Australia is an attractive market for foreign investors, particularly when in comes to owning property including land. However, with escalating property prices in Sydney and Melbourne, the Australian and State Governments have made it more restrictive for foreign residents to purchase residential property in Australia.
In this article, Ben Weeding from Buyside buyers agency outlines what investors can currently do when it comes to purchasing properties in Australia.
Residential Real Estate
As a general rule, foreigners are restricted to purchasing:
- New or “off-the plan” residential property which has been approved by the Foreign Investment Review Board (FIRB)
- Vacant land with the intention of building a property within four years, also requiring FIRB approval which costs a minimum of $5,000 depending on the value.
Foreign buyers are also subject to additional fees on top of what residents pay which includes state stamp duty (NSW 4%, Victoria 7%, Queensland 3%) and a land tax surcharge (NSW 0.75%, Victoria 1.5%).
Recent changes – in the May 2017 Federal budget, a number of additional measures have been introduced which will apply to foreign investors:
- any capital gains are fully taxable (residents receive a 50% discount on the assessable amount
- CGT withholding tax will increase from 10% to 12.5%
- developments will be limited to 50% foreign investors
- where properties remain vacant for more than six months, and $5,000 fee will apply
Australian commercial property investment has become an attractive alternative for foreign investors with the with a strong business environment, higher rental returns and fewer restrictions.
Purchases can be made up to $252M without FIRB approval, although where the proposed acquisition is considered to be sensitive the threshold is $55M.
For countries where Australia has a Free Trade Agreement (FTA), the threshold is $1,094 million regardless of whether the land is considered sensitive. Current FTA countries include New Zealand, Canada, Chile, Korea, Japan, Thailand, Malaysia, Singapore and the US.
This is land that can be used for primary production and all proposed investments by foreigners must be notified to the Australian Taxation Office Register of Foreign Ownership. Approval is required where the cumulative value exceeds $15 million, again except FTA partners.
For more information or assistance with purchasing Australian property contact Ben Weeding – details here.