Foreign Dividends and the Temporary Resident Exemption: Does the Permanent Resident Application Date Matter?

A foreign national lived in Australia throughout FY2025, was an Australian tax resident under ordinary residency rules, held a temporary visa until July 2025, applied for permanent residency (PR) in April 2025, and received foreign dividends throughout the year.

In July 2025, PR was granted. A common question arises in practice:

Does the PR application date change when the temporary-resident tax exemption ends?

The short answer is no. The exemption is tied to temporary-resident status, not the date the PR application is lodged.

The temporary-resident concessions are contained in:

Subdivision 768-R, ITAA 1997

• s.768-900 – Introduction: explains that the subdivision modifies tax rules for individuals who are temporary residents

  https://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s768.900.html

• s.768-910 – Foreign-sourced income (other than employment income) of a temporary resident is non-assessable non-exempt income (NANE)

  https://www.ato.gov.au/law/view/document?DocID=PAC/19970038/768-910

  
  

Key points from these provisions

1. A temporary resident is an individual who is an Australian tax resident but who is not an Australian permanent resident.

2. Most foreign-sourced income of a temporary resident is Non-assessable non-exempt (NANE) income. This includes foreign dividends, bank interest, and capital gains from non-taxable Australian property, subject to limited exceptions.

   Therefore, foreign-sourced dividends derived while the person is a temporary resident are NANE.

3. Once the person ceases to be a temporary resident, the temporary-resident concessions stop from that date onward.

4. Nothing in the ITAA ties the exemption to the date the PR application is lodged.

   
   

The legislation is explicit:

·       The concession applies while a person is a temporary resident.

·       It does not extend to the period after they cease to be one.

Does the PR application date have any effect?

The ITAA 1997 does not recognise PR application dates for the purpose of Subdivision 768-R.

The only relevant date is when the individual ceases to be a temporary resident under the definition in s.995-1 — which is the point at which they become a permanent resident for tax purposes.

Therefore:

• Foreign dividends received before the cessation date → NANE

• Foreign dividends received on or after the cessation date → Assessable

  
  

This operates on a daily derivation basis, not on a percentage-of-year basis.

Summary

Event	Date	Tax Impact
Australian tax residency under ordinary rules	All FY2025	Not in dispute
PR application submitted	April 2025	No tax effect under Subdiv 768-R
Temporary-resident status continues	Until July 2025	Foreign dividends = NANE
PR granted	July 2025	Temporary-resident concessions cease
Foreign dividends derived after this point	July 2025 onwards	Assessable foreign income

Practical outcome

FY2025 will contain two distinct tax periods:

1. 1 July 2024 → PR grant date (July 2025):

   Foreign dividends are non-assessable, non-exempt income.

2. From PR grant date → 30 June 2025:

   Foreign dividends are fully taxable and reportable.

Why the rules exist:

The Explanatory Memorandum to the 2006 reforms introduced Subdivision 768-R to:

• encourage highly skilled individuals to live and work in Australia

• simplify tax treatment by removing foreign passive income from the Australian tax net for temporary residents

• align Australia with competitive expat regimes globally

Final Thoughts

Australia’s tax residency rules are already difficult for many new migrants. When combined with international investment income and changing visa statuses, the obligations become even more complex.

The key takeaway:

Your visa status—not your intention—determines whether foreign dividends are taxable.

For individuals transitioning from temporary visas to permanent residency, careful review of timing can prevent unnecessary tax or missed reporting obligations.