When an Australian non-resident holds a rental property in Brisbane, receives franked dividends from an ASX share portfolio, and earns a salary in Hong Kong or Singapore, they face one of the most layered tax return scenarios in the Australian system. The critical point is this: each income stream is governed by different rules under Australian tax law, and the sequence in which you calculate and report them directly affects your final tax position. Filing these three streams as if they are interchangeable is the single most common error ODIN Tax encounters when reviewing returns lodged by generalist accountants [2].
TL;DR: Key Takeaways
- Australian non-residents are taxed only on Australian-sourced income; foreign salary is generally not assessable in Australia.
- Non-residents receive no tax-free threshold, meaning rental income and dividends are taxed from the first dollar at non-resident rates.
- Franked dividends carry a different treatment for non-residents than for residents, and imputation credits cannot be refunded to non-residents.
- Negative gearing on rental properties still applies to non-residents and can reduce net Australian taxable income.
- Sequencing the calculation of losses, offsets, and withholding credits in the correct order prevents both over-payment and ATO audit triggers.
What Income Must an Australian Non-Resident Actually Declare?
The starting point for any non-resident return is drawing a hard line between what is assessable in Australia and what is not. A non-resident individual is liable to Australian income tax only on Australian-sourced income. That means your Hong Kong salary, your Singapore bonus, or your UAE consultancy fees are outside the scope of an Australian return entirely.
What remains inside the scope is typically:
- Australian rental income (net of allowable deductions)
- Australian dividends (subject to withholding rules)
- Australian interest income (also subject to withholding)
- Capital gains on taxable Australian property (covered separately from this article)
This distinction matters enormously. Many expats either over-report by including foreign salary or under-report by omitting investment income assuming it is “covered” by withholding tax [5]. Both errors attract ATO scrutiny.
How Does the No-Tax-Free-Threshold Rule Change the Maths?
Building on the question of what is assessable, the next structural difference is how it is taxed. Unlike Australian residents who pay no tax on income up to the tax-free threshold (for the 2025-26 financial year), non-residents are taxed on every dollar of Australian-sourced income from zero. There is no low-income tax offset either.
For the 2025-26 financial year, non-resident tax applies at a flat 30% rate on the first tier of Australian taxable income, escalating at higher income levels [4]. This architecture means that a non-resident with modest net rental income and a small dividend stream still faces a meaningful tax liability, whereas a resident in the same position might pay nothing.
The practical consequence: deductions against rental income carry greater marginal value for non-residents than many clients initially expect, because every dollar of deductible expense reduces income that would otherwise be taxed from the first dollar.
How Does Negative Gearing Work for Non-Residents?
Negative gearing is not a residents-only benefit. A non-resident who holds an Australian investment property can deduct allowable rental expenses against their Australian rental income, and if those deductions exceed rental income, the resulting net rental loss reduces total Australian taxable income. This is one of the most underutilised positions in non-resident returns.
Common deductible items include:
- Loan interest (on the portion attributable to the investment property)
- Property management fees
- Rates and land tax
- Repairs and maintenance (note: capital improvements are not immediately deductible)
- Depreciation on eligible plant and equipment (subject to quantity surveyor reports)
- Body corporate fees
Generally, rental income and its associated deductions should be calculated first to establish net rental income or loss before applying it against any other Australian income in the return. This is general information only and does not constitute personal tax advice for your specific return.
What Happens to Franked Dividends When You Are a Non-Resident?
Stepping back from property into the investment portfolio, dividends introduce an additional layer of complexity. Franked dividends received by Australian residents carry imputation (franking) credits that can reduce tax payable or generate a refund. For non-residents, the position is fundamentally different.
| Scenario | Resident Shareholder | Non-Resident Shareholder |
|---|---|---|
| Fully franked dividend | Grossed up; franking credits offset tax; excess refunded | Withholding tax (WHT) applies to unfranked portion only; no refund of franking credits |
| Unfranked dividend | Included in assessable income at marginal rate | Subject to WHT (rate varies by Double Tax Agreement country) |
| Partly franked dividend | Grossed up proportionally | WHT applies to unfranked component only |
The withholding tax rates on dividends depend on whether a Double Tax Agreement (DTA) exists between Australia and the non-resident’s country of residence. ODIN Tax works across 40+ DTA countries, which means rate verification is a standard step in every non-resident dividend assessment.
How Should These Income Streams Be Sequenced in the Return?
The ordering of calculations is not arbitrary. The following sequence applies to returns with rental, dividend, and foreign income components in the same year, and a Registered Australian Tax Agent should verify the correct approach for your specific circumstances:
- Establish tax residency status first. Residency governs every other rule. An incorrect residency classification invalidates the entire return [2].
- Calculate net rental income or loss. Apply all deductions to establish whether the property is positively or negatively geared.
- Add Australian dividend income. Identify the grossed-up amount, franked portion, and applicable withholding already deducted at source.
- Apply any other Australian-sourced income. Interest, trust distributions, and similar items.
- Apply non-resident tax rates to the total Australian taxable income. No tax-free threshold; no LITO.
- Offset withholding taxes already paid against the tax liability assessed.
- Confirm Foreign Income Tax Offset (FITO) eligibility only if any foreign income has, unusually, become assessable in Australia under specific provisions.
Skipping or reordering steps two and three is where errors typically compound. A net rental loss reduces the base to which non-resident rates are applied, not the other way around.
Frequently Asked Questions
Do I need to lodge an Australian tax return if I live overseas?
Yes, if you have Australian-sourced income such as rental income or Australian employment income, you are generally required to lodge an Australian tax return regardless of where you live [3]. Note that dividends paid to non-residents are generally subject to a final withholding tax, meaning they typically do not need to be reported on an Australian tax return where the correct withholding has been applied.
Is my foreign salary included in my Australian tax return as a non-resident?
No. As an Australian non-resident for tax purposes, you are taxed only on Australian-sourced income. Your overseas salary is not included in your Australian return.
Can I claim the tax-free threshold as a non-resident?
No. Non-residents are not entitled to the tax-free threshold. Tax applies from the first dollar of Australian taxable income at non-resident rates.
Can I get a refund of franking credits as a non-resident?
No. Imputation (franking) credits are not refundable to non-resident shareholders. The benefit of franking for non-residents is that withholding tax does not apply to the franked portion of a dividend.
What if I have not lodged for several years?
Overdue lodgments can attract penalties, but the ATO has mechanisms for managing this, particularly where there is a genuine reason for delay. ODIN Tax specialises in backdated and overdue non-resident lodgments and manages ATO correspondence as part of the process.
Does negative gearing still apply to non-residents?
Yes. Non-residents can offset net rental losses against other Australian taxable income, reducing the total Australian taxable income subject to non-resident rates.
How does a Double Tax Agreement affect my dividend withholding rate?
DTAs between Australia and your country of residence may reduce the standard withholding tax rate on dividends. The applicable rate depends on the specific DTA country and the type of income. A tax agent should verify the applicable rate for your situation.
About ODIN Tax
ODIN Tax is Australia’s specialist tax agent practice for Australian expats and non-residents, headquartered in Hong Kong and serving clients across 40+ countries. As a Registered Australian Tax Agent, ODIN Tax prepares complex non-resident returns, manages overdue lodgments, and provides tax residency and CGT advice for Australian citizens living abroad. Part of the ODIN Group alongside Odin Mortgage, ODIN Tax operates as part of an integrated expat property team where tax strategy is built into property and mortgage planning from the outset, not treated as an afterthought. With 10,000+ clients served and a 4.9/5 Google rating from over 330 verified reviews, ODIN Tax brings the depth of a specialist practice to every multi-income lodgment scenario.
Have rental income, dividends, and overseas salary in the same tax year?
Speak to ODIN Tax’s specialist non-resident team about preparing your return correctly the first time. Visit www.odintax.com to get started.
References
- Australian tax: A guide for foreigners and expats (www.expertsforexpats.com)
- Do Australian Expats Need to Complete a Tax Return? (atlaswealth.com)
- Australian income tax brackets and rates (2025-26 and … (www.superguide.com.au)
- What Income to Declare Tax Return 2025-26: Complete Guide (itp.com.au)
