Murphy, an international tax expert at TJD Accounting Australia, said that non-resident investors selling properties after 2024 will be affected. 

“For instance, if you sell for $600,000, $90,000 (15%) of tax will be withheld by the Australian Tax Office (ATO). This is a major increase that you need to prepare for,” he said.

In addition to the increased withholding tax, investors face high land tax rates and potential reassessments. 

Murphy warned that if state governments find investors are non-residents, they may reassess tax liabilities at a higher rate, potentially covering the last five years, leading to significant penalties.

Murphy noted that over 70% of his overseas (non-resident) clients have faced reassessment tax bills between $60,000 and $100,000, often catching them off guard due to unawareness of their tax obligations.

Despite these challenges, foreign investment in Australian property remains strong. In 2022–23, foreign investors, purchased 5,360 properties worth $4.9b, up from 4,228 properties valued at $3.9b in the previous year.

However, Stephen Bailey, a property consultant at Blue Crest Property Solutions, revealed that 94% of his non-resident clients are unaware of their tax obligations in Australia.

What overseas property investors can do
Murphy advises non-resident property investors to start filing annual tax returns, even retroactively, to potentially recover withholding tax. Obtaining an Australian Tax File Number (TFN) is crucial, and investors should apply for one as soon as they purchase property.

He stressed the importance of acting quickly to avoid severe financial consequences. Murphy also suggested exploring trusts in Australia to mitigate tax liabilities. Bailey added that whilst taxes for foreigners are high, some states offer lower rates or different requirements.

Moreover, investors are strongly advised to seek professional guidance to get clarity on these complex tax regulations and protect their investments.
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Our team at TJD Accounting Services has over 40 years of experience in handling non-resident tax returns and providing financial guidance to overseas investors. Let us help you make informed decisions to help protect your assets and finances.  

Email us at info@tjdaccounting.com.au or call +61 3 9379 4040. 

You may also be interested in our article about the tax landscape for foreign property investors from January 1 2025: https://tjdaccounting.com.au/overseas-property-investors-australia-face-complex-tax-challenges/