Australian Non-Resident Withholding Tax Rates
Non-resident withholding taxes are a final tax on certain Australian sourced income that is not subject to income tax. Australian expatriates or foreign investors who are non-resident for Australian tax purposes pay these rates of withholding tax on certain Australian sourced interest and investment income.
When an Australian expatriate proceeds overseas they should advise their bank(s) and investment managers of their new overseas address, and typically this will lead to withholding tax being automatically deducted from their investment or interest earnings, with no need to lodge an Australian tax return if this is an expat's only Australian sourced income.
The table below provides an indication of the rates of withholding tax applicable when an expatriate or foreign investor is based in a country with which Australia has, or does not have, a Double Tax Agreement (DTA).
| Type of Payment | Non-Tax Treaty Country | Tax Treaty Country (Indicative rates - refer to DTA) |
|---|---|---|
| Unfranked Dividends | 30% | Generally 15% |
| Franked Dividends | 0% | 0% |
| Interest | 10% | Generally 10% |
| Royalties | 30% | Generally 10% |
Note that Australian banks frequently contact clients to confirm their tax residency status. If an expatriate does not advise the bank or investment manager that they have proceeded overseas and become non-resident, and as a consequence withholding tax is not deducted from their interest or investment earnings, then there will be a need to submit individual tax returns for the particular years in question. This is quite a regular occurrence, but preferably avoided.
If non-residents find that their Australian interest income is being taxed at other than 10% their first point of contact should be their bank or financial institution - there are a number of factors that may impact the withholding rate, including how the individual is categorised by the bank's system. For example, if you do not provide an overseas address tax may be withheld at a rate of 47%.
Note that a specific form of withholding tax applies to non-residents selling real property in Australia, including Australian citizens and permanent residents - Foreign Resident Capital Gains Tax Withholding (FRCGW).
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