A Guide to Buying a House in Australia as a Non-Resident
Buying a house in Australia has become a popular choice for global investors, reflecting a broader trend in international property investments. Australia stands out as a hotspot, not just for its stable economy and robust real estate market but also for its breathtaking landscapes and natural beauty.
For non-residents, the allure of Australia’s property market is undeniable, promising excellent capital growth and rewarding opportunities.
However, diving into this venture isn’t always straightforward. You must be well-prepared and informed, especially given the strict regulations set by the Foreign Investment Review Board (FIRB) for foreign persons wanting to buy a house in Australia.
This guide aims to be your starting point, offering crucial insights and information for non-residents eager to navigate the Australian property landscape, including the steps to apply to the FIRB.
Benefits of Investing in Australia
Before we delve into the intricacies of the regulations surrounding property investment for non-residents, let’s shed light on some of the benefits that the Australian property market offers.
Potential Rental Yields
Australia’s major cities, such as Sydney, Melbourne, and Brisbane, have consistently demonstrated strong rental yields. Rental property demand is driven by a combination of factors, including a growing population, a steady influx of international students, and a robust job market, all of which contribute to a high demand for rental properties.
The Australian property market has historically shown resilience and steady growth. Investors can potentially benefit from long-term capital appreciation, especially in sought-after suburbs and regions. The country’s stable economy and proactive government policies further bolster the real estate market, making it a promising avenue for capital growth.
Diverse Investment Opportunities
From bustling urban centres to serene coastal towns, Australia offers a diverse range of property investment opportunities. Whether you’re looking for a high-rise apartment in the heart of Sydney or a quaint cottage in the countryside, there’s something for every investor’s taste and budget.
Can a Foreigner Buy Property in Australia?
Yes, foreign residents, temporary residents, and short-term visa holders are allowed to buy investment properties and residential real estate in Australia, provided that they’re granted permission to do so by the Foreign Investment Review Board (FIRB).
The FIRB reviews foreign investment proposals on a case-by-case basis. Beyond applying for permission, there are strict rules regarding the type of residential real estate and investment property you can buy.
This is because the Foreign Investment Review Board is responsible for ensuring that most foreign property investment is targeted at new dwellings instead of established dwellings.
The idea is that if non-residents invest in building new properties, then job creation will follow in the construction industry, and the economy will grow – it’s a matter of national interest. Beyond that, the government can gain revenue through stamp duty taxes while ensuring that Australian residents aren’t deprived of property they can purchase and live in.
What Types of Properties Can You Purchase?
The rationale for allowing foreign buyers to purchase Australian property is based on the fact that they can’t buy an established dwelling.
That means that foreign investors can purchase new buildings or vacant land.
The FIRB defines ‘new buildings’ as property that has not been previously sold as a dwelling and has not been previously occupied. If the developer sold the investment property, it must not have been occupied for more than 12 months.
The FIRB approves vacant land purchases subject to a property being constructed within four years of the approval date. Once construction has been completed, proof must be sent to the FIRB within 30 days.
Are There Exceptions to the Established Dwelling Rule?
Although foreign investors are generally not allowed to purchase established properties, there are three exceptions to this rule.
Buying an Established Dwelling to Redevelop
Foreign investors can buy an established dwelling provided that they plan to redevelop the property and increase the housing stock. In other words, they’re going to knock the existing property down, replace it, and add an additional dwelling or more onto the land.
So, redevelopment is subject to the condition that more than one additional property has to be built.
There are also time constraints on the redevelopment. The demolition, redevelopment, and construction of the new property must be completed within four years of FIRB approval, and proof must be sent to them within 30 days of the construction being completed.
Temporary Residents Who Plan to Sell
The second exception applies to a temporary resident buying 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.
And lastly, the established dwelling rule doesn’t apply to commercial property. The FIRB typically approves commercial investments with less hassle than residential ones. However, the requirement for approval still applies.
How Does the Foreign Investment Review Board Application Process Work?
Once you’ve familiarised yourself with the FIRB rules around purchasing property as a foreign investor, the application process is fairly straightforward. You’ll find the application form on the Australian Tax Office (ATO) website. It’s an online application, so you’ll fill in your details and submit it via the ATO website.
Along with the application form, you’ll have to pay an application fee.
The fee is entirely dependent on the cost of the new property or vacant land you want to buy and changes each year. You will need to keep an eye on the FIRB’s website.
You’ll typically find out within 30 days whether your application has been approved or declined.
FIRB Approval Exemptions When Buying a House
FIRB applications are generally only required for non-residents or temporary residents looking to purchase property in Australia. So, the following groups of people are exempt from applying for approval with the FIRB:
- Australian citizens (regardless of whether they live in Australia or not)
- New Zealand citizens
- Australian permanent visa holders
- Foreigners buying property as joint tenants and are married to someone who belongs to one of the above groups.
How Can Property Tax Specialists Help with Buying Property in Australia?
While this article provided guidance as to the process of applying to the FIRB, there is a lot to consider before buying a house in Australia as a foreigner. For example, you’ll have to pay taxes such as stamp duty on your new property. And if you’re buying an investment property, you’ll likely have to pay income tax on the rental income that you generate.
You also have to consider that you may have to pay capital gains tax if you decide to eventually sell the property.
You’ll need to engage the services of an Australian tax agent to help you navigate the complex world of Australian tax.
Property Tax Specialists are a team of qualified accountants with the objective of legally minimising your tax liability and protecting your assets. We offer a range of services to help our clients achieve their goals, including cash flow and profitability analysis, investment property portfolio administration, and regulatory compliance.
The Australian Government has strict rules about who can purchase what type of property, so be sure that you are compliant with these rules and regulations before you get started.
Foreign investors can purchase residential property in Australia, but only subject to the Foreign Investment Review Board’s approval, and you’re limited to new buildings and vacant land.
To discuss any matter relating to buying an investment property as a non-resident, asset protection, or your tax affairs, get in touch today.
What Are the Tax Implications for Non-Residents?
Non-residents buying property in Australia may be subject to several taxes. This includes stamp duty on the property purchase, income tax on any rental income generated from the property, and capital gains tax should the property be sold in the future. It’s essential to consult with an Australian tax specialist to understand the full scope of potential tax liabilities and any available deductions or benefits.
Can I Buy a Property in Australia as a Non-Resident?
Yes, non-residents can buy property in Australia, but there are certain restrictions and regulations they need to follow. It’s essential to consult with local real estate experts and legal professionals to understand the specific requirements and processes involved.
What Is the Tax on Foreigners Buying Property in Australia?
Foreigners buying property in Australia are subject to various taxes, including stamp duty, land tax, and capital gains tax. The exact amount and type of tax can vary depending on the state or territory where the property is located. It’s recommended to consult with a tax professional or accountant familiar with Australian property taxes for foreigners to get a clear understanding.
How Long Does the FIRB Application Process Take?
Typically, after submitting your application to the Foreign Investment Review Board (FIRB) via the Australian Tax Office (ATO) website, you can expect to find out whether your application has been approved or declined within 30 days.
What Are the Financing Options Available for Foreign Investors?
Foreign investors have several financing options available when purchasing property in Australia. Many Australian banks and financial institutions offer loans to non-residents, though the terms and conditions might differ from those offered to residents. Typically, a larger deposit is required, and interest rates may be slightly higher. It’s advisable to consult with a mortgage broker or financial institution in Australia to explore the best financing options tailored to your needs.
How Long Do You Have to Live in Australia Before You Can Buy a House?
There isn’t a specific residency requirement to buy a house in Australia. However, the type of property and the approval process might differ based on your residency status. For instance, non-residents might need approval from the Foreign Investment Review Board (FIRB) before purchasing certain types of properties.
Can I Get Australian Citizenship If I Buy a House?
Purchasing a house in Australia does not automatically grant you Australian citizenship. Citizenship involves a separate application process, including residency requirements, character checks, and a citizenship test. Owning property can be an investment or residential decision, but it doesn’t directly influence citizenship eligibility.
DISCLAIMER: This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, or needs.
Amir Ishak is a Limited Authorised Representative (1269908) of Merit Wealth Pty Ltd, Australian Financial Services Licence 409361, ABN 89 125 557 002