The united voice for expat & foreign owners of Australian property.
Income Tax – Each year ending 30th June the Federal Government requires taxpayers to lodge a return to account for any tax payable.
For foreigners and expats living out of Australia, it is likely that only your Australian rental property will be taxed, and you need to declare the gross rent less any costs associated with the property such as interest, maintenance and property management fees.
You may also be entitled to Building and asset write offs each year as well.
Only the net rental is subject to tax, and if the expenses are greater than the income no tax is payable in that year and any shortfall can carry forward into future years to offset any taxable or capital gains in subsequent years.
Capital Gains Tax – When you sell a Taxable Australian Asset you must report your Taxable Capital Gain in your tax return in the year that the property was sold (based on date of sale contract not actual settlement).
For foreigners and expats living out of Australia, it is likely that the only capital gains taxable activity will be the Australian property.
Prior to May 2012 investors were entitled to a 50% discount on Capital Gains before tax was levied, however this was removed by the then Labour Government. Now the discount only applies for the period of time the asset is owned prior to May 2012 or after only if you were living in Australia. This is usually applied on a pro rata basis.
Prior to June 2019 if an Expat sold their former family residence, it was entitled to capital Gains Tax Free treatment for the period lived in and up to 6 years rented. This was removed for any sale that occurs if the sale happens while the Expat is living overseas, with limited exceptions. So it is essential for Expats to not sell while abroad without specific advice so they understand the tax implications.
Goods & Services Tax – Australia introduced a Goods & Services Tax of 10% on the 1st July 2000. It applies to all activities except primary food, health, government services and export goods. Although GST is collected by the Federal Government it is passed to the States as part of their funding arrangements.
The key impact of GST for foreign investors and expatriates, is the fact that GST is a component of new property purchases. It is always included in the purchase price unless otherwise stated, so in many ways it is a hidden cost of purchase.
Foreign Investment Review Board Fee – A fee for buying an Australian property by foreigners was introduced on 1st December 2015 and applies to anyone that seeks to buy a property in Australia that is not an Australian Citizen or Permanent Resident Visa holder. Prior to 2015 it was necessary to an application, but there was no fee.
It should be noted that if a foreign person is buying a property as joint owners with their Australian spouse, then no application of fee is required.
Vacancy Fee – Since May 2017, and foreign investor that laves their property unoccupied for more than 6 months in a year and not genuinely available for rent, is subject to a Vacancy Fee annually equal to the FIRB at the time.
The vacancy fee does not apply to anyone that is an Australian Citizen or Permanent Resident Visa holder.
Stamp Duty – Each State levies a transfer duty when a property is moved from a seller to a buyer. The rate of duty varies from State to State and percentage charged usually rises as the value of the property increases.
There are usually various incentives available for first home buyers and sometimes concessions for off-plan purchases.
Most States now also impose an additional duty where the property is acquired by a “foreign person”. In all States except NSW, anyone with Australian citizenship or holding a Permanent Resident Visa is not classed as a foreign person. In NSW, citizens are excluded, but for Permanent Resident Visa holders to be excluded they needed to be living in Australia for more than 200 days in the past year.
Land Tax – Each State charges an annual ownership fee for properties in their respective States. In all cases, if the property is the family home then no Land Tax is levied as it usually only applies to properties rented out. The rate of duty varies from State to State and increases both on the value of the property and number of properties owned in the state.
Most commonly the Land Tax is levied on the Unimproved Value of the land, which is different to the market value, as it assumes the property is bare land only, not accounting for the value of buildings or improvements.
Foreign Owner Land Tax Surcharge – Most States now also impose an additional land tax surcharge where the property is owned by a “foreign person”. In all States except NSW, anyone with Australian citizenship or holding a Permanent Resident Visa is not classed as a foreign person. In NSW, citizens are excluded, but for Permanent Resident Visa holders to be excluded they needed to be living in Australia for more than 200 days in the past year.
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