Key considerations when buying a property in Australia as a non-resident

We spoke with one of our experts, Pau Lam from Odin Mortgage & Tax, to give you the essential information you need when it comes to buying a property in Australia as an expat non-resident.

Watch the full interview here or read the summary below:

What are the restrictions on Australian mortgages for expats?

When non-Australian expats are looking to buy a property in Australia, the rules are slightly different. Right now, many Australian banks are not taking on non-Australian mortgages. Therefore, expats need to look at non-bank lenders, known as Financial Institutions, who can still offer mortgages to non-Australians looking to buy a property. However, some international banks like HSBC will sometimes offer a mortgage to non-Australians.

To explain the difference between bank and non-bank lenders in Australia, Financial Institutions are generally happy to lend you a mortgage of up to 80% of the value of the property. The main difference between them and the banks is their rates are potentially 1-2% higher. This is because they want to ensure they make a profit when offering a mortgage to non-Australians. However, other features like online banking, loan terms and locations and types of properties are pretty much similar to the banks.

As an expat, if you have the option to go with an international bank like HSBC, that is likely going to be a better option for you because they will be cheaper.

What property taxes should expats buying property in Australia expect to pay?

The first tax to be aware of is stamp duty, which applies to anyone buying a property in Australia. Different states have different rules, but in general, stamp duty in Australia is around 5%.

Expats without Australian permanent residency or citizenship will also be expected to pay an additional customs duty surcharge. The surcharge amount depends on which state you are looking to buy in, as every state is slightly different, but generally, it is around a 7-8% additional surcharge on top of the 5% stamp duty.

Therefore, you can expect to pay a total of 13-14% of stamp duty plus customs surcharges when you are buying a property in Australia.

Another thing you need to take into consideration as an expat is an approval from the FIRB (Foreign Investor Review Board). This is an application for the Australian Government to look into your financial details and personal situation to make sure that you have a clean record, you are not money laundering, and you are capable of buying a property in Australia. There is a fee associated with this application, depending on the value of the property you're looking to buy.

On top of these taxes, there will be other costs associated with buying a property in Australia like legal fees, which will be an additional couple of thousand dollars.

Then, when it comes to running the property, there are further costs to take into account. On top of council rates and water rates charged by the local council, depending on where you live, you may also have to pay land tax to the state government if your property or land is valued at over a certain amount.

Additionally, if you are buying the property as an investment and are receiving rental income, you will have to declare the income in Australia and pay income tax. Then, later down the line, if you are looking to sell the property, there could be a capital gains tax to pay depending on the profit you have made. However, if you're buying the property to live in it as a main residence, you may be exempt from some of these costs.

What tax allowances and exemptions, if any, are available for expats buying property in Australia?

Unfortunately, because of a lot of rule changes, the Australian government has been getting harsher when it comes to foreign investors. A lot of the exemptions available are currently only available to citizens and those with permanent residency who have ties with Australia. Therefore, as a foreign property owner, you wouldn’t be eligible for these.

However, there are still some incentives available for both residents and expats. For example, if you are buying the property as an investment, there is a rule we call ‘negative gearing’. This means if you are making a loss on the property, you can accumulate these losses to offset any future income from the property or if you eventually end up working in Australia.

You may also be eligible for land tax exemptions depending on the property value. And, if you're living in the property as a main residence, you will be entitled to the main residence exemption from capital gains. Therefore, you won’t need to pay any capital gains when you eventually sell.

While many of the same exemptions apply to residents and expats, as we mentioned earlier, the upfront costs of buying a property will be slightly higher for expats compared to residents.

Is there anything else expats should know if they are considering buying property in Australia?

The most important thing to make sure you understand as an expat is the tax implications of being a non-resident. When it comes to the tax system in Australia, they don't look at your citizenship and whether you are an Australian or non-Australian. They look at whether you live in Australia or outside of Australia to determine your tax residency – and the rules are different for tax residents and non-residents.

For example, if you are a non-resident, you start to pay tax on the first dollar you make in Australia – but you're only liable for tax on income you make in Australia. Whatever you're earning overseas has nothing to do with Australia for tax purposes.

Therefore, if you are an expat living outside Australia and have another property overseas, you don’t need to pay tax on that foreign income in Australia.

The other thing is to ensure you fully understand the cost of buying and maintaining the property and eventually, what sort of capital gain tax you might need to pay and have a plan. For example, you could potentially buy a property, rent it out at first, and then live in it yourself in the future before you sell. That could help you to bring down your tax liability.

How do you help expats who are considering buying property in Australia?

We have two parts of our business, Odin Mortgage and Odin Tax. Our reason for combining these services is that when people are looking to buy a property and need a mortgage, the next question that always comes up is tax.

Therefore, we wanted to offer an in-house, one-stop-shop for expats and we can assist you from day one of looking to buy a property in Australia. We can offer you mortgage services based on your personal situation, let you know what options are available to you, provide the breakdown of the whole cost of buying a property, get you the finance and manage your tax going forward.

When you work with us, you don't have to worry about needing to talk to a different person about different things. Everything will be done by the team.

We also specialise in helping expats with foreign incomes to buy property in Australia, because the policies are completely different. If you work with someone locally, they may give a different answer, which might not be the right answer – so it is always best to talk to a specialist like us.

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