A double tax agreement is a treaty between Australia and another country that decides which country can tax each type of income, so the same money is not fully taxed twice. If you are an Australian resident, you still declare your overseas income here, and you usually get relief through the foreign income tax offset for tax you paid in the other country.
For Indian-Australian families the question comes up all the time. Rent from a flat in Punjab, interest on an Indian bank account, a parent’s pension or a salary earned partly in India can all be taxed in India first and still belong in an Australian tax return.
This guide explains how Australia’s tax treaties work, uses the Australia-India agreement as the main example, and walks through a worked example with real 2025-26 tax rates.
Key takeaways
- Australia has comprehensive income tax treaties with more than 40 countries, including India. Treasury keeps the current list of income tax treaties.
- A treaty is not an exemption. Australian residents still declare worldwide income and claim relief for foreign tax paid.
- Under the Australia-India agreement, rent from Indian property may be taxed in India, and private pensions are generally taxed only where you live.
- If your foreign tax is $1,000 or less you can claim it without working out the offset limit. Above $1,000 you need the full calculation.
- Unused foreign tax cannot be carried forward or refunded in Australia.
What does a double tax agreement do?
A treaty works through three questions. Can Australia tax the income? Can the other country tax it too? If both can, how is the double tax relieved? Each type of income, such as wages, rent, dividends, interest and pensions, has its own article with its own answer.
| Item | Position |
|---|---|
| Australia’s treaty network | More than 40 countries, plus a separate arrangement with Taiwan |
| Australia-India agreement | Signed 25 July 1991, in force 30 December 1991, amended by a protocol in force from 2 April 2013 |
| Who uses it | Australian residents with foreign income, and foreign residents with Australian income |
| Main relief for residents | Foreign income tax offset (FITO) in the Australian return |
| FITO shortcut | Up to $1,000 of foreign tax can be claimed without working out the offset limit |
| Excess foreign tax | Cannot be carried forward and is not refunded |
| Australian default withholding on payments to foreign residents | 10% on interest, 30% on unfranked dividends and royalties, unless a treaty sets a lower rate |
Treaties have the force of law in Australia through the International Tax Agreements Act 1953. Section 4 of that Act says the treaty provisions apply despite anything inconsistent in the income tax assessment Acts, except for listed provisions such as the Part IVA anti-avoidance rules.
How do treaties stop you being taxed twice?
For most income, the country where the income comes from (the source country) can tax it first, sometimes only up to a capped rate. The country where you live (the residence country) then taxes your worldwide income and gives a credit for the source country tax.
Australia gives that credit through the foreign income tax offset. The ATO explains that residents must declare income earned anywhere in the world, and can claim an offset only for foreign tax they have actually paid and can prove with records.
- Reduced withholding. A treaty can cap the tax the source country takes from dividends, interest and royalties.
- Sole taxing rights. Some income, such as private pensions under the India agreement, is taxable only in the country of residence.
- Credit for foreign tax. Where both countries can tax, Australia allows the foreign tax as an offset against Australian tax on the same income.
Watch out
Only foreign tax that was correctly imposed under the treaty counts towards your offset. If the other country took more than the treaty rate, the ATO says you need to recover the extra from that country’s tax authority. Australia will not credit it.
Which articles of the Australia-India agreement matter most?
The ATO publishes the synthesised text of the Australia-India agreement. For most families, these articles do the heavy lifting.
| Article | What it covers | What it means in practice |
|---|---|---|
| Article 4 | Residency tie-breaker | If both countries treat you as resident, you are resident where you have a permanent home. If you have one in both or neither, it is where your personal and economic relations are closer. |
| Article 6 | Income from real property | Rent from a flat in India may be taxed in India. An Australian resident still declares it here. |
| Article 10 | Dividends | India can tax dividends paid to an Australian resident at no more than 15% of the gross amount. |
| Article 11 | Interest | India can tax interest paid to an Australian resident at no more than 15% of the gross amount. |
| Article 12 | Royalties | Capped at 10% or 15%, depending on the type of royalty. |
| Article 15 | Employment income | Wages are taxed where the work is done. There is a short-stay exemption if you are there no more than 183 days in that country’s year of income, the employer is not resident there, and the cost is not borne by a permanent establishment there. |
| Article 18 | Private pensions and annuities | Taxable only in the country where you live. |
| Article 19 | Government service and pensions | Indian government pensions are generally taxable only in India, unless you are both a resident and a citizen of Australia. |
| Article 24 | Relief from double tax | Indian tax paid in line with the agreement is allowed as a credit against Australian tax on that income. |
Does the 183-day rule decide your residency?
No. The 183-day test in Article 15 is about where wages are taxed, not about residency. For Australian residency the ATO applies four residency tests: the resides test, the domicile test, the 183-day test and the Commonwealth superannuation test. Spending fewer than 183 days in Australia does not on its own make you a foreign resident.
The treaty tie-breaker in Article 4 only comes into play if both countries treat you as a resident under their own laws. If you have recently moved, our Australian expat tax guide covers the residency questions in more detail.
Worked example: Indian rental income and the foreign income tax offset
The facts
Priya is an Australian resident for the 2025-26 income year. She earns a salary of $70,000 and owns a flat in India. The net rent for the year is INR 600,000 and she pays INR 84,000 of Indian tax on it.
- Using an illustrative exchange rate of INR 1 = AUD 0.018, the net rent is INR 600,000 x 0.018 = $10,800.
- The Indian tax is INR 84,000 x 0.018 = $1,512.
- Her taxable income is $70,000 + $10,800 = $80,800.
- She has private hospital cover, so no Medicare levy surcharge applies.
In a real return you would use the ATO’s exchange rate rules or published average rates, not this round figure. Because her foreign tax is more than $1,000, she has two choices.
Option 1: claim the $1,000 shortcut
Priya can enter $1,000 without working out her offset limit. The ATO’s myTax 2026 foreign income tax offset instructions warn that if you do this, you cannot claim the rest of your 2025-26 foreign tax later.
- Offset claimed: $1,000
- Foreign tax not used: $1,512 – $1,000 = $512
Option 2: work out the full offset limit
The offset limit is the Australian tax (including Medicare levy, ignoring tax offsets) on her full income, minus the tax on her income without the foreign rent. Using the ATO’s 2025-26 resident tax rates:
- Tax on $80,800: $4,288 + 30% x ($80,800 – $45,000) = $4,288 + $10,740 = $15,028. Medicare levy 2% x $80,800 = $1,616. Total $16,644.
- Tax on $70,000: $4,288 + 30% x ($70,000 – $45,000) = $4,288 + $7,500 = $11,788. Medicare levy 2% x $70,000 = $1,400. Total $13,188.
- Offset limit: $16,644 – $13,188 = $3,456.
Her foreign tax of $1,512 is below the $3,456 limit, so she can claim the full $1,512. That is $512 more than the shortcut. Her Australian tax on the rent drops from $3,456 to $3,456 – $1,512 = $1,944, so across both countries she pays $3,456 in total on that income, not $4,968.
Tip
If the foreign tax had been higher than the offset limit, the extra would simply be lost in Australia. That is why checking the treaty rate and the Indian tax assessed matters before you lodge.
How do you claim treaty relief in your tax return?
- Confirm your residency. Work through the ATO residency tests, and the treaty tie-breaker only if both countries claim you.
- Match each income type to its article. Rent, wages, interest, dividends and pensions are treated differently.
- Convert everything to Australian dollars. Keep a record of the rates you used.
- Collect proof of foreign tax paid. The ATO says tax that is only payable, not paid, does not count.
- Work out the offset. Use the $1,000 shortcut only when your foreign tax is $1,000 or less, or when you accept losing the rest.
- Fix it later if needed. If you pay foreign tax after lodging, you can amend within four years of paying it. Our guide on how to amend a tax return explains the steps.
To get less tax taken overseas in the first place, the ATO notes you can give the foreign tax authority a certificate of residency and an overseas tax relief form. If you pay Australian income to people living overseas, see our guide to non-resident withholding tax in Australia.
What are the common mistakes with double tax agreements?
- Leaving foreign income out of the Australian return because tax was already paid overseas.
- Treating the 183-day rule as the whole residency test. It is one of four tests.
- Claiming more than the treaty rate. Tax above the treaty cap does not count towards your offset.
- Using the $1,000 shortcut out of habit when the full calculation would give a bigger offset.
- Assuming a new treaty applies straight away. Each agreement has its own article setting out when it takes effect, so check the dates on Treasury’s list.
Watch out
Tax treaties allow tax authorities to exchange information. If you own property or bank accounts overseas, make sure the income appears in your return each year. You can estimate the Australian tax on your total income with our income tax calculator or the tax refund calculator.
Frequently asked questions
Does a double tax agreement mean I do not pay tax in Australia?
Not usually. An Australian resident still declares worldwide income in their Australian return. The agreement decides which country can tax each type of income, and Australia then gives relief, mostly through the foreign income tax offset for tax correctly paid overseas.
How many countries does Australia have a double tax agreement with?
Australia has comprehensive income tax treaties with more than 40 countries, including India, the UK, the US, New Zealand, China and Singapore. Treasury keeps the current list, along with the signing and entry into force dates for each agreement.
Is rent from a property in India taxable in Australia?
Yes, if you are an Australian resident for tax purposes. Under Article 6 of the Australia-India agreement, India may also tax the rent because the property is there. You then claim a foreign income tax offset in Australia for the Indian tax paid, up to your offset limit.
Can I carry forward foreign tax I could not use?
No. Under the ATO foreign income tax offset rules, foreign tax above your offset limit cannot be carried forward to a later year and is not refunded. If too much tax was taken overseas, for example above a treaty rate, you need to ask the foreign tax authority for a refund.
Are Indian pensions taxed in Australia?
It depends on the type. Under Article 18, private pensions and annuities paid to an Australian resident are generally taxable only in Australia. Indian government service pensions fall under Article 19 and are generally taxable only in India, unless the person is both a resident and a citizen of Australia.
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Talk to a registered tax agent
If you have income in India or another treaty country, speak with a registered tax agent at Nanak Accountants & Associates on 1300 626 258. Our migrants and expats team can check your residency, the treaty articles and your foreign income tax offset, and our property accounting and individual tax return services cover overseas rental income. If you are leaving Australia, see our tax clearance services for migrants, or contact our team for a review.
This article is general information only and is not personal financial or tax advice. Information checked against ATO, Treasury and Federal Register of Legislation sources on 13 October 2026.
