If you are an Australian resident for tax purposes, rent from an apartment in mainland China, the gain on selling it, and dividends, interest and most pensions from mainland China generally have to be declared in your Australian return, in Australian dollars. Mainland China may also tax some of that income, especially rent and property sales, and the Australia–China tax treaty allocates taxing rights. Double taxation is usually relieved in Australia by the foreign income tax offset, but only for PRC income tax actually paid, and only up to a limit.
This is general information; the answer depends on your facts, and advice should be obtained from an Australian accountant and a qualified PRC tax adviser.
The starting point: Australian residents are taxed on worldwide income
An Australian resident for tax purposes is taxed on income from all sources. Keeping the money in a Chinese bank account, or never bringing it to Australia, does not change this.
The main exception is for temporary residents. Broadly, a person who holds a temporary visa, and whose spouse is not an Australian citizen or permanent resident, is generally not taxed in Australia on foreign-source income (other than overseas employment income) or on foreign capital gains. Once you become a permanent resident, the exemption ends and your mainland Chinese income becomes taxable from that point. Our article on becoming an Australian tax resident explains the residency tests in more detail.
If mainland China still treats you as resident
Under the PRC Individual Income Tax (IIT) Law, an individual who has a domicile in mainland China, meaning they habitually reside there because of household registration (hukou), family or economic ties, is a PRC tax resident, as is a person without a domicile who stays 183 days or more in a tax year. Someone who has moved to Australia but keeps a hukou, a home and family in mainland China may still be regarded as domiciled there, and must report foreign income, including Australian income, between 1 March and 30 June of the following year.
Where both countries treat you as resident, the treaty tie-breaker looks first at where you have a permanent home available and then, if necessary, at where your personal and economic relations are closer. Since 2025 the State Taxation Administration (STA) and local tax bureaus have publicly reported contacting residents about undeclared overseas income identified through the Common Reporting Standard (CRS), moving from reminders and self-correction to interviews, investigation and public disclosure, with a late-payment surcharge of 0.05% per day. Any doubt about PRC residence should be resolved with a PRC tax adviser. Tax clearance is also required before a hukou is cancelled on emigration.
Converting RMB to Australian dollars
Generally, income is converted at the exchange rate when it is derived (for rent, when you or your agent receive it) and expenses when incurred; for regular income an average rate can usually be used, and the ATO publishes annual averages. Use one method consistently and record the rates.
The PRC tax year is the calendar year, while the Australian year runs from 1 July to 30 June, so one PRC tax receipt may need to be split across two returns. For capital gains, the purchase price and each later cost are converted at the rate when paid and the sale price at the rate on sale, so exchange movements alone can create or reduce an Australian gain.
Rent from an apartment in mainland China
Mainland China
Rent from property in mainland China can be taxed there whether or not you are a PRC resident; Article 6 of the treaty allows the country where real property is located to tax its income. The IIT Law sets a 20% rate on rental income after a standard deduction (RMB 800 for each payment of RMB 4,000 or less, otherwise 20%), and preferential policies have reduced the rate for individuals leasing residential housing. In practice many cities collect a single combined rate on the rent, and a corporate tenant often withholds. Many private leases are never taxed in mainland China at all, and no PRC tax paid means no Australian offset.
Australia
The gross rent, converted to Australian dollars and including any PRC tax withheld, is assessable. Expenses of earning it are generally deductible, such as agent fees, repairs, property fees and, subject to the usual rules, interest on borrowings to buy it and certain depreciation amounts. Travel to inspect a residential rental property is generally not deductible for individuals, so a trip to China to check the apartment cannot be claimed. A net foreign rental loss can generally be offset against other income, and PRC income tax paid on the rent may be claimed as an offset.
Selling an apartment in mainland China
Mainland China
Under Article 13 of the treaty, mainland China may tax a gain on the sale of real property located there. PRC IIT on a property transfer is charged at 20% on the gain (sale price less original cost and allowable costs). Where the original cost cannot be documented, local tax bureaus may instead assess tax as a percentage of the sale price. Tax is usually settled on registration of the transfer, together with transaction taxes such as VAT, which depend on the holding period and local rules.
A commonly cited exemption, set by a 1999 notice that remains in force, exempts from IIT the income from selling a home the individual has used for more than five years and that is the family’s only home (often called 满五唯一). How “the family’s only home” is tested is applied locally, and property held by a spouse or other family members can affect it, so check with a PRC adviser before selling.
Australian capital gains tax
For an Australian resident, the sale is a CGT event and the capital gain is worked out in Australian dollars. Points to note:
- Cost base. If you bought the apartment before becoming an Australian resident, you are generally treated as having acquired it at its market value on the day you became resident. If you were a temporary resident first, that date is generally the day you stopped being a temporary resident (usually when you became a permanent resident). A valuation as at that date is important evidence.
- The 50% discount. An individual who has held the asset for at least 12 months can usually reduce the gain by 50%. The discount is reduced for any periods of ownership after 8 May 2012 during which you were a foreign or temporary resident.
- Main residence exemption. Usually unavailable, because the apartment is not your main residence while you live in Australia. It may be relevant only where it genuinely was your main residence while you were an Australian resident and the detailed rules, including on absences, are met.
- Relief. PRC IIT paid on the sale may be claimed as a foreign income tax offset against the Australian tax on that gain. Transaction taxes such as VAT are not income taxes and do not qualify, although they may be relevant as costs of the sale.
Consider a typical situation: a couple bought an apartment in a Chinese city years before migrating, became permanent residents, and sell it now. If the “only home held five years” exemption applies, there may be no PRC IIT, but the gain since the date they became Australian residents (measured in Australian dollars) is still assessable in Australia, and there is no PRC tax to offset.
Dividends, interest and bank deposits
The treaty limits PRC tax on dividends paid to an Australian resident beneficial owner to 15% of the gross dividend, and on interest to 10% of the gross interest. PRC domestic rules can produce a lower result: for example, IIT on interest from savings deposits in mainland China banks has been suspended since 9 October 2008, and different rules apply to listed shares and investment products. Tax withheld above the treaty rate should be reclaimed in mainland China; it is not creditable in Australia.
In Australia, the gross dividend or interest (in Australian dollars, adding back any PRC tax withheld) is assessable, with an offset for PRC tax properly paid. Because ordinary deposit interest is usually not taxed in mainland China, it is generally taxed in full in Australia. It is one of the most commonly omitted items.
Pensions and social insurance payments from mainland China
A PRC basic pension and retirement pay paid under national rules are exempt from PRC IIT. Under Article 18 of the treaty, pensions for past employment and social security payments made to an Australian resident are taxable only in Australia. A different rule in Article 19 applies to pensions for government service: these are generally taxable only in mainland China, unless the recipient is both an Australian resident and an Australian citizen.
Australia generally taxes foreign pensions received by residents, even if nothing is withheld overseas. A portion returning your own contributions may be tax-free, which the ATO may need to determine by private ruling. Lump-sum social insurance refunds and enterprise annuity payments may be treated differently and should be checked with your accountant.
Inheritances and gifts from family in mainland China
Australia has no inheritance or gift tax, and the ATO’s general position is that gifts and inheritances are not income. Money received from parents in mainland China is not itself taxable in Australia; what follows is, such as interest on the money, rent from an inherited apartment, or a gain when an inherited asset is sold. Inherited assets have their own cost base rules, and distributions from overseas trusts are treated differently from gifts.
Documentation still matters, because banks in both countries will ask where the money came from: a notarised inheritance certificate, the Will, a death certificate and a clear transfer trail. Our article on inheritance from overseas covers this in more detail.
The foreign income tax offset and its limits
The offset reduces Australian tax by PRC income tax paid on income also assessable in Australia. Its limits:
- It is available only for foreign income tax actually paid and not refundable. Tax that could be reclaimed under the treaty does not count.
- If your total offset is $1,000 or less, you can claim the tax paid without further calculation. Above $1,000, the offset is capped at the Australian tax attributable to your foreign income.
- It is non-refundable and cannot be carried forward. PRC tax above the limit is lost.
- If PRC tax is paid after you lodge, you generally have four years from the payment to amend that year’s return to claim it.
Summary table
| Income type | Taxed in mainland China? | Taxed in Australia (resident)? | Relief |
|---|
| Rent from a China apartment | Yes in principle (treaty Art 6); collection varies by city | Yes, net of deductions; losses can offset other income | Offset for PRC IIT actually paid |
| Sale of a China apartment | Yes, 20% of gain or assessed rate; possible “only home, 5+ years” exemption | Yes, CGT in AUD; 50% discount usually available; main residence exemption rarely | Offset for PRC IIT paid; none if exempt in China |
| Bank deposit interest | IIT currently suspended | Yes, in full | Usually nothing to offset |
| Other interest | Yes, capped at 10% by treaty | Yes | Offset, up to the limit |
| Dividends | Depends on domestic rules; capped at 15% by treaty | Yes | Offset, up to the limit |
| Basic pension / social security | Exempt from PRC IIT; treaty gives Australia sole right (Art 18) | Yes, generally | Treaty allocation; possible tax-free portion |
| Government-service pension | Generally yes (Art 19) | Generally not, unless an Australian citizen and resident | Treaty allocation |
| Inheritance or gift | No inheritance or gift tax as such; property transfer taxes may apply | Not income; later earnings and gains are | Not applicable |
Reporting correctly in your Australian return
Foreign rent, interest, dividends and pensions go in the foreign income section, with PRC tax paid shown separately; foreign capital gains go in the capital gains section. The return also asks whether at any time during the year you owned or had an interest in assets located outside Australia with a total value of AUD 50,000 or more (including real estate, deposits, shares and loans).
Under the CRS, mainland China banks ask account holders to self-certify their tax residence, and Australian residents’ account balances and income are reported to the STA and exchanged with the ATO. If earlier years were missed, a voluntary disclosure made before the ATO raises the matter is generally treated far more favourably than a discrepancy the ATO finds.
Moving money to Australia
Mainland China individuals generally have an annual facilitation quota of US$50,000 for buying foreign currency. Larger amounts, and purchases by individuals who are not PRC residents for foreign exchange purposes, require supporting documents. For apartment sale proceeds, banks typically ask for the sale contract, registration documents, tax payment certificates, the invoice and proof of ownership; for an inheritance, a notarised inheritance certificate or court document. Requirements differ between banks and branches. Splitting a transfer across relatives’ quotas to get around the limit is prohibited.
In Australia, banks report international transfers to AUSTRAC and may ask about the source of large transfers. This is not a tax; the answer is the same paperwork, translated where needed. Loans from family should be documented as loans.
Records to keep in both currencies
- Purchase and sale contracts, ownership certificates, invoices (发票) and receipts for costs.
- A market valuation at the date you became an Australian resident or stopped being a temporary resident.
- Leases, rent records and expense receipts.
- PRC tax payment certificates (完税证明) for each tax paid.
- Bank statements, and the exchange rates used with their source.
Keep Australian tax records for five years after lodgment, and CGT records for five years after the sale.
Common mistakes
- Assuming income kept or exempt in mainland China is not taxable in Australia.
- Using the original RMB price instead of the market value on becoming resident, or converting everything at today’s rate.
- Claiming an offset for PRC tax that was never paid, or for VAT and other transaction taxes.
- Overlooking the change when a temporary resident becomes a permanent resident.
- Answering “No” to the foreign assets question when RMB deposits or an apartment exceed AUD 50,000.
How we can assist
We advise on the Australian legal side of these situations, including residency, inheritance documentation and estate planning for families with assets in both countries, working alongside accountants in Australia and tax advisers in mainland China and Hong Kong. For families with assets in several countries, our article on structuring wealth across jurisdictions is a useful next step.
Related reading
Chua Tan Associates acts for families and their professional advisers on Australian legal matters with a cross-border dimension, working alongside tax advisers in Australia, mainland China and Hong Kong. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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