Property Investment for Overseas Investors
Contrary to popular believes, foreigners have found ways to invest in Australian properties and reap the rewards of Low AUD$ and Rising Property Prices.
Between 2019 and 2021, Australian property prices have grown over 50%! It is definitely a spectacular growth, and it has never been seen before. How can foreign Investors invest in Australian properties? With the Australian Dollar still relatively weak, but recovering and property prices on a significant upward trend, many investors have approached us to help them source for the right property to invest in.
Buying an investment property in Australian is not difficult. However, buying the right type of property in the right areas is important, if you are intending to reap the double rewards of growth and AUD appreciation.
Here at Concierge Buyers Advocates, we help buyers outsmart the property market and avoid the inflated pricing.
Not all properties can be bought by non-Australian residents. And not all properties for foreign investors are good investment grade properties.
Here is what you need to know about investing in Australian Properties.
Who can puy Properties in Australia?
Australian property buyers can generally be classified into 3 main types, depending on your residency status.
Citizens and Permanent Residents - Residents who have the right and privilege to remain in Australia for an unlimited length of time.
Temporary Residents - Residents on short term temporary visas, such as student visa, temporary skilled migrant visas, temporary business visa, etc. When you are granted an Australian visa for entry into Australia, your visa will have a visa class number. This class number helps to determine if you are considered a temporary or a permanent resident.
Non-Residents - Foreigners who do not have any residency visa.
The types of property which you can buy, depends on the type of visa you hold.
What properties can a foreigner buy? Residency status and Australian properties.
Citizens and Permanent Residents
No restrictions. Citizens and permanent residents can purchase any number of properties anywhere in Australia.
Temporary residents is usually allowed to purchase only one established dwelling to live in as their residence (home) in Australia, on the conditions that they:
Use the property as their principal place of residence in Australia;
Do not rent any part of the property, and must ensure that the property is vacant at settlement; and
Sell the property within three months from when it ceases to be their principal place of residence.
Temporary residents are not permitted to purchase established dwellings as investment properties, or rent out, or as holiday homes.
Non-resident foreign investors are able to buy new properties, off-the-plan apartments and vacant land. A non-resident foreigner buying any residential property in Australia, will first need to obtain approval from Foreign Investment Review Board (FIRB) for each property prior to purchase, and generally they will be prohibited to purchase established dwellings in Australia.
Types of properties for non-residents
Restrictions apply to non residents intending to purchase Australian properties. These are generally new properties, which reduces the need for regular maintenance, and allows for tax depreciation. Some of these properties includes:
A new dwelling is a dwelling that will be, is being, or has been built on residential land.
Foreign persons will normally be allowed to purchase vacant land for residential dwelling development, subject to conditions that:
The development is completed within four years from the date of approval; and
Evidence of completion of the dwelling/s is submitted within 30 days of being received. This could include a final occupancy or builder’s completion certificate.
Vacant land that previously has an established dwelling on the land would generally not be considered as vacant land for the purposes of Australia’s foreign investment framework.
Foreign persons will normally be allowed to purchase an established dwelling for redevelopment in Australia, provided the redevelopment genuinely increases the housing stock.
Foreign persons will generally not be given approval to purchase an established dwelling to redevelop into a single new dwelling.
FIRB and Stamp Duties
Property purchased by foreigners are subject to approval by the Foreign Investment Review Board (FIRB). Provided all restrictions are satisfied, there are generally no reasons why an application will be rejected.
Applications for review and approval is made with payment of the following application fees:
$1 million or less :- $5,000
$1 million - $1,999,000 :- $10,000
$2 million - $2,999,000 :- $20,000
$3 million - $3,999,000 :- $30,000
For each further $1 million increase $10,000
Foreigners buying an Australian property may also be subjected to additional stamp duties. The amount of stamp duty due varies by state. In Victoria, a foreign buyer stamp duty of between 3% to 8% of the property price applies. It may sound a lot, but many buyers are not letting this hold them back from a good investment. Here is why.
With property prices rising between 10-30% in recent years, you will recover the additional stamp duties in no time.
Taxation and Deductions
Just like any forms of investments in any country, there are tax considerations for investing in Australian property as well.
Rental income received from the investment property will need to be declared on an Australian tax return, and, you may need to pay Capital Gains Tax on any profit made when selling the property.
However, there are generous deductions allowed, which can offset the cost of investment, such as cost of maintaining the property, cost for owner-inspections, cost of repairs, cost of leasing, etc. What you can claim, is dependant on your tax structure. Have a chat with us. We can refer you to good accountants to help you understand your taxes and get your investment structure setup optimally.
* This information is provided for general guidance only. You should get independent financial and taxation advice from an accountant.