Double Taxation Agreement Australia Germany: A Plain English Guide for Australians

Taxes are not the most exciting topic, but the Australia-Germany Double Taxation Agreement (DTA) is genuinely important for any Australian living, working, or investing across both countries. Understanding the basics prevents you from accidentally paying tax twice on the same income — or from making financial decisions based on a misunderstanding of how the two tax systems interact.

This guide explains the Australia-Germany DTA in plain English, covering the key situations Australians encounter: employment income in Germany, Australian investment income, superannuation, rental properties, and the question of tax residency.

What Is a Double Taxation Agreement?

A Double Taxation Agreement (also called a tax treaty) is a bilateral agreement between two countries that determines which country has the right to tax specific types of income. Without such an agreement, you could theoretically be taxed twice on the same income — once by the country where you earned it and once by the country where you live.

Australia and Germany have had a DTA in place since 1972, with subsequent amendments. The current version allocates taxing rights between the two countries across most common income types.

The core principle: For most types of income, the DTA either allocates the taxing right exclusively to one country, or allocates primary rights to one country and limits the other to taxing only the amount not covered by the first country. In practice, you pay tax once — to the right country — rather than paying full tax to both.

Tax Residency: The Starting Point for Everything

Before the DTA can tell you which country taxes your income, you need to determine which country (or countries) you are a tax resident of. This is the starting point for all DTA analysis.

Australia's tax residency rules: Australia taxes its residents on worldwide income, regardless of where it is earned. Residency is determined by several tests, primarily the "resides test" (ordinary place of residence) and the "domicile test" (permanent home). Many Australians living in Germany remain Australian tax residents because they intend to return, maintain Australian assets, or have family in Australia.

Germany's tax residency rules: Germany taxes its residents on worldwide income. You become a German tax resident when you have a Wohnsitz (home) or gewöhnlicher Aufenthalt (habitual abode) in Germany. Once you have completed your Anmeldung and are living in Germany, you are generally a German tax resident.

The common situation — dual residency: Many Australians in Germany find themselves technically tax resident in both countries. This is exactly what the DTA is designed to handle.

The DTA tiebreaker: When both countries claim you as a resident, the DTA has a series of tiebreaker tests applied in order:

1. Permanent home — where is your permanent home? If only in Germany, Germany wins.
2. Centre of vital interests — where are your personal and economic ties stronger?
3. Habitual abode — where do you habitually live?
4. Nationality — if you are only Australian (not German), Australia would be preferred.
5. Mutual agreement — the two tax authorities decide together.

In most cases, Australians living in Germany on a multi-year basis will be determined to be German tax residents under the DTA tiebreaker. This means Germany taxes your worldwide income and Australia steps back to taxing only Australian-sourced income (with various exemptions applying).

Employment Income: Working in Germany

The rule: Salary and wages earned from working in Germany are taxed in Germany. Full stop.

If you live in Germany and work for a German employer, your salary is subject to German income tax (Einkommensteuer) and social contributions. Australia does not additionally tax this income once you are a German tax resident, due to the DTA.

German income tax rates: German income tax is progressive, ranging from 0% on income up to the basic allowance (€11,604 in 2026), through graduated rates up to 42% for higher earners, and a 45% top rate (Reichensteuer) for the highest incomes. Social contributions (health insurance, pension, unemployment, nursing care) add approximately 20% on top (split between employee and employer).

Working remotely for an Australian employer from Germany: This is increasingly common and more complex. If you are employed by an Australian company and working remotely from Germany:

• Germany likely taxes your employment income as your economic activity is occurring in Germany
• Your Australian employer may have German tax and social contribution withholding obligations — though many Australian SMEs are unaware of this
• Australia may also consider the income Australian-sourced (since your employer is Australian)
• The DTA typically assigns taxing rights to Germany (where the work is performed) rather than Australia (where the employer is)

In practice, many Australian remote workers in Germany operate in a legal grey area — not from malice but from the complexity of the situation. If you are working remotely for an Australian employer from Germany long-term, get professional tax advice from both an Australian tax accountant and a German Steuerberater.

Australian Investment Income: Dividends, Interest and Rent

If you have Australian investments — shares, term deposits, rental properties, managed funds — the income they generate continues to be Australian-sourced income. The DTA affects how each type is treated.

Australian dividends: Under the DTA, Australian dividends paid to a German resident are subject to a withholding tax in Australia capped at 15% (for non-portfolio investors) or 15% generally. Australian companies typically withhold this tax before paying dividends to overseas recipients.

Germany may then tax the same dividends as worldwide income, but credits the Australian withholding tax against the German tax owed. In practice, you pay Australian withholding tax (up to 15%) and if the German rate is higher, you top up the difference in Germany.

Australian bank interest: Interest from Australian bank accounts is taxed in the country where you reside under the DTA — which means Germany, if you are a German tax resident. Australia may withhold a small amount but the DTA limits this, and Germany credits it.

Australian rental income: Rental income from property in Australia is taxed in Australia under the DTA (Article 6 — immovable property). This is one case where Australia retains primary taxing rights regardless of your residency. You declare Australian rental income in your Australian tax return and pay Australian tax on the profit.

However, Germany may also include Australian rental income in your German worldwide income calculation to determine your overall tax rate (the Progressionsvorbehalt — progressive rate reservation). Germany does not actually tax the Australian rental income but uses it to bump up the rate applied to your German income. This is legal under the DTA and is a genuine cost.

Capital Gains

Capital gains tax (CGT) treatment under the DTA is asset-specific.

Australian shares and managed funds: Capital gains on Australian shares sold while you are a non-resident of Australia are generally not taxable in Australia (shares are not land). Germany may tax them as your worldwide income if you are a German resident.

Australian real estate: Capital gains on Australian real estate are taxed in Australia regardless of your residency. The CGT main residence exemption is partially available to non-residents in some circumstances but has been significantly restricted in recent years.

Important CGT change for non-residents: Australia changed its CGT rules for non-residents significantly. The 50% CGT discount (which applies to assets held over 12 months) is generally not available to non-residents on Australian assets. This is a significant consideration if you own Australian property or shares with large unrealised gains.

Superannuation Under the DTA

As discussed in detail in our superannuation guide, this is the most complex DTA issue for Australians in Germany.

Accumulation phase (while your super is growing): Investment returns inside your super fund are taxed at 15% in Australia. Germany generally does not additionally tax these as they accrue — they are inside a foreign pension vehicle.

Drawdown phase (when you access your super): This is where interpretation becomes genuinely contested. The DTA's pension articles (Articles 17 and 18) deal with pensions and similar remuneration. Whether Australian superannuation qualifies as a "pension" under the DTA is a grey area.

The practical position for most working-age Australians in Germany: You are in the accumulation phase and not drawing on your super. The cross-border tax issue is a future concern to plan for — not an immediate problem. Seek advice before you actually start drawing on your super if you are a German resident at that time.

German Pension Entitlements and Australia

If you work in Germany and accumulate German pension entitlements (Deutsche Rentenversicherung), the Australia-Germany Social Security Agreement (a separate agreement from the DTA) coordinates entitlements between the two pension systems.

Key points of the Social Security Agreement:

• Contribution periods in both countries can be combined to meet minimum eligibility thresholds
• You cannot receive full pension from both countries for the same period (pro-rata rules apply)
• German pension paid to an Australian resident is taxed in Australia (as foreign pension income)
• Australian Age Pension rules may consider your German pension income

For Australians who spend 5–20 years in Germany, the German pension entitlement at German retirement age (67) is a genuine and sometimes significant asset. Do not ignore it.

Practical Steps for Australians in Germany

Step 1: Determine your Australian tax residency status This determines whether you need to lodge an Australian tax return and how Australian income is treated. If uncertain, get advice from an Australian tax accountant before you file your first year.

Step 2: Notify Australian authorities

• Update your Australian super fund with overseas contact details
• Notify Australian share registries of your overseas address (dividend withholding rates change)
• If you own rental property, your property manager or accountant needs your overseas details

Step 3: Engage a German Steuerberater A German tax adviser is essential if you have complex Australian income (property, shares, business income). The intersection of Australian and German tax law is not something to navigate alone.

Step 4: Lodge tax returns in both countries (if required) If you remain an Australian tax resident, you must still lodge an Australian tax return and declare worldwide income. Germany taxes your German income. The DTA prevents double taxation through credit mechanisms.

Step 5: Claim foreign income tax offsets Australia offers a Foreign Income Tax Offset (FITO) for taxes paid overseas. If you pay German tax on income that is also Australian-sourced, you can offset the German tax paid against your Australian tax liability.

When You Return to Australia

If you return to Australia after a period in Germany, you become an Australian tax resident again. Your German pension entitlements remain in the German system. Australian CGT may apply to assets acquired while you were a non-resident if you subsequently dispose of them after returning.

The year of return involves two tax residency statuses in one year — German resident for part of the year, Australian resident for the remainder. Both German and Australian tax returns for that year will be more complex than usual.

Finding the Right Professional Help

In Australia: Look for a tax accountant with experience in Australian expat tax or cross-border taxation. H&R Block has expat tax specialists. Expat Tax Australia (expattaxaustralia.com.au) and similar firms specifically handle Australian expats. The Tax Institute (taxinstitute.com.au) has a member search.

In Germany: A Steuerberater (tax adviser — a regulated profession in Germany) handles German tax. Most Steuerberater speak English in major cities. Find one via steuerberatersuche.de or ask your employer's HR department for recommendations.

Cost of professional advice: Expect to pay AUD $300–$800 for Australian expat tax advice from a specialist, and €150–$400/year for a German Steuerberater for a standard employed expat situation. This is money well spent compared to the cost of getting it wrong.

Frequently Asked Questions

I earn money only in Germany and have no Australian income. Do I need to lodge an Australian tax return? If you are a non-resident of Australia for tax purposes and have no Australian-sourced income, you generally do not need to lodge. If you remain an Australian tax resident (even while living in Germany), you must lodge.

Does the DTA mean I pay zero tax in Australia if I live in Germany? Not necessarily. If you have Australian-sourced income (dividends, rent, capital gains on Australian property), Australia typically retains taxing rights on that income under the DTA.

My German employer is paying me under a German contract — do I still have Australian tax obligations? If you are a non-resident of Australia, generally no — German salary is not Australian-sourced income. If you remain an Australian resident, you technically owe Australian tax on worldwide income, but the DTA and foreign income tax offset mechanism prevents double taxation.

Summary

The Australia-Germany Double Taxation Agreement ensures you do not pay tax twice on the same income. In most cases: German employment income is taxed in Germany; Australian rental income is taxed in Australia; Australian dividends face capped withholding; and superannuation accumulation is taxed inside the fund at 15% in Australia.

The key action items are: determine your Australian tax residency status, engage professional advisers in both countries if you have complex situations, and plan early for superannuation drawdown if you might be a German resident at retirement.

Related reading: Australian Superannuation While Living in Germany | German Health Insurance for Australians | How to Move to Germany from Australia