Simple Guide For Foreign Investors To Taxation In Australia

Foreign investment is critical to Australia’s economic growth. It has contributed to the country’s well-being by promoting financial growth. 

The Australian property market is red hot right now in several locations. Given Australia’s relatively stable historical performance as an asset class, it is unsurprising that some foreign investors are snapping up Australian businesses in their never-ending pursuit of higher investment returns and financial stability,” says Novalease licensed specialist in novated leasing for individuals and organizations Hayes Thomas.

However, taxation in Australia is also known to be one of the most complicated for investors. As a result, foreign investors should know their tax obligations before investing in Australia.

Australian Taxation System For Foreign Investors

When a foreign investor purchases and sells property in Australia, any income or capital gain generated by the property is generally taxable, regardless of whether the foreign investor is a resident, non-resident, or temporary resident for Australian tax purposes. As a result, the property owner must file annual Australian tax returns to report income and capital gains.

Non-resident Tax Rates

The corporate income tax rate is 30%, except for companies with less than AU$50 million in “aggregated turnover” and earning no more than 80% of their income in passive forms, taxed at 26% in the 2020-2021 fiscal year. Australia will reduce this rate to 25% for 2021-2022 and subsequent fiscal years. The country’s standard budgetary year runs from July 1 to June 30. 

On payments to non-residents, Australia imposes withholding taxes of 30% on dividends, 30% on royalties, and 10% on interest. DTA or domestic law exceptions may reduce withholding tax rates.

Foreign Investment Framework

The Australian Foreign Investment Review Board (FIRB) reviews certain foreign acquisitions of Australian shares and assets to protect Australia’s interests while maximising investment flows.

Australia’s Foreign Investment Policy explains what factors are typically considered when determining whether an investment proposal is in the national interest.

Foreign Investment Information

Under current rules, unless a specific exemption applies, foreigners acquiring both residential and commercial properties in Australia will require FIRB clearance by default, regardless of the property’s value or the purchaser’s nationality.

Acquisitions exempted from FIRB approval:

  • a New Zealand citizen purchasing a residential property in Australia;
  • a foreign national purchasing residential property as a joint tenant with their Australian citizen spouse;
  • a new home sold by a developer who has obtained prior permission to sell the property to a foreign national; and
  • a foreigner purchasing an interest in developed commercial property that the investor will use immediately and in its current state for industrial or non-residential purposes
  • Other commercial purposes
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