Quick Answer: Australia and Israel concluded an income tax treaty in 1999 that entered into force on 30 December 2003. It caps Israeli withholding tax on dividends paid to Australian residents at 5% for qualifying corporate shareholders holding at least 10% of the Israeli company's voting power, and at 15% in all other cases. Interest is capped at 10%, and royalties at 10% — there is no zero-rate tech exemption in this treaty. Capital gains on shares in ordinary companies are taxable only in the seller's country of residence, with a real-property-company carve-out. Superannuation is not specifically addressed and is the most common planning challenge for Australians making Aliyah. Neither the Israel Tax Authority (ITA) nor the Australian Taxation Office (ATO) applies treaty rates automatically — both require affirmative steps from the taxpayer or withholding agent.

Australia and Israel have more financial ties between them than most people realise. Roughly 120,000 Jewish Australians in Sydney and Melbourne maintain some connection to Israel — property they inherited, investments they hold, family they support financially, or plans to eventually make Aliyah. Going the other way, Australian super funds and tech investors have quietly moved into Israeli startups over the past decade.

The treaty often does real practical work, but a lot of people who need it have no idea it exists, let alone how to activate it. Australian landlords with Israeli apartments pay 25% withholding on rental income when the treaty could cut that. Holding companies receive Israeli dividends at 25% when 5% or 15% is correct. And Australians preparing to move to Israel routinely miss what happens to their superannuation once they become Israeli tax residents. This guide covers each of those situations.

1. Background: a treaty built on the OECD model

The Agreement between the Government of Australia and the Government of the State of Israel for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed in Canberra on 28 January 1999. It entered into force on 30 December 2003, after both countries completed their domestic ratification processes. Its provisions apply to withholding taxes from 1 January 2004 and to other taxes on income for Australian tax years beginning on or after 1 July 2004, and for Israeli tax years beginning on or after 1 January 2004.

The convention uses the OECD Model Tax Convention format that was standard in 1999 — older than Australia's more recent treaty network. Unlike Australia's 2009 convention with Japan or later treaties that incorporate BEPS minimum standards, the 1999 treaty has no principal purpose test or limitation-on-benefits clause. Anti-avoidance falls back on domestic law: Section 86 of the Income Tax Ordinance on the Israeli side and Part IVA of the Income Tax Assessment Act 1936 on the Australian side.

The treaty covers income taxes on both sides. For Australia, it covers the income tax imposed under the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997, including the Medicare Levy. For Israel, it covers income tax, company tax, and capital gains tax as imposed under the Income Tax Ordinance [New Version], 5721-1961. The treaty does not extend to the goods and services tax, Israeli VAT, Australian payroll tax, or Australian state land taxes.

2. Tax residency: two systems, one tie-breaker

The treaty applies only to a "resident of Australia" or a "resident of Israel" as those terms are defined by reference to each country's domestic law. Residency has to be sorted before anything else. If a person is simultaneously resident in both countries under their respective domestic rules, the treaty tie-breaker determines which country has primary claim.

Australia uses a common-law residence test supplemented by several statutory tests under Division 6 of the Income Tax Assessment Act 1997. The primary test asks whether an individual "resides" in Australia in the ordinary sense — taking account of physical presence, family, property, employment, social ties, and intention. Statutory presumptions apply for persons spending more than half the year in Australia. Critically, a person who has historically been an Australian resident but leaves Australia to live overseas may retain Australian tax residency for years if they maintain a domicile in Australia and do not permanently emigrate. For the treaty, however, what matters is domestic-law tax residency on both sides, not just Australian domestic law.

Israel defines residence under Section 1 of the Income Tax Ordinance using a "center of life" test. The ITA weighs family connections, permanent home, economic interests, social ties, professional activities, and where the individual considers themselves to live. Statutory presumptions run in both directions: 183 days or more spent in Israel in any tax year creates a presumption of Israeli residency, and 30 days in the current year combined with 425 days across the current year and the two preceding years shifts the burden to the individual to demonstrate that their center of life remains outside Israel.

Where both countries claim the same individual as a resident — most commonly for Australians who have moved to Israel but have not yet severed Australian residential ties — the treaty's tie-breaker article resolves the conflict through a hierarchy. The first test is where the individual has a permanent home available. If homes are available in both countries, the deciding factor becomes the center of vital interests: where personal and economic relations are stronger, where family lives, where professional connections are concentrated, where the individual habitually keeps. If that remains inconclusive, habitual abode is considered, then nationality, then mutual agreement between the ITA and the ATO's International Tax.

In Practice — Cutting Australian Tax Residency Before Aliyah: An Australian making Aliyah often assumes that obtaining an Israeli Teudat Oleh automatically ends Australian tax residency. It does not. Australia's residency rules look at whether you have permanently left with no intention of returning — and many Australians making Aliyah retain family, property, or business ties that the ATO treats as maintaining Australian residence. The consequences of dual residency are serious: Australia taxes residents on worldwide income, meaning Australian income tax is charged on Israeli-source salary and Israeli investment returns, with a credit for Israeli tax paid. To become an Australian non-resident from a specific departure date, you need to demonstrate a clear and permanent change of domicile: surrender or lease your Australian home, move the household to Israel, establish Israeli banking, school enrolment, and employment, and notify the ATO of your change of tax status. The ATO will typically recognise a departure date once the facts establish you became and remained a resident of Israel. Get a written tax opinion from an Australian-qualified tax adviser before your departure flight, not after.

3. Dividends: 5% for qualifying companies, 15% for everyone else

Israeli domestic law imposes 25% withholding on dividends paid to non-resident individuals under Section 170 of the Income Tax Ordinance, with a higher 30% rate applying to "significant shareholders" holding 10% or more of the Israeli company's means of control. An Israeli company paying dividends to an Australian shareholder must withhold at these domestic rates unless a treaty-based Reduced Withholding Tax Certificate has been obtained from the ITA in advance.

The treaty's dividends article reduces these rates. Two rates apply:

  • 5% of the gross dividend, where the beneficial owner is a company that holds at least 10% of the voting power in the Israeli company paying the dividend.
  • 15% of the gross dividend in all other cases — dividends paid to Australian individuals, to companies holding less than 10% of the voting power, and to entities that are not the true beneficial owner of the dividend.

The 10% voting-power threshold is lower than the 25% threshold in several of Israel's other tax conventions. That means an Australian private equity fund, family holding company, or individual investor who holds 10% or more of an Israeli company qualifies for the 5% rate rather than the 15% fallback — without having to hold a quarter of the company.

The beneficial owner concept is applied strictly. An Australian entity that is merely a conduit — where the economic interest ultimately flows through to residents of a third country — is unlikely to qualify for the reduced rate. The ITA has domestic anti-avoidance rules under Section 86 of the Income Tax Ordinance that can override the treaty where the structure lacks genuine commercial substance and is designed to access treaty benefits that the underlying investors would not otherwise receive.

In Practice — Claiming the 5% Rate on a Dividend from an Israeli Company: An Australian holding company that owns 15% of an Israeli technology company wants to receive a NIS 300,000 dividend. Without action, the Israeli company withholds NIS 75,000 (25%), leaving the Australian company with NIS 225,000. To withhold at the treaty rate of 5% instead, the process is: (1) The Australian company obtains a Certificate of Residency from the ATO — individuals and companies request this through ATO Online Services, at a cost of AUD 75 with a typical processing time of 28 days. (2) The Israeli company submits that certificate to the Withholding Tax Unit at the relevant ITA District Tax Office, together with an application for a ishur nikui mekor mufhat (Reduced Withholding Tax Certificate), specifying the treaty article and the applicable rate. (3) The ITA processes the application over approximately 30 to 60 working days and issues a certificate valid for the current tax year. (4) With the ITA certificate in hand, the Israeli company withholds NIS 15,000 (5%) and remits to the ITA within 7 days of the end of the month in which the dividend is paid. The saving in this example is NIS 60,000. Where the dividend is paid before the ITA certificate arrives, the Israeli company must withhold at the domestic 25% rate. The Australian company then files ITA Form 2513 (Request for Refund of Excess Withholding Tax) to recover the difference — the filing window is five years from the end of the relevant Israeli tax year.
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4. Interest: 10% ceiling across the board

Under Israeli domestic law, interest paid to a non-resident is generally subject to 25% withholding under Section 170 of the Income Tax Ordinance. Certain exemptions apply to interest on Israeli government bonds held through licensed foreign investors and to foreign-currency deposits in Israeli banks under specific conditions, but the 25% rate is the default for ordinary commercial lending and private bonds.

The treaty's interest article caps withholding at 10% of the gross interest paid to an Australian beneficial owner. Unlike the Canada-Israel treaty, which provides a lower 5% rate for unrelated financial institutions, the Australia-Israel convention uses a flat 10% ceiling with no further differentiation between banking and non-banking creditors.

The treaty provides full exemption from withholding in a limited number of cases: interest paid to the government of the other state or its central bank, to a body wholly owned by the government, and to certain government-backed financial agencies is exempt at source. Interest on Israeli government bonds held by the Reserve Bank of Australia as part of foreign reserve management is fully exempt under this provision.

As with dividends, the reduced rate does not apply automatically. The Israeli borrower or the Israeli bank paying interest must obtain a Reduced Withholding Tax Certificate from the ITA before applying the 10% rate. Where interest has been paid at the higher domestic rate without a certificate, the Australian lender files ITA Form 2513 for a refund.

A practical note on CPI-linked instruments: many Israeli corporate bonds and intercompany loans are denominated in New Israeli Shekels and linked to the Consumer Price Index. The ITA treats both the coupon and the CPI adjustment component as gross interest for withholding purposes. Australian investors unfamiliar with this characterization sometimes assume the inflation-compensation element is a capital return rather than income. Withholding applies to the full receipts from index-linked instruments unless the treaty applies.

5. Royalties: 10% general rate, no tech exemption

The treaty's royalties article caps withholding at 10% of gross royalties paid to an Australian resident beneficial owner. Unlike Australia's more recent treaties and unlike the Canada-Israel convention, the 1999 Australia-Israel treaty does not carve out a zero-rate exemption for software royalties, patents, or know-how. The same 10% rate applies to literary and artistic copyright royalties, patents, trademarks, designs, models, plans, secret formulas, software, and payments for the use of industrial, commercial, or scientific equipment.

Australian software companies licensing to Israeli customers, and Australian pharma companies licensing patents to Israeli licensees, pay 10% withholding at source — compared to zero under the Canada-Israel treaty. On a large licensing deal that runs for years, that gap is worth something. Some Australian tech companies consider routing Israeli licensing through another jurisdiction with a better treaty position, but that planning exercise requires specialist advice on both countries' anti-avoidance rules before any structure is put in place.

The beneficial owner requirement for the 10% rate applies in the same way as for dividends and interest. An Australian subsidiary of a multinational that merely passes royalties up to a parent in a third country is unlikely to qualify for the treaty rate if the arrangement lacks substance in Australia.

6. Capital gains: residence-based with a real-property exception

Under the treaty's capital gains article, gains from the sale of shares or other ownership interests in companies are generally taxable only in the country of the seller's residence at the time of sale. For an Australian resident selling shares in an Israeli company, this means Israel has no right to tax the gain under the treaty, and no withholding obligation arises under Section 170 of the Income Tax Ordinance — provided the shares are in an ordinary operating company.

One important exception overrides the residence rule. Where more than 50% of the value of the shares derives directly or indirectly from real property situated in Israel, the source-country rule applies and Israel retains the right to tax the capital gain. This catches Israeli real estate holding companies, certain Israeli property funds, and operating companies where the majority of balance-sheet value is in Israeli land and buildings. The buyer in any share transaction involving Israeli real-estate-heavy companies should request a written confirmation from the seller that the 50% real-property threshold is not met, because the buyer carries secondary liability for withheld tax where the threshold is crossed.

For gains on Israeli real property itself — apartments, commercial buildings, land — the treaty follows the standard approach: gains on immovable property are taxable in the country where the property is located. An Australian resident selling an Israeli apartment is subject to Israeli betterment tax (*mas shevach*) under the Land Taxation Law 5723-1963, regardless of the treaty. The ATO also taxes the gain, with a credit for the Israeli tax paid. Where the Australian resident has held the asset for more than 12 months, the 50% CGT discount under the Income Tax Assessment Act 1997 applies in Australia, which can reduce the Australian tax to a level below the Israeli credit available — potentially resulting in a net Australian tax credit with no Australian tax payable on the Israeli property gain.

In Practice — Selling an Israeli Apartment as an Australian Non-Resident: An Australian living in Sydney owns an Israeli apartment purchased in 2015 for NIS 1,800,000. She sells it in 2026 for NIS 3,200,000. The Israeli gain is NIS 1,400,000. Israel calculates betterment tax under Section 48 of the Land Taxation Law: a linear time-based calculation allocating gain between the pre-2012 exempt period (if applicable) and the taxable period. For a non-resident without a primary residence exemption under Section 49B, the taxable gain is taxed at 25% in Israel. Assume an Israeli tax bill of approximately NIS 300,000. In Australia, the same sale triggers an ATO CGT event. The Australian cost base is the purchase price converted to AUD at the 2015 exchange rate. The gain (in AUD) is the difference between sale proceeds and cost base. Because she has held the property over 12 months, the 50% CGT discount applies in Australia, reducing the capital gain by half before applying marginal tax rates. A foreign income tax offset (FITO) under Division 770 of the ITAA 1997 allows her to credit the Israeli tax paid against Australian CGT. In many cases, the Israeli tax at 25% exceeds the discounted Australian tax, resulting in no net Australian CGT to pay. The transaction nonetheless requires both an Israeli betterment tax filing and an Australian tax return for the year of sale. The betterment tax declaration must be filed within 30 days of signing the sale agreement and the tax paid within 60 days of signing (Sections 73(a) and 90A of the Land Taxation Law), not from completion, and the selling lawyer is required to withhold tax from the sale proceeds under Section 15A of the Land Taxation Law if no ITA clearance certificate has been issued.

7. Employment income, pensions, and business profits

Employment income. The treaty follows the standard OECD approach: income from employment is taxable in the country where the work is physically performed. An Australian national working in Israel for more than 183 days in any 12-month period is subject to Israeli income tax on their Israel-based remuneration under Section 2 of the Income Tax Ordinance. An Australian employee sent to Israel by an Australian employer for a short-term assignment of fewer than 183 days may remain taxable only in Australia, provided the employer is Australian, the remuneration is paid by the Australian employer, and the cost is not borne by an Israeli permanent establishment of the Australian business.

Directors' fees. Fees paid to a director of an Israeli company are taxable in Israel regardless of where the director lives. An Australian board member of an Israeli company — a situation increasingly common in Israeli startups backed by Australian venture capital — is subject to Israeli income tax and Bituach Leumi withholding on those fees, and the Israeli company must withhold at the applicable rate.

Pensions. Pensions and similar remuneration paid for past employment are taxable only in the state of the recipient's residence. An Israeli tax resident receiving a pension from a former Australian employer, or defined-benefit payments from an Australian state government scheme, owes Israeli income tax on those payments under the normal rules. Australian pension administrators typically apply 15% non-resident withholding to such payments by default. To stop Australian withholding, the recipient must notify the ATO and the fund of their non-resident status and provide an Israeli Certificate of Residence, requesting a variation of withholding through the ATO's PAYG withholding variation process.

Business profits. An Australian company's profits from Israeli customers are taxable in Israel only if the Australian company has a permanent establishment there. The treaty defines permanent establishment as a fixed place of business (office, workshop, factory, branch), a building site lasting more than six months, or a dependent agent who habitually concludes contracts on the Australian company's behalf in Israel. An Australian company that exports goods or services to Israeli clients through an independent Israeli distributor, without any Israeli-based employees or owned premises, typically does not have an Israeli permanent establishment. An Australian software company whose Israeli-based employees are entering contracts and closing deals on the company's behalf probably does — with resulting Israeli corporate income tax obligations at 23% under Section 126 of the Income Tax Ordinance.

8. Superannuation: what the treaty does not cover

Super generates more questions from Australians making Aliyah than almost anything else, and the treaty is least helpful here precisely because it says nothing about Australian superannuation. The 1999 agreement predates the super-specific provisions that appear in Australia's more recent treaties.

Several aspects of super create Israeli tax exposure that Australians don't expect:

  • Preservation and access. Australian super remains preserved in Australia. It cannot generally be accessed until the member reaches the preservation age (currently 60 for most people) and satisfies a condition of release. Moving to Israel does not give early access to super, and Israeli tax residency does not affect Australian fund management rules.
  • Employer contributions. If you continue to receive employer superannuation contributions from an Australian employer after you become an Israeli tax resident, the ITA treats those contributions as employment income earned during the relevant period. Whether they are exempt from Israeli tax under Section 14 of the Income Tax Ordinance (the 10-year new-immigrant exemption for foreign-source income) depends on the ITA's characterization of the underlying income — and the ITA's published position does not clearly resolve this for super contributions made after the date of Aliyah by an Australian employer. Obtain an ITA ruling before assuming the exemption covers ongoing contributions.
  • Withdrawals on retirement. Once you reach preservation age and satisfy a condition of release, you can withdraw super from Australia while living in Israel. For an Israeli tax resident, super withdrawals from a complying Australian fund may fall under the treaty's pensions article and be taxable only in Israel. If you are in the 10-year exemption period under Section 14, the ITA may classify the withdrawals as exempt foreign-source income — a very favorable outcome. However, this characterization is not guaranteed, and the ITA has discretion to apply different treatment depending on the nature of the payment and whether the fund satisfies the definition of a "pension fund" for Israeli purposes. The ATO generally does not impose withholding on retirement-phase super withdrawals made by Australian non-residents from complying funds — confirm this with the fund trustee before your first withdrawal.
  • The trust question. For Israeli tax purposes, an Australian self-managed super fund (SMSF) may be treated as a foreign trust under Sections 75A-75C of the Income Tax Ordinance, which can trigger annual income attribution to the Israeli-resident trustee-member. This is the same issue that affects Canadian TFSAs and is a significant trap for Australians who move to Israel while retaining a self-managed fund. Speak to an Israeli tax adviser about restructuring an SMSF before Aliyah — the consequences of non-compliance with Israeli trust reporting rules include penalties of NIS 95,000 or more per year, in addition to the attributed income being assessed as taxable.
In Practice — Superannuation Planning for Australian Olim: An Australian planning Aliyah at age 55 holds AUD 600,000 in a retail super fund and AUD 200,000 in a SMSF. Before departure: (1) Consolidate the SMSF into a large-fund APRA-regulated retail or industry fund to avoid the Israeli foreign trust attribution problem. This involves rolling over the SMSF balance, winding up the fund, and deregistering with the ATO — a process taking 60 to 90 days that should be completed before the Aliyah date is fixed. (2) The retail fund is not a foreign trust for Israeli purposes and does not trigger trust-attribution rules. (3) After Aliyah, no Israeli tax event occurs simply from holding the Australian super balance — the tax trigger is a withdrawal or a benefit payment. (4) At age 60 (preservation age), if the individual is still in the 10-year exemption period under Section 14, withdrawals from the retail fund should be analyzed with an Israeli CPA to determine whether they qualify as exempt foreign pension income. If they do, and the ATO confirms no Australian withholding applies on retirement-phase withdrawals, the individual receives the super tax-free in both countries — an extraordinarily favorable outcome that requires careful documentation and is best underpinned by a formal ITA advance ruling. Contact the ITA's Foreign Residents Unit in Jerusalem (Rechov Kaplan, Jerusalem) for advance ruling requests on specific super fund payments; typical processing time is 60 to 90 days.

9. How to claim treaty rates: the practical mechanics

The ATO and ITA both require affirmative steps to activate reduced withholding rates. Waiting for a refund after over-withholding is valid under both countries' rules but creates a cash-flow cost and delays that are worth avoiding.

Step one: ATO Certificate of Residency. Obtaining an Australian Certificate of Residency is the first step for any claim by an Australian resident for reduced Israeli withholding. Individuals and companies apply through ATO Online Services or myGov using the "Certificate of Residency" application. The ATO charges AUD 75 per application and typically issues the certificate within 28 days. The certificate confirms Australian tax residency for a specified period and is accepted by the ITA as proof of Australian treaty entitlement.

Step two: ITA Reduced Withholding Tax Certificate. The Australian Certificate of Residency is submitted to the Israeli payer, who then applies to the Withholding Tax Unit at the relevant ITA District Tax Office for a ishur nikui mekor mufhat (Reduced Withholding Tax Certificate). The application specifies the type of income, the treaty article relied upon, and the requested rate. The ITA processes applications in approximately 30 to 60 working days and issues a certificate specifying the rate and its period of validity, typically one Israeli tax year (January to December).

Step three: withholding at the treaty rate. With the ITA certificate in hand, the Israeli payer withholds at the certified rate and remits to the ITA within 7 days of the end of the calendar month in which the payment is made. The Israeli payer retains both the Australian certificate and the ITA certificate for potential audit by the ITA's audit division.

Claiming a refund after over-withholding. Where the Israeli payer has already withheld at the higher domestic rate before the certificate is obtained, the Australian recipient files ITA Form 2513 (Request for Refund of Excess Withholding Tax) with the ITA's Foreign Residents Unit in Tel Aviv. A complete application requires the certificate from the ATO, the Israeli withholding tax slips confirming what was withheld, and a bank account for AUD or ILS transfer. Refund applications must be filed within five years of the end of the Israeli tax year in which the withholding occurred. The ITA processes these in approximately 6 to 12 months.

Capital gains exemption certificates. Where an Australian resident is selling an Israeli company stake and the shares are not in a real-property company, the seller applies to the ITA's Capital Gains Unit for a withholding exemption certificate in advance of the sale. The application states the treaty article and provides evidence of Australian tax residency. With the exemption certificate, the Israeli buyer is released from the obligation to withhold under Section 170 of the Income Tax Ordinance. Without it, the buyer must withhold — making the exemption certificate a practical prerequisite that should be applied for as soon as a sale is expected.

In Practice — Key Contacts and Timelines: ATO International Tax: certificates of residency processed in 28 days, cost AUD 75, applied via ATO Online Services. General treaty enquiries to ATO International Tax at +61 13 28 61 (International tax). ITA Withholding Tax Unit (at the relevant District Office for the Israeli payer's registered address): Reduced Withholding Tax Certificate, 30–60 working days, valid one tax year, renewable. ITA Capital Gains Unit: exemption certificate for share sales, approximately 20–30 working days. ITA Foreign Residents Unit (Rechov Kaplan, Jerusalem): Form 2513 refund applications, 6–12 months; advance rulings on specific treaty questions, 60–90 days. ITA advance rulings are strongly recommended for superannuation and complex multi-step transactions — the ITA is generally cooperative on ruling requests that present complete factual summaries and clear legal analysis, and a favorable ruling provides certainty that significantly reduces audit risk.

Frequently Asked Questions

Yes, but only on Australian-source income. Once your center of life has moved to Israel and you have become an Israeli tax resident under Section 1 of the Income Tax Ordinance, you are no longer a "resident of Australia" for treaty purposes as far as Israeli income is concerned. The treaty cannot reduce Israeli tax on Israeli-source income. It continues, however, to protect your Australian-source income: rental income from an Australian property, dividends from Australian listed companies, and pension payments from Australian employers all remain covered by the relevant treaty articles even after you become an Israeli resident.

Five percent if the Australian company is the beneficial owner and holds at least 10% of the voting power of the Israeli company. In all other cases the rate is 15%. Without a Reduced Withholding Tax Certificate issued by the Israel Tax Authority in advance, the Israeli company must withhold at the domestic 25% rate under Section 170 of the Income Tax Ordinance. The certificate application requires an ATO Certificate of Residency and takes approximately 30 to 60 working days at the ITA. Do not instruct the Israeli company to withhold at treaty rates before the ITA certificate is in hand — the Israeli company carries secondary liability if the certificate is later found deficient.

The 1999 treaty contains no specific superannuation article. Employer contributions made while you were an Australian resident are treated by the ITA as employment income from your Australian working years. Withdrawals after moving to Israel may fall under the treaty's general pension article, making them taxable only in Israel as the residence state — and potentially exempt under the 10-year Section 14 new-immigrant exemption if you are within that window. The precise ITA treatment varies by fund type and payment structure. Australians making Aliyah with significant super balances should obtain an ITA advance ruling before moving, and should consolidate any self-managed super fund into an APRA-regulated fund to avoid Israeli foreign trust attribution exposure.

Australia has the primary taxing right as the source country on income from Australian real estate, regardless of where you live. Australian rental income from a non-resident is subject to Australian withholding at 10% (or the marginal rate through an annual return). Israel, as your country of residence, also taxes that income but gives a credit for Australian tax paid under Section 200 of the Income Tax Ordinance. If you are within the 10-year Section 14 exemption period, Australian rental income may qualify as exempt foreign-source income in Israel, eliminating Israeli tax on it. Verify the ITA's current position with a tax adviser before your first rental payment, as the exemption's reach over specifically passive real estate income is subject to guidance and practice.

Under the treaty's capital gains article, gains on shares in a company that does not derive more than 50% of its value from Israeli real estate are taxable only in your country of residence — Australia — and Israel has no taxing right. No Israeli withholding should be taken from your sale proceeds. If the Israeli company does derive more than 50% of its value from Israeli real property, Israel retains the right to tax the gain and the buyer may have a withholding obligation under Section 170 of the Income Tax Ordinance. In either case, obtain an ITA capital gains exemption certificate before settlement — this confirms Israel's position formally and releases the Israeli buyer from withholding obligations.

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