Property Investment for Foreigners
Reap the rewards of Low AUD$ and Rising Property Prices
Planning to investment in Australian properties? With the Australian Dollar recovering and property prices on the 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.
What do 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, subject to the conditions that they:
Use the property as their principal place of residence in Australia;
Do not rent any part of the property, included ensuring 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 generally prohibited from purchasing established dwellings in Australia. Non-resident foreign investors can only 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.
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 generally subject to approval by the Foreign Investment Review Board (FIRB). Provided all restrictions are satisfied, there are generally no reasons why an application is rejected.
Application 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
In addition, foreigner buying an Australian Property may be subject to additional stamp duties. The amount of stamp duty due varies by state. In Victoria, there is between 3% to 8% foreign buyer stamp duty. It sounds a lot, but many buyers are not letting this hold them back from a good investment. Here is why.
Taxation and Deductions
Just like any forms of investments in any country, there are tax considerations for investing in Australian property as well. Any rental income received from the investment will need to be declared on an Australian tax return, and, you’ll need to pay Capital Gains Tax on any profit made when selling the property.
However, there are generous allowable deductions, 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. As our client, we can connect you with good accountants to 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.