Who can claim
This deduction is available to individuals and companies.
- The taxpayer is a foreign resident individual carrying on a business or a foreign resident company completing the relevant business or company return.
- The expense is directly related to assessable income subject to foreign resident withholding.
What you cannot claim
- An Australian resident does not use the specific foreign-resident-withholding expense label; otherwise deductible costs belong at the relevant ordinary expense label.
- Foreign resident capital gains withholding is separate.
- Expenses relating to exempt income or non-assessable non-exempt income are excluded and reconciled separately.
- Do not duplicate an amount already included under another business or company expense label.
How the amount is worked out
Claim only the deductible expense directly related to the relevant foreign resident withholding income at the applicable individual business-schedule or company-return label, after removing exempt, non-assessable and duplicated amounts.
Records the ATO expects
- Residency evidence
- Income and withholding statements
- Expense invoices
- Direct-allocation and reconciliation workpapers
Before you rely on this rule
This classification depends on taxpayer type, foreign residency, the withholding regime and the income to which the expense directly relates.
Where this rule comes from
Primary source: Income Tax Assessment Act 1997 section 8-1 (Section 8-1). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.
Supporting sources:
- ATO foreign resident withholding variation instructions (Updated 21 August 2025)
- Income Tax Assessment Act 1997 section 26-25 (Section 26-25 withholding compliance)