Federal and state taxes that apply to foreign purchases
There are a range of federal and state taxes that apply to foreign purchases of residential real estate.
These taxes include the following:
- Application fees for foreign buyers of residential real estate, effective 1 July 2016. This is a federal tax. MoreThe online calculator indicates that the fee would be $5,500 for a residential property purchase of $1,000,000.Residential land means land where there is at least one dwelling, or land on which less than 10 dwellings could reasonably be built. It does not include land used wholly and exclusively for a primary production business, or on which the only dwellings are commercial residential premises.Generally, a separate fee is payable for each residential land title for which a notice is given. This means that a foreign person must pay a separate fee for each title of land that is proposed to be acquired.A single fee applies for foreign persons purchasing residential land as joint tenants.
- An additional stamp duty tax (seven per cent of the purchase price, effective 1 July 2016 for foreign purchasers. (Victorian Tax) MoreWhen does additional duty apply?
Additional duty applies to any arrangement or transaction that involves the transfer of an interest in residential property to a foreign purchaser. These include:- Buying a residential property at, for example, auction or by private sale,
- Buying a non-residential property with the intention to convert it to residential property,
- Being given a residential property as a gift,
- Certain leasing arrangements in respect of residential property,
The additional duty applies even if you only acquire part of, or a part interest, in the property. It also applies to relevant acquisitions in a landholder that holds residential property.
This additional duty applies to contracts, transactions, agreements and arrangements entered into on or after 1 July 2015. You will not pay the additional duty if you entered into a contract to purchase residential property on or before 30 June 2015 even if the settlement date is on or after 1 July 2015.
Where you have entered into a contract to purchase residential property before 1 July 2015 but nominate a foreign purchaser to take a transfer right of the property on or after 1 July 2015, additional duty may apply to the transfer.
Rates of additional duty
For contracts, transactions, agreements and arrangements entered into on or after 1 July 2015 but before 1 July 2016, the additional duty rate is 3% (even if the settlement date is on or after 1 July 2016). For contracts, transactions, agreements and arrangements entered into on or after 1 July 2016, the additional duty rate is 7 per cent. - Absentee land tax for overseas buyers, 1.5 per cent effective 1 July 2017. (Victorian Tax) MoreIf you are an absentee owner, an absentee owner surcharge applies to taxable Victorian land you own. This surcharge is 1.5 per cent from 1 January 2017 (previously 0.5 per cent).
- Vendors selling real estate worth $750,000 or more will lose 12.5 per cent of the purchase price if they can’t prove they are an Australian resident prior to settlement, effective 1 July 2017 (Federal Tax)Where a foreign resident disposes of certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price (see note below) and pay that amount to the Australian Taxation Office (ATO). This increased on the 1st of July from 10 to 12.5% and the threshold for declarations was lowered from $2 million to $750,000.
If you are selling real estate estimated to be likely to sell for more than $750,000, you should ensure your solicitor or licensed conveyancer includes a Foreign Resident Capital Gains Withholding Clearance Certificate in your Vendors Statement. More
For independent advice on buying or selling real estate, contact Janet Spencer at Buyer Solutions +61 3 9816 8555 or email jspencer@buyersolutions.com.au
Buying property, Housing Market, Investment, Investment property, Landlords, Overseas Buyers
+61 39816 8555