Australian Tax on Overseas Property: What Owners in Thailand and Indonesia Should Know in 2026

An Australian who buys a condo in Phuket or a villa lease in Bali takes on two tax systems at once. The host country taxes the property where it sits. The ATO taxes Australian residents on worldwide income, so the rent, the deductions and the eventual sale all land on your Australian return as well. Add the negative gearing and capital gains reforms legislated in 2026, and the after-tax picture of an overseas purchase looks different from even a year ago.

This article is general commentary on how the rules work, drawn from public ATO material and published practitioner guidance. It is not tax advice. Your residency status, structure, funding and personal use all change the outcome, so take advice from a registered tax agent before you buy.

Do You Have to Declare Overseas Rental Income in Australia?

Yes, if you are an Australian tax resident. The ATO requires you to declare rental income from an overseas property on your Australian return, converted to Australian dollars. That applies whether the rent stays in a Thai bank account, gets paid to a Bali villa manager, or never leaves Indonesia. Keep the management statements, bank records and exchange-rate workings for each year, because you will need them for the return and for any later audit.

What Can You Deduct?

Published guidance treats overseas rental deductions much like Australian ones. Owners claim interest on money borrowed to buy the property, management and booking fees, repairs, local property taxes, insurance, utilities and strata or service charges, plus depreciation where it applies. Deductions only apply for periods when the property earns rent or sits on the market for rent at a fair price.

Two limits catch holiday-home owners. First, travel to inspect or maintain a residential rental property has not been deductible since 1 July 2017. Second, weeks you or your family use the property, or rent it to friends below market, reduce what you can claim. Expect your accountant to apportion costs between rental and private use. Our guide on holiday homes versus investment property explores that trade-off.

Negative Gearing on Overseas Property, and the 2026 Reforms

Since Australia removed foreign loss quarantining in 2008, residents have been able to offset a net loss from an overseas rental against Australian income, the same way as a domestic investment property. That position changed with the May 2026 Federal Budget.

Parliament has since legislated reforms that limit negative gearing on residential property to new builds, with existing holdings grandfathered. According to the ATO and Budget material, properties bought after 7:30pm AEST on 12 May 2026 lose the ability to offset rental losses against wage income from 1 July 2027, unless they qualify as new builds. Losses on those properties can offset other residential property income or carry forward.

Capital Gains Tax When You Sell

Australian CGT applies when a resident sells an overseas property. The calculation converts the cost base to AUD at the exchange rate when you bought, and the sale proceeds to AUD at the rate when you sold. Currency movement alone can create a gain or a loss. An Australian who bought in Thai baht when the dollar was strong, and sold after the dollar weakened, may report an Australian gain even if the baht price never moved.

The 2026 reforms also change the CGT discount. For individuals, the 50% discount gives way to cost base indexation and a 30% minimum tax rate on capital gains, applying to gains that accrue after 1 July 2027. Gains accrued before that date keep the old treatment. Your adviser can tell you how that split works for a property bought before, and sold after, the change.

A holiday home will not qualify for the main residence exemption while your main residence sits in Australia. If you move overseas and make the foreign property your home, different rules apply, and moving can also affect the exemption on your Australian home. That combination needs advice before you relocate, not after.

Avoiding Double Tax: Treaties and the Foreign Income Tax Offset

Australia has double tax agreements with both Thailand and Indonesia. In broad terms, the country where the property sits keeps the first right to tax rental income and gains from that property, and Australia gives residents a credit for the foreign tax they pay through the Foreign Income Tax Offset (FITO).

The offset has limits. It cannot exceed the Australian tax payable on that income, it is non-refundable, and you cannot carry unused amounts forward. You can only claim tax you have paid. In practice, if Indonesian or Thai tax on the rent exceeds the Australian tax on the same income, you absorb the difference. If the foreign tax is lower, you pay the top-up in Australia.

What the host countries charge

Indonesia. Rent from land and buildings attracts a final withholding tax, cited by practitioners at 10% of gross rent for residents, with higher rates for non-residents subject to treaty relief. Owners pay annual PBB land and building tax. A PT PMA company pays corporate tax on its profit. Buyers pay 5% BPHTB on purchase, and sellers pay income tax on the transfer value.

Thailand. Thailand taxes rental income earned from Thai property, and owners face the Land and Building Tax on property held. On sale, the seller faces withholding tax, plus Specific Business Tax of 3.3% within five years of purchase or stamp duty of 0.5% after. Our article on property tax in Thailand and Indonesia sets out the transaction costs.

Records Worth Keeping From Day One

• The purchase contract, title or lease, and land office registration in both the local currency and AUD.
• Every transfer from Australia, with dates, amounts and exchange rates.
• Annual rental statements from your manager, and evidence of foreign tax paid.
• A diary of the weeks you, family or friends used the property.
• Receipts for improvements, which may form part of your cost base.

Questions to Bring to Your Accountant

Do the 2026 negative gearing limits apply to the property I plan to buy? Should I buy in my own name, jointly, or through another structure? How will my personal use affect deductions? What happens to my Australian home's tax treatment if I retire to Thailand or Bali? How do I report foreign tax paid so I can claim the offset?

Kinnara Asia does not give tax advice. Our Concierge team can point you toward cross-border tax practitioners, and our guide for Australian buyers covers the ownership side. The tax line on your overseas property starts the day you transfer the deposit. Have you priced it?