If you're using Actors and Stage, you can use setZIndex.
If you're using SpriteBatch and textures, you will have to order your sprites before rendering them.http://stackoverflow.com/questions/892811/drawing-isometric-game-worldshttp://gamedev.tutsplus.com/tutorials/implementation/creating-isometric-worlds-a-primer-for-game-developers/http://bannalia.blogspot.ca/2008/02/filmation-math.html
Alternatively, you can use the depth buffer for "hardware sorting" so to speak. There are some downsides, like alpha transparency issues. Often CPU sorting is "fast enough" so just stick with Painter's Algorithm until you find it to be a bottleneck.