As the Australian government implements ways to welcome international students and opening the country for many types of visa holders, we expect to see an increase in foreigner activity in the real estate market in the coming months.
Below is a snapshot of the requirements needed as a foreigner citizen to purchase a property in Australia.
How to buy a property in Australia?
As a foreigner you’ll need to apply to the Foreign Investment Review Board (FIRB) – a non-statutory body in charge of assessing foreigners who want to invest or buy a home in Australia. FIRB requires a completed online application to be submitted via the Australian Taxation Office (ATO) website. Along with the application form, you will be required to pay an application fee - the fee is entirely dependent on the value of the property you plan on buying.
The Labour Government has doubled the FIRB application fees effective from July2022, with an aim of assisting Australians to get into the housing market by increasing tax revenue to fund the ‘Help to Buy’ scheme.
Current applications fees start at $13,200 for acquisitions of properties valued at $1million or less, rising to a maximum of $1,045,000 for acquisitions of properties valued at more than $40 million.
Type of Properties Available for Foreigners to Purchase
If you are a foreigner and do not hold any eligible visa, you will only be approved to purchase into brand new buildings (in which FIRB defines as property that has not been previously sold as dwelling and has not been previously occupied) or vacant land, where construction is planned to start within 4 years of the FIRB approval date.
There are a couple of exceptions to this rule:
Foreigners can buy established dwelling provided they plan to redevelop to increase housing stock: In other words, you knock down an existing dwelling of 4 units and develop a dwelling of 6 units.
Temporary Resident buying into Australian Property: Temporary residents can apply to purchase residential property to reside in, provided that they sell the home once they leave the country. However, if the temporary resident becomes a citizen or permanent resident, they will not have to sell the dwelling.
If you are a foreign citizen and acquire residential-related property in NSW, you must pay Surcharge Purchaser Duty.
Surcharge Purchaser Duty is currently calculated at 8% of the value of the property and is paid in addition to the standard stamp duty (circa 5.5% – 6.5%).Surcharge Purchaser Duty must be paid at the same time as the standard stamp duty, either 3 months from the date of contract exchange or on/before settlement.
Foreign Owner Surcharge on Land Tax
If you're a foreigner who owns residential land in NSW, you must pay surcharge land tax in addition to any land tax you may already pay. You may be required to pay surcharge even if you do not pay land tax.
The current rate for the Foreign Owner Surcharge on Land Tax for 2023 is 4% of the Value of the Land on top of the standard 1.6%of the Value of Land above the Threshold ($969,000 for 2023)
Selling Australian Real Estate
Foreign and temporary residents are subject to Capital Gain Tax (CGT) only on taxable Australian property and are not entitled to main residence exemption. If you are a foreign resident selling Australian real estate worth more than $750,000,the buyer of your property must withhold 12.5% of the purchase price and send it directly to the Australian Taxation Office (ATO). This is known as Foreign Resident Capital Gains Withholding. You can claim it back when you lodge your Australian tax return.
Beyond the beautiful settings and thriving economy in Australia, the property market has significant potential for capital growth. It was only a matter of time before foreign investors are showing widespread interest in purchasing property in Australia.
Here's how Sydney Slice can help:
At Sydney Slice we cover all phases of the purchasing process for foreigners looking at investing into the Australian property market. We can also liaise with the right institutions and provide guidance for FIRB applications if needed.
If you are planning on entering the Australian real estate market, don’t hesitate to contact the team at Sydney Slice.
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