Managing an Australian Investment Portfolio as a Non-Resident Australian Expat

For many Australians living and working overseas, maintaining investments in their home country is a strategic way to stay connected and grow long-term wealth. However, once you’re classified as a non-resident for tax purposes, the landscape changes significantly, bringing with it specific tax implications, compliance requirements, and strategic considerations that must be carefully managed.

In this blog, we'll explore key strategies for managing an Australian investment portfolio as a non-resident, including tax implications, income treatment, and how to choose the right investment platform.

Understanding Your Tax Residency Status

The first and most crucial step is confirming whether you are considered a non-resident for Australian tax purposes. Your tax status is determined by several factors, such as your ties to Australia, time spent overseas, and overall living situation. It’s encouraged to consult a qualified tax adviser to determine your residency status before making investment decisions.

Capital Gains Tax (CGT) Implications

As a non-resident Australian Expat, some unique changes occur:

• You are only subject to CGT on assets considered “Taxable Australian Property”, such as real estate or direct interests in Australian land-rich companies.

• Shares and managed funds are generally not subject to CGT in Australia when purchased and sold while you are a non-resident. There are specific rules that apply if you held shares before becoming a non-resident. See our guide here on deemed disposal.

Dividends and Interest Income

Dividend and interest income are key components of most portfolios and are treated differently for non-residents:

• Fully franked dividends are generally not subject to any withholding tax, due to the franking credit attached. As franking credits cannot be claimed for expats, the income is considered tax neutral.

• Unfranked dividends are generally subject to withholding tax of 30%, unless reduced by a Double Tax Agreement (DTA).

• Interest income is usually taxed at a flat 10% withholding rate for non-residents.

Strategy tip: Prioritise fully franked dividends where possible and understand which of your holdings generate taxable distributions.

Direct Shares

Holding direct shares in Australian companies is a common and often tax-efficient way for expats to stay invested in the local market.

Compared to managed funds, direct shares offer greater control, transparency, and potential tax advantages, provided your portfolio is structured with your non-resident status in mind. However, Direct shares can have their drawbacks, requiring a more hands-on approach, with regular review and monitoring. This has led a lot of investors to choose managed funds and ETFs.

Managed Funds and Exchange-Traded Funds (ETFs)

Managed funds and ETFs can be excellent tools for Australian expats looking to build a globally diversified portfolio with low costs and minimal day-to-day involvement. They provide access to a wide range of asset classes, professional management, and market exposure that suits long-term investors living overseas.

Managed funds and ETFs are common choices for Australian investors, but for non-residents, tax treatment varies depending on the type of income distributed:

• Dividends and interest within these funds are subject to withholding tax.

• Capital gains may be exempt from Australian tax if not tied to taxable Australian property.

  
  

Choosing the Right Investment Platform for Non-Residents

One of the most overlooked aspects of managing an Australian investment portfolio as a non-resident is selecting an investment platform that accommodates your non-resident status. Not all Australian brokers and platforms are set up to handle the tax and compliance requirements for expats.

If your investment provider doesn’t properly record your non-resident status:

• You may be incorrectly taxed as a resident, leading to compliance issues.

• Withholding tax may not be deducted, forcing you to lodge an Australian tax return unnecessarily.

A platform that supports non-residents will:

• Automatically apply the correct non-resident withholding tax on dividends and interest.

• Eliminate the need to lodge a tax return if you only earn passive income and withholding tax is correctly applied.

• Provide appropriate tax summaries for non-residents.

• Maintain your access and service levels, even from overseas.

When evaluating your investment provider, check that they:

• Accept and properly document non-resident tax status on your account.

• Apply withholding tax at source in accordance with ATO rules and relevant DTAs.

• Offer accurate tax statements tailored for non-residents.

• Provide responsive support for overseas clients.

Compliance and Reporting Obligations

If the correct withholding tax is applied at source, passive investment income, such as dividends and interest, typically doesn’t require you to lodge an Australian tax return. However, if you earn other Australian-sourced income, like rental income or proceeds from selling property, you’ll likely still need to file one. Additionally, depending on the tax rules in your country of residence, you may also be required to report your Australian investment income there.

Conclusion

Managing an Australian investment portfolio as a non-resident requires a more deliberate and informed approach than when you're living in Australia. You need to understand the tax rules, choose the right platform, monitor compliance, and adapt your strategy as your circumstances change.

With careful planning and the right advice, Australian expats can continue building financial security at home while living globally. As always, it’s wise to consult with an experienced Tax Adviser or Financial Planner who understands the complexities of cross-border investing and expat taxation.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the link below:

Contact Us

General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.