Foreign investors’ tax write-off on Aussie homes revealed by ATO

International investors are racking up billions of dollars in tax write offs to use as negative gearing and deductions from their Aussie home profits.

And none of the changes made in the Albanese government’s federal budget overhaul of property investment in Australia will have any impact on the super-wealthy offshore landlords currently able to slash their tax liabilities with Australian benefits.

Market watchers have warned while the revelation would not “pass the pub test” with most Australians, the reality was consistent undersupply of new home building meant foreign landlords were now a necessity as rental supply struggled to meet demand.

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The Australian Taxation Office released its 2024 financial year data in June, and it shows more than 34,000 non-residents claimed net rent losses worth a combined $473m.

It’s almost four times the number of Australians who signed up as rentvestors in the same year.

The loss entitles the owner to a reduction in the tax on their rental income, but for super wealthy internationals getting rent from multiple properties or with other income it opens the door to a negative gearing claim.

Over the past decade, the total for rental losses claimed in tax returns by non-residents was $35bn.

Across the same timeline the tax data shows $68.6bn in rent interest deductions were also claimed, as well as $10.5bn in rent capital works deductions and even $65bn in “other” rental deductions.

It’s expected the more than $175bn in tax write offs would signal an intent to claim tax deductions when the homes are sold.

According to the ATO’s online calculator and PropTrack median home value data, an offshore investor who bought a house in Sydney in June, 2014, and sold it at the same time in 2024 would be looking at a $701,000 overall profit and a $295,650 tax bill.

But with, for example, $100,000 in deductions like net rental losses, they could reduce the profit subjected to tax to $601,000 and pay the government just $250,650.

Tax Institute tax counsel John Storey said the federal budget’s changes to CGT benefits and negative gearing in May would have no impact on wealthy foreign investors, despite major changes for smaller scale Aussie investors.

“It’s one of the budget changes where the wealthier you are, the less relevant they are,” Mr Storey said.

“It’s really your aspirational, hard working tradies or young professionals who will look for this (negative gearing and CGT benefits) as a way to better themselves. They are the ones getting hit.

“But an Elon Musk couldn’t care less about the changes.”

The government’s tax changes mean that Australian investors can now only negatively gear newly built properties, and the same is necessary for those wanting to access capital gains tax discounts of a flat 50 per cent after owning a home for a year.

International investors’ benefits remained unchanged, with their options already limited to new builds and their access to the CGT change stamped out more than a decade ago.

Real Estate Institute of Australia president Jacob Caine said while it had a bad look, “decades of policy and delivery failure across all levels of government” around housing supply had left the nation little choice but to accept tax benefits for foreign investors.

“That question of does this pass the pub test, on the first pass it would look pretty problematic to the average Australian,” Mr Caine said.

“When you look at the opportunity for tax relief that potentially incredibly wealthy foreign investors will receive on their investments in Australia, not a lot of people would be supportive of maintaining the status quo.

“However, what’s critical to remember is that Australia’s housing system is an ecosystem and it relies on foreign investment to help support the infrastructure and architecture of the system.

“Without tax relief, foreign investors are less likely to invest in the market.”

The Australian government has addressed tax benefits for international investors and foreign residents in the past, having revoked capital gains tax discounts from them in 2012 and more recently broadening the range of foreign-owned assets that will attract capital gains tax charges — though things like shares are still exempt in most instances.

This week the Tax Institute lauded a government decision to amend legislation that would have made the more recent changes retrospective and potentially left internationals facing tax bills for historic profits that had not been applicable at the time.

It did not relate to real estate.

Mr Storey said in light of recent trade war scenarios, making a change to stop negative gearing among foreign investors would have had the potential to raise the ire of US president Donald Trump.

While negative gearing can only be claimed against any income earned in Australia, losses can be carried forward and ultimately used to reduce the capital gains tax paid when they sell the homes for a profit down the track.

The ATO data covers both residential and commercial property, but foreign investors are limited to purchasing only new residences.

Separate ATO data shows that the dominant international force investing in Australian homes is the People’s Republic of China, with 22,272 and more than 25,500 once combined with Hong Kong. Singapore is next at 1978, then Malaysia, 1795, and Japan, 1711.

The data covers properties acquired from 2016-2025 still owned by offshore investors up to the end of the 2025 financial year.

Property Investment Professionals of Australia chair Cate Bakos said knowing that foreign investors had not faced any changes in the nation’s tax overhaul “does rub salt in the wounds” for the Millennials and Gen Ys who had been hoping to rentvest their way towards a dream home later in life.

While the latest ATO data suggests at least 34,000 foreign investors would have met basic requirements for negative gearing, depending on their wider Aussie income, separate Australian Bureau of Statistics data for the 2024 financial year shows fewer than 8300 Australians bought an investment property as their first home in the same timeline — a rough guide to the number of Aussies looking to rentvest

“It emphasises the reduced opportunity for young Australians who are wanting to build a better financial future for themselves,” Ms Bakos said.

Property Investor Council of Australia chair Ben Kingsley said one of the positives in the data was it suggested international investors were actually renting their properties out.

“I’m pro-everything investment into Australia and to have all those extra homes being built,” Mr Kingsley said.

“It adds to rental supply and overall economic prosperity. And I’d be very careful about making any further adjustments to what can come into the country as investment.”

However, the property pundit said the tax office needed to split the data by residential and commercial property to better inform key decisions for governments.