So, you’re buying a home in Australia. Fantastic! We’re sure you’ve considered the ‘big questions’ like where you’d like to buy a house, when you’d like to do it, and your budget for the purchase, but there may be other, smaller considerations that you’ve overlooked. Fear not; we’re here to help.
Rules for foreign buyers
Since 2016, the Australian government has made it slightly more difficult for non-Australians to own Australian property. They have done so by introducing some slight tax changes and legislative restrictions.
From 2016, foreign property investors were liable to pay a 10% Capital Gains Tax upon selling their residence when their property was worth in excess of 2 million Australian dollars. This tax was updated in 2017: the tax rate has been increased to 12.5% and it now applies to properties worth 750,000 Australian dollars. (Ouch!)
In addition, a ‘ghost tax’ is applied to properties that remain without occupants for over six months of the year. This tax starts at 5,000 Australian dollars.
Another hurdle for foreign buyers is a governmental restriction of foreign ownership of new property developments across Australia. Now, only 50% of new property developments are available to foreign buyers and investors, the other 50% is safeguarded for Australian buyers and investors.
Filing (or lodging) tax returns
Speaking of tax, you will have to file (or lodge) your tax returns each year to the Australian government. This is relatively easy to do and your property manager should have all of your rent/expenses records for you. Simply have them send these details to your accountant in Australia and they’ll deal with the tax return.
We recommend that you budget an extra 5% of the property price to account for the additional costs that will inevitably come your way. It’s a good idea to speak to your solicitor or conveyancer about the additional costs you will face as they’ll be able to break them down for you specifically.
These can include legal fees, agency fees, stamp duty (which we’ll discuss shortly), and property inspection fees. Again, we strongly advise consulting your solicitor or conveyancer for your full breakdown.
A stamp duty is a tax imposed on property purchases. This tax is used by the government to support and improve infrastructure and services in the local community of the property being purchased. In Australia, there is an additional stamp duty is imposed on foreign buyers who purchase property in New South Wales, Victoria, and Queensland.
Ways to avoid this additional stamp duty include buying in a different state, or buying in partnership with an Australian citizen.
If you’re planning to move to Australia indefinitely, you could wait until you are a naturalised citizen before making the purchase. Of course, this may not be feasible, depending on your circumstances, as it can take a number of years to attain Australian citizenship.
Managing the property is mainly a concern for those of you who are buying property as an investment or to rent. You could opt to do this yourself, or you could hire the services of a property manager who will take care of all aspects of your property.
They will usually take a portion of the weekly rent as payment, and may even charge you ad hoc fees when unexpected additional costs arise.
A property manager will take care of things such as collecting rent, inspecting the property, keeping financial records and overall property maintenance.
If you do opt to hire a property manager, make sure they are licensed by the Office of Fair Trading (or equivalent). This may seem obvious to some, but you’d be surprised at how many fraudsters and imposters there are out there!
While there are many more things to consider when buying a property in Australia, we hope we’ve shed some light on the smaller things you may not have considered. If you are going to be buying a property in Australia anytime soon, Currency UK can help you with the payment side of things.