Do Non-Residents With Only Rental Income Need to Lodge an Australian Tax Return? The ATO’s Actual Rule Explained for 2025-26

Yes. If you are a non-resident for Australian tax purposes and you earn any rental income from an Australian property, you must lodge an Australian tax return, regardless of how small that income is. For the 2025-26 financial year, the ATO requires foreign residents to lodge a return once they earn $1 or more of Australian taxable income, and rental income does not fall under the final non-resident withholding tax categories (such as fully franked dividends or bank interest) that would otherwise remove the lodgment requirement. There is no tax-free threshold that applies to non-residents earning rental income, so even a single dollar of net rental income triggers the obligation.

This is one of the most common misunderstandings ODIN Tax sees among Australian expats who have kept a property back home while living overseas. As a Registered Australian Tax Agent working exclusively with Australian expats and non-residents across 40+ countries, ODIN Tax has processed thousands of non-resident rental income returns and regularly encounters clients who assumed a small rental loss or modest rental profit meant no return was needed. It does not work that way, and the ATO’s rule here is unambiguous.

TL;DR

• There is no tax-free threshold or minimum exemption amount for rental income earned by non-residents.
• The rule applies the same way regardless of property type: residential, commercial, or vacant land.
• Missing the lodgment deadline triggers a failure-to-lodge penalty calculated in 28-day blocks, up to a capped maximum.
• Non-residents lose the 50% CGT discount available to residents and may face 15% Foreign Resident Capital Gains Withholding when they eventually sell the property. From 1 July 2027, new legislation replaces the 50% CGT discount with cost-base indexation; residents can still use the discount for gains accrued before that date, and foreign residents generally cannot access it.

About the Author: This article was prepared by ODIN Tax, a Registered Australian Tax Agent practice that has lodged returns for 2,300+ Australian expats across 40+ countries, led by Tax Director Pau Lam, who has spent over a decade specialising in non-resident and expat tax matters.

What counts as “Australian-sourced income” for a non-resident?

Australian-sourced income is any income generated from an asset, activity, or source physically located in Australia, and it is the category the ATO uses to decide what a non-resident must declare. For most expats who still own an investment property back home, this means rent collected from an Australian tenant, even if the lease is managed entirely by a local property manager and the owner never sets foot in the country during the year. Non-residents are only taxed on Australian-sourced income, not their worldwide income, which is the opposite of how residency-based tax works for someone living in Australia. But “only taxed on Australian income” is frequently misread as “only lodge if that income is significant.” It isn’t. Assessable income for a non-resident includes Australian-sourced employment income, rental income, pensions, annuities, and capital gains on taxable Australian property, and any of these on their own can trigger a lodgment obligation.

Is there a minimum rental income threshold before you have to lodge?

No. This is the specific point that trips up most expats, and it deserves a direct answer: there is no minimum threshold. The ATO does not apply a tax-free threshold to non-residents earning rental income, and for 2025-26 the rule is that a non-resident must lodge once they earn $1 or more of Australian taxable income. That figure is not a typo or a rounding convention, it is the actual bright line the ATO applies. Compare this to an Australian tax resident, who benefits from a tax-free threshold on their total income each year. Non-residents get no equivalent buffer for rental income specifically, which means even a property that runs at a modest paper profit after expenses still needs to be reported.

A useful way to think about this: the tax-free threshold for residents exists because residents are taxed on everything they earn, everywhere, so the threshold acts as a baseline exemption before any tax applies. Non-residents are only ever taxed on a narrow slice of income (the Australian-sourced portion), so the ATO does not layer a second exemption on top of an already-narrow tax base. The absence of a threshold isn’t a penalty aimed at non-residents, it is a structural consequence of how the non-resident tax base is defined in the first place.

Does it matter if the property runs at a loss?

Building on the point above, the lodgment obligation is triggered by earning rental income, not by making a rental profit. If your Australian property generates a net loss after deducting interest, depreciation, and management fees, you still need to lodge a return to report that outcome, even though no tax is payable on a loss-making property in that year. This matters for two practical reasons. First, a rental loss can potentially be carried forward and offset against future Australian-sourced income, but the ATO can only track and apply that carried-forward loss if the loss was actually reported in a lodged return. Second, non-residents cannot offset Australian rental losses against non-Australian income, since non-residents are only assessed on Australian-sourced amounts in the first place. Skipping a return in a loss year does not save you money; it simply creates a gap in your lodgment history that the ATO can later flag.

Does the type of property change the rule?

No, and this is worth stating plainly because it is another area of confusion. Whether the income comes from a residential rental, a commercial lease, or vacant land held for future development, the lodgment obligation for non-residents is identical: if $1 or more of Australian assessable income is earned, a return must be lodged. There is no carve-out for commercial property owners who assume business-use assets are treated differently, and no exemption for vacant land generating minimal or irregular income. The ATO’s rule is deliberately uniform across property types, which keeps compliance straightforward even if the underlying deduction rules (depreciation schedules, capital works deductions, GST treatment for commercial leases) differ by property category.

What happens if you don’t lodge?

A related but distinct question is what actually happens if a non-resident skips the return, either by oversight or by assuming the amount was too small to matter. The ATO applies a failure-to-lodge (FTL) penalty for individuals who miss their deadline, calculated at one penalty unit for every 28 days the return remains overdue, up to a maximum of five penalty units. This penalty accrues automatically and independently of whether any tax was actually owed, which is precisely the scenario many non-resident landlords find themselves in: a small or loss-making rental property with no tax payable, but a penalty applied anyway because no return was filed. In ODIN Tax’s experience helping expats catch up on multiple years of overdue lodgments, the penalty exposure is almost always smaller than clients fear, but it compounds the longer it is left unaddressed, and the ATO’s amnesty and remission options are generally easier to negotiate the earlier a client comes forward.

How does this interact with capital gains when you eventually sell?

Stepping back from annual rental income, a separate but connected issue arises when the property is eventually sold. Non-residents do not receive the 50% CGT discount that Australian residents get on assets held longer than 12 months, meaning a larger portion of any capital gain is taxable. In addition, sales of Australian real property by foreign residents are subject to Foreign Resident Capital Gains Withholding, generally withheld at 15% of the sale price by the purchaser and remitted to the ATO, unless a clearance certificate or variation applies. This withholding is separate from the annual rental income lodgment obligation but reinforces the same underlying principle: the ATO tracks non-resident property ownership closely at every stage, from the first dollar of rent to the eventual sale.

Frequently Asked Questions

Do I need to lodge if my rental property makes a loss?
Yes. The obligation is triggered by earning rental income (or having Australian assessable income more broadly), not by making a profit. Loss-making properties still require a lodged return.

Is there a minimum dollar amount of rental income before I need to lodge?
No. For 2025-26, non-residents must lodge once they earn $1 or more of Australian taxable income, with no exemption threshold for rental income specifically.

Does owning vacant land instead of a rented house change anything?
No. The lodgment rule applies uniformly across residential, commercial, and vacant land holdings.

What if I’ve missed several years of lodgments for my rental property?
The ATO applies failure-to-lodge penalties calculated in 28-day increments up to a capped maximum, but options exist to manage overdue lodgments. Getting professional guidance early generally produces a better outcome than waiting.

Do non-residents get the same CGT discount as residents when selling?
No. Non-residents do not receive the 50% CGT discount available to Australian tax residents, and sales are typically subject to 15% Foreign Resident Capital Gains Withholding.

Can I claim negative gearing deductions as a non-resident?
Non-residents can generally still claim standard rental deductions (interest, depreciation, management fees) against Australian rental income, subject to the same substantiation rules that apply to residents.

Does this apply to foreign nationals who are not Australian citizens but own Australian property?
Yes. The lodgment rule is based on tax residency status and source of income, not citizenship. Any non-resident, Australian citizen or otherwise, earning Australian rental income must lodge.

About ODIN Tax

ODIN Tax is a Registered Australian Tax Agent practice built exclusively for Australian expats and non-residents, part of ODIN alongside ODIN Mortgage. Led by Tax Director Pau Lam, with 10+ years of specialist expat tax experience, the team has served 2,300+ clients across 40+ countries and holds a 4.9/5 Google rating from 400+ verified reviews. Because ODIN Tax works alongside ODIN Mortgage’s property team, rental income compliance, negative gearing structuring, and eventual CGT and FRCGW obligations can be coordinated at every stage from the point of purchase through to any eventual sale. This article is general information only and does not constitute personal tax advice; individual circumstances vary, and formal advice should be sought through a consultation.

If you own Australian property while living overseas and are unsure whether your rental income needs to be reported, or you have overdue returns to catch up on, get in touch with ODIN Tax at https://www.odintax.com/ to talk through your specific situation.