Overseas investments: the tax points worth knowing before you act
Most clients come to us with the investment question already sorted. The question they have not sorted is what happens on the Australian side. These are the points we put on the table before they sign anything.
Australian tax residents are taxed on worldwide income
If you are an Australian tax resident, the ATO expects you to declare income from anywhere in the world. The fact that the tax was withheld in the other country does not erase the Australian obligation —it may give you a foreign income offset, but you still have to report it.
Timing of realisation
Capital gains events in another country have Australian tax consequences. The timing of when you sell, and in which financial year, is a decision your tax agent should sign off on, not one made by looking at a chart.
Withholding tax
Many countries withhold tax at source on dividends or interest. Australia has double-tax treaties with many of them, which can reduce the rate. The mechanism is not automatic —you have to claim the offset. This is paperwork, not a tax department nicety.
Foreign investment structures
Holding offshore assets through a company, trust or similar structure changes the Australian tax treatment materially. This is where most mistakes happen, and where specialist advice is genuinely worth paying for.
Capital gains on overseas property
An Australian tax resident who sells overseas property may be liable for Australian capital gains tax on the disposal, even if tax was also paid in the country where the property is located. Double tax agreements may provide relief, but the calculation requires knowing the cost base in AUD at the time of purchase, the sale price in AUD at the time of sale, and the applicable exchange rates. This is an area where a registered tax agent is essential; the numbers are not intuitive.
Foreign income reporting
Australian tax residents must report worldwide income on their Australian tax return, including salary earned overseas, foreign rental income, interest on overseas bank accounts, and dividends from foreign companies. Tax paid overseas can usually be claimed as a foreign income tax offset, but the offset is capped at the Australian tax payable on that income. Failing to report overseas income is one of the most common compliance gaps for new arrivals.
Superannuation on departure
When an Australian tax resident leaves Australia permanently, their superannuation does not automatically disappear. They may be entitled to a Departing Australia Superannuation Payment (DASP), subject to withholding. Alternatively, they may choose to leave the super in Australia until preservation age. The right choice depends on expected return to Australia, visa status and tax treatment in the new country of residence.
This note is general information. We are not registered tax agents. Speak to one before acting on anything above.