Can I Buy Property in Australia as a Foreigner?

Are you considering purchasing a house in Australia, even if you don’t hold Australian citizenship or permanent residency?

Is it possible for non-citizens or non-residents to buy property in Australia?

The answer is yes.

However, it’s essential to be aware that there are restrictions on the types of properties that foreigners and non-residents can acquire, and, in most cases, government approval is necessary in Australia.

Australia’s property market can be attractive to foreign investors, but it’s vital to comprehend the regulations and processes involved when buying properties as a foreigner.

Who is the Foreigner?

Through this link, you can see a more detailed definition of a foreign investor. A foreign person is defined as an individual who is not ordinarily resident in Australia or a foreign government or foreign government investor.

How to Buy a Property in Australia as a Non-Resident?

As a foreigner, when considering the purchase of property in Australia, it is crucial to obtain approval from the Foreign Investment Review Board (FIRB).

Once FIRB approval is granted, several key considerations come into play:

1. You can only purchase a new house or vacant land with the intention of constructing a new dwelling within four years. Upon the completion of construction, proof of completion must be submitted to FIRB within 30 days.

2. Purchasing established dwellings is generally prohibited. However, temporary residents are permitted to purchase one established dwelling to use as their place of residence, not for other purposes, such as investment properties or renting out. Temporary visa holders must sell it once they no longer reside there. Additionally, temporary residents can also purchase an established dwelling for redevelopment, such as splitting one house into two or creating additional housing units.

3. Foreign nationals purchasing residential property as joint tenants with their Australian citizen, New Zealand citizen, or permanent resident spouse are exempt from the need to seek foreign investment approval.

Attempting to purchase property without securing FIRB approval can result in severe penalties.

For most applications, FIRB is mandated to make a decision on the application within a timeframe of 30 days from the date of fee payment.

When making a property purchase, it is advisable to include a condition in the contract that the transaction will proceed only if FIRB approval is obtained, particularly if approval has not been granted yet.

Keep in mind that FIRB approval can only be sought after selecting the property, as FIRB does not provide pre-approval.

How Much is the FIRB Application Fees?

When it comes to purchasing property in Australia as a foreigner, it’s important to consider the application fees required for Foreign Investment Review Board (FIRB) approval.

These fees vary depending on the value of the properties, from 1 July 2023 to 30 June 2024, here is a breakdown:

Amount | Fee
——-|—–
Less than $75,000 | $4,200
$1 million or less | $14,100
$2 million or less | $28,200
$3 million or less | $56,400
$4 million or less | $84,600
$5 million or less | $112,800

Source: Australian Taxation Office website

Considering the median house prices by state, expect to pay around $14,100 for a home under $1 million.

What Else Does it Cost to Purchase Properties in Australia as a Foreigner?

When considering the purchase of property in Australia as a foreigner, it’s essential to be aware of additional costs beyond the property’s price.

State Stamp Duty Surcharge and Absentee Land Tax Surcharge

State | Stamp Duty Surcharge | Absentee Land Tax Surcharge
——|———————|—————————
New South Wales | 8% | 4%
Victoria | 8% | 2% (From 1/1/2020), 4% (From 1/1/2024)
Queensland | 7% | 2% (2% on taxable land valued at $350,000 or more applies in addition to the land tax rates.)
Western Australia | 7% | –
South Australia | 7% | –
Tasmania | 8% | –
Northern Territory | – | –
ACT | – | 0.75%

Transfer Duty (Stamp Duty)

Firstly, on top of the typical house-buying fees, you’ll be required to pay ‘transfer duty,’ commonly referred to as ‘stamp duty,’ when acquiring a property.

The transfer fee typically varies based on the property’s value and is an amount that both residents and non-residents must pay when acquiring property in Australia.

Foreign investors will also need to pay an additional surcharge on the value of the property, which varies depending on the state in which you’re buying the property.

Foreign buyers in New South Wales and Victoria face an 8% surcharge, while in Tasmania, Queensland, Western Australia, and South Australia, the surcharge is 7%.

The Australian Capital Territory and Northern Territory do not impose an additional surcharge for foreign buyers.

Absentee Land Tax Surcharge

Land tax is an annual tax imposed on properties that exceed a certain land value threshold.

Generally, land tax on residential properties is exempt, with the tax typically applied to investment properties.

For foreigners, there are specific additional land tax provisions, often referred to as absentee land tax, which include cases where the owner is not an Australian citizen or permanent resident.

In Western Australia, South Australia, and Tasmania, this additional land tax is not applicable. However, in New South Wales, a 4% rate is imposed, and in Victoria and Queensland, a 2% rate is applied.

Capital Gain Tax Discount Exclusion

If you sell a property in Australia, you are required to pay Capital Gains Tax, which is taxed at the same rate as taxable income.

If you have owned the property for more than a year, you can benefit from a 50% discount. However, foreign investors are not eligible for this discount.

Also, the purchaser is required to withhold 12.5% of the purchase price and remit it to the ATO.

So if the property being sold is priced at $750,000 or more, foreign sellers receive only 87.5% remainder, excluding the 12.5%, which may be subject to a refund during the Australian year-end settlement process, depending on the circumstances.

First Homeowner Grant Exclusion

In addition to stamp duty, different states offer a First Home Owner Grant, which provides financial assistance to first-time homebuyers.

In Perth, if the property’s value is under $750,000, you may be eligible for a $10,000 grant.

However, one of the conditions is that at least one applicant must be an Australian citizen or permanent resident at the time of making the application.

This means that foreign buyers purchasing property independently may not be eligible for this grant.

What to Expect from Investing in Australian Property

While the process of obtaining FIRB approval and dealing with foreign surcharges may seem complex and costly, there are several factors that make the Australian property market an attractive investment.

• Over the past three decades, the Australian property market has consistently exhibited growth, compounding at an average annual rate of 5.4% from July 1992 to 2022. This historical trend in capital gains suggests promising prospects for future growth. (Source: Corelogic, 30 years of housing values)

• With a low rental vacancy rate hovering around 1%, and continuous rent increases, the persistent housing supply shortage is unlikely to be easily resolved. This points to a robust environment for generating yields in the rental market.

• The ongoing influx of population further underscores the anticipation of increased housing demand. With this in mind, it’s worth considering whether the expected property price appreciation, coupled with the potential rental yield, surpasses the cost of investment and offers a return that outperforms prevailing interest rates.

• Foreign investors can apply for a house loan, and they can borrow as much as Australian citizens from an Australian bank.

In conclusion, it is possible for foreigners to buy property in Australia, but there are restrictions and regulations in place, including the need for approval from the Foreign Investment Review Board (FIRB). Additionally, there are additional costs such as stamp duty surcharges and absentee land tax surcharges. Despite these factors, the Australian property market offers potential for growth and rental yields, making it an attractive investment option for foreign buyers.