Foreign property purchases are regulated by the Foreign Investment Review Board (FIRB). This means foreigners can buy property in Australia. However, they must first seek approval through the FIRB. Subject to approval, 'foreign persons', as they are classified, may also be liable to pay Foreign Transfer Duty in addition to Land Transfer Duty.
This article explains Foreign Transfer Duty, and how it might apply to you. We break down the different government rates across each state. We also provide information to help you determine whether you are exempt from paying Foreign Transfer Duty.
'Foreign person' is an umbrella term used to describe three types of foreign entity:
1. Foreign Individual
2. Foreign Corporation
3. Foreign Trustee
Foreign transfer duty is an additional tax on the dutiable value for certain transactions and landholder acquisitions involving foreign persons acquiring residential property in Australia.
The following table shows the applicable tax rates attributable to the ‘foreign persons’ ownership stake.
|
State | Effectivity date for contracts signed on or after... | Rate of additional duty |
|
VIC | 1 July 2019 | 8% |
|
NSW | 01 July 2017 | 8% |
|
QLD | 01 July 2018 | 7% |
|
SA | 01 January 2018 | 7% |
|
WA | 01 January 2019 | 7% |
|
TAS | 01 April 2020 | 8% |
Foreign Transfer Duty applies if you are:
For example, if you are an Australian citizen who has a foreign spouse, and you purchase a property together for $500,000 with an equal 50 percent share in Western Australia, the foreign buyer's tax payable is $17,500. Seven percent Foreign Buyers Tax will only apply to the 50 percent share that is being purchased by your foreign spouse, which is $250,000.
Therefore, the tax owed: ($500,000 x 50%) x 7% = $17,500.
Certain exemptions to Foreign Transfer Duty may apply in the following ways:
1. Land acquired by ‘foreign persons’ for residential developments is chargeable with Foreign Transfer Duty. However, if the development will produce 10 or more residential dwellings, or lots on which 10 or more dwellings can be constructed, the foreign transfer duty may be refunded.
2. Nominal duty or transfer duty exemptions:
Most transactions that would be eligible for nominal duty or an exemption from transfer duty will be exempt from foreign transfer duty if the person receiving the residential property is foreign. This includes:
3. If you are a foreign person who signed a contract to purchase a property before the effectivity date, but the property settles after that date, you won't be liable for the additional duty if the names of the transferees on the transfer are the same as the names of the purchasers on the agreement or contract.
4. If you sign an agreement to buy the property before you obtain Australian Citizenship but are granted citizenship prior to settlement and then transfer the property, you will be eligible for a reassessment and refund of the foreign transfer duty charged on the agreement.
If you’re considering buying a property in Australia, you need to consider the costs and for traditional expats that have a non-resident spouse, as there may be a way to avoid foreign transfer duty through the structure of ownership.
If you are considering investing in a property in Australia and require lending to support the purchase, we can help.
