What are the Property Taxes for Non-Residents in Australia?
Owning a property in Australia means incurring various hidden expenses, one of which is taxes. The amount of tax paid on a property varies between Australian non-tax residents and tax residents.
So, who is a tax non-resident?
It’s important to note that there are two distinct definitions of non-residency.
One definition is being considered an Australian non-resident for tax purposes, even if you are an Australian citizen. The other definition refers to a foreign national residing in Australia who is considered a resident for tax purposes.
Types of Property Taxes
Non-residents and foreign residents may need help understanding their tax obligations concerning their properties in Australia. We will clarify the applicable taxes and the amount payable by each individual.
Non-Resident Income Tax in Australia
Tax obligations are a part of owning rental property in Australia, including for expats. Australian income tax for non residents is higher than for tax residents, including 32.5% on all income below $120,000. You can claim eligible property-related expenses as deductions to reduce the tax burden.
Australian Capital Gains Tax Rates for Non-Residents
Capital gains tax is due on selling assets, including real estate. If you’re an Australian citizen and have lived in your primary residence for over 12 months, you can be exempt from the capital gains tax. However, this exemption does not apply to non-residents or expats.
Therefore, if you sell your property as a foreign resident, you must pay capital gains tax, which is calculated similarly to income tax. You need to add the capital gains to your Australian income on your tax return for the financial year in which the sale occurs.
Australian tax residents must be cautious about capital gains tax when selling property overseas. Since they pay Australian tax on all worldwide income, including foreign assets, they must consider capital gains tax implications.
Seek professional advice to avoid paying unnecessary high taxes, including capital gains tax in Australia for non-residents.
Stamp Duty for Non Australian Residents
Stamp duty and capital gains tax are both required for property transactions in Australia. When purchasing a property, stamp duty is a one-time fee that ranges from 4-5% of the property value and varies by state.
All Australian citizens, including expats, must pay stamp duty. In most states, foreign citizens may face a surcharge, but the Northern Territory and ACT don’t have this additional fee. If an expat is buying a property with a foreign spouse, it’s advisable to consider if keeping the spouse off the title would result in a lower stamp duty fee. When selling a property, capital gains tax must be paid, calculated based on the gain made from the sale.
Note that the main residence exemption, which exempts Australian citizens from capital gains tax if they’ve lived in the property for over 12 months, is not available to non-residents or expats.
Foreign Ownership of Australian Property
Many states also implement a foreign ownership surcharge. This only applies to foreign nationals, not expats. The surcharge ranges between 0.75% (ACT) to 2% (NSW).
As with the foreign resident stamp duty surcharge, it adds a hefty sum to your property purchase. If you can avoid paying the foreign ownership property tax, it could save you significant amounts.
Land Tax in Australia for Non-Residents
Expats must pay annual land taxes on their Australian investment properties, unlike citizens who might be eligible for a main residence exemption.
The amount of land tax is calculated based on the total taxable value of the property. It varies by state, with some states, like the Northern Territory, not imposing any land taxes.
Get a detailed summary about your investment property in Australia using our Investment Property Calculator.
Land Tax threshold: state by state
New South Wales
In New South Wales, the Valuer-General assesses the land value at the start of each tax year. It is the unimproved value of the land.
The taxable value depends on the average value over the last three years, with a minimum threshold of $822,000 in 2022. The land tax rate is 1.6% of the total value, rising to 2% for land valued above $5,026,000.
To encourage an increase in housing supply, New South Wales offers a discount for newly built rental properties until 2040.
Victoria
In Victoria, if your property or land is above $300,000, you must pay land taxes. The state implements a marginal tax rate system with different tax amounts based on the value of the land:
- If the value is between $300,000 and $600,000, you pay $375 plus 0.2% of the amount below $300,000.
- If the value is between $600,000 and $1,000,000, you spend $975 plus 0.5% of the amount below $600,000.
- If the value is between $1,000,000 and $1,800,000, you pay $2975 plus 0.8% of the amount below $1,000,000.
Queensland
- You don’t need to pay land tax for properties valued at $599,999 or less.
- Properties valued between $600,000 and $999,999 must pay $500 plus an additional 1% on the value above $600,000.
- For properties valued between $1,000,000 and $2,999,999, the land tax obligation is $4,500 plus 1.65% on the value above $1,000,000.
South Australia
- In South Australia, properties with a value less than $482,000 are exempt from land tax.
- For properties valued between $482,000 and $774,000, the state levies a 0.5% tax rate.
- For those valued between $774,000 and $1,126,000, the tax rate is $1,460 plus 1.25%.
West Australia
In Western Australia, a marginal tax rate applies to land taxes.
- Properties with a value of less than $300,000 are exempt from land tax.
- For those valued between $300,001 and $420,000, the state imposes a flat rate of $300.
- Properties valued between $420,000 and $1,000,000 must pay an additional $300 plus 0.25% over the value of $420,000.
Tasmania
In Tasmania, properties below $49,000 are exempt from land tax.
For properties valued between $50,000 and $399,999.99, you must pay a surcharge of $50 plus 0.55% above $50,000.
Properties valued at $400,000 and above must pay $1,975 plus 1.5% over $400,000.
Northern Territory
You don’t have to pay land tax in the Northern Territory.
Australia Capital Territory
The ACT assesses land tax quarterly instead of annually. The state imposes a fixed fee of $1,392. For land values:
- Up to $150,000: a rate of 0.54% is applied.
- Between $150,000 and $275,000: $810 plus 0.64% of the amount above $150,000 is owed.
- Between $275,001 to $2,000,000: $1,610 plus 1.12% of the amount above $275,001 is owed.
Other tax deductions are available for expats and overseas residents who own Australian property.
Understanding property tax for non residents in Australia
- Australians and non-residents are responsible for paying taxes on their Australian property, including income tax, capital gains tax, stamp duty, and land tax.
- Taxation on land applies to residential properties, holiday homes, company units, and even vacant land.
- The amount of land tax owed varies based on the value of the property and the state in which it is located.
- Property such as primary residences, farms, and charity lands are generally exempt from land tax.
- In many states, non-residents must pay additional surcharges on stamp duty and land tax.
It is possible to file your Australian property tax return online, and options are available specifically for overseas residents.
Feel free to speak with our tax experts if you have more questions regarding property taxes in Australia.
FAQs about property taxes in Australia
Australia’s property owners must pay income tax on rental properties, capital gains tax, stamp duty, and land tax. Land tax rates vary from state to state, with the Northern Territory being the exception as it does not impose the land tax.
The annual value of the property determines the amount of land tax owed, and in the ACT, it is assessed every quarter.
In Australia, residents and non-residents must pay tax on all income earned. Property ownership in Australia also entails the obligation to pay stamp duty, capital gains tax, and land tax.
Non-residents may face additional stamp duty and land tax surcharges.
In Australia, each state has a unique land tax rate structure, with most states having a tax-free limit. An exception is the Australian Capital Territory, which doesn’t have a threshold.
As a reference, New South Wales has a tax-free limit of $822,000, meaning if the land value is below this amount, you won’t owe land tax.
On the other hand, if the land value is above $822,000, the owner must pay 1.6% of the value in land tax.
Land tax is mandatory for all property owners in Australia unless the land is exempt due to being a primary residence, a farm, or used for charity purposes. Also, properties that fall below the tax threshold are exempt from paying land taxes.
It is important to note that there may be specific exemptions to land tax in your state, and it is best to check these details before making any assumptions.
Generally, the following are exempt from land tax:
- Your primary residence
- Agricultural land
- Land used for charitable purposes
- Land with a taxable value below the state’s threshold
The buyer must pay stamp duty and land tax when acquiring a property in Australia. Those who rent out their property must pay income tax, and capital gains tax is due upon selling the property.
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