What Foreigners Need to Know About Buying Property in Australia
We have been working with a number of families migrating to Australia and questions often arise on understanding the rules of migrants buying property in Australia,either as a new family home or for investment purposes.
Before diving into the market, it's essential to understand the regulations and guidelines set by the Foreign Investment Review Board (FIRB). In this guide, we will explore the process of investing in Australian property as a foreigner, including the types of properties foreigners can purchase, the application process, and the costs involved.
Can Foreigners Purchase Property in Australia?
Yes, foreigners can purchase property in Australia, but there are certain rules and limitations set by the FIRB. The FIRB is a government body responsible for managing foreign investments and property purchases in Australia. Its main objective is to ensure that foreign investments align with the country's economic interests while safeguarding opportunities for Australian citizens to own residential properties.
Foreign investors, including non-residents and temporary Australian residents, are required to seek approval from the FIRB before purchasing property in Australia. However, there are exemptions for Australian citizens, New Zealand citizens, Australian permanent visa holders, and foreigners buying property jointly with someone from the aforementioned groups.
Types of Properties Foreigners Can Purchase
Foreign investors are generally restricted from purchasing established dwellings in Australia. Instead, they can apply to the FIRB for permission to invest in new dwellings or vacant land for development. New dwellings refer to properties that have not been previously sold or occupied as a dwelling. If the property was sold by a developer, it must not have been occupied for more than 12 months.
Vacant land purchased by foreign investors must be developed within four years of receiving FIRB approval. Once the construction is completed, proof of completion must be submitted to the FIRB within 30 days.
There are exceptions to the rule for purchasing established dwellings. The FIRB may grant permission to foreign investors to purchase existing dwellings if they have plans to redevelop the property, creating room for more potential residents. For example, the investor may demolish one home and build two in its place. However, this exception is subject to specific conditions and approval from the FIRB.
The Application Process for Foreign Investors
To purchase property in Australia, foreign investors must follow the application process outlined by the FIRB. Here are the steps involved:
Visit the FIRB Website: Begin by visiting the official FIRB website to access the necessary forms and guidelines.
Determine Eligibility: Ensure that you meet the eligibility criteria for the type of property you wish to purchase.
Complete the Application: Fill out the online application form, providing all required details and documentation. This may include information about your visa status, financial capability, and investment intentions.
Pay the Application Fee: Submit the required fee specified on the FIRB website. The fee varies depending on the value of the property.
Await Approval: The FIRB will review your application, and once approved, you will receive a notification of approval and any conditions attached to it.
Proceed with the Purchase: Once you have received approval, you can proceed with your property purchase in accordance with the conditions outlined in your approval.
Foreign investors should note that the application process can take up to 30 days, and attempting to purchase property without FIRB approval can result in severe penalties.
Costs Involved in Purchasing Australian Property
When investing in Australian property as a foreigner, there are several costs to consider. The primary cost is the application fee required for FIRB approval. The fee is determined based on the value of the property and can range from $4,000 for properties valued at less than $75,000 to $1,045,000 for residential properties worth over $40 million.
In addition to the application fee, foreign investors may also incur stamp duty charges. The amount of stamp duty varies depending on the state in which the property is purchased and is worth checking during the property hunting process. For example, New South Wales currently imposes an 8% surcharge on stamp duty for foreign citizens.
It's important for foreign investors to consider these costs and factor them into their investment plans.
Tax Obligations for Foreign Property Investors
Foreign property investors in Australia have certain tax obligations that they must fulfil. Rental income received from investment properties must be declared in an Australian tax return, and the costs of property maintenance can be claimed as tax deductions.
If the value of the property increases while the investor owns it, they may be subject to capital gains tax (CGT) when they sell the property. CGT is calculated based on the difference between the purchase price and the sale price, and it's advisable to consult with a tax specialist to understand the applicable tax implications.
Foreign investors should also be aware of the annual vacancy charge. If a non-resident owns an Australian residential property but does not live in it or rent it out for at least six months of every year, they may be subject to an annual vacancy charge determined by the Australian Taxation Office (ATO).
Conclusion
Investing in Australian property as a foreigner offers significant potential for capital growth, but it's important to understand and adhere to the regulations set by the FIRB. By following the application process, being aware of the types of properties that can be purchased, considering the associated costs, and fulfilling tax obligations, foreign investors can navigate the Australian property market successfully.
Remember, seeking professional guidance from property investment experts is crucial to ensure compliance and make informed decisions. With the right support, foreign investors can seize the opportunities that the Australian property market has to offer.
How InterRetire Can Help You
If you’re an Australian expatriate who is considering moving back to Australia, we can help you maximise your assets, minimise your tax obligations and help you transition smoothly.
Disclaimer: This article provides general information on avoiding double taxation in Australia and should not be considered as professional tax advice. It is recommended to consult with a qualified tax advisor or accountant for personalised guidance based on your specific circumstances.
