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ASK THE EXPERT: Is Now A Good Time To Invest In Foreign Property?

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In the past 12 months, there have been unprecedented changes in property tax related issues in Australia.

Have these changes made the climate better for overseas property investment?

Federal fees changes

Foreign Investor Buying fees have recently been increased – it is now A$5,500 for acquisitions less than A$1 million, and A$11,000 for those more than. Foreigners must also pay an extra A$11,000 for each additional A$1 million more than $2 million.

There is now also a vacancy levy of A$5,000, applicable if any foreign owner leaves his or her property vacant for more than 6 months.

Claims for travel costs and depreciation on fixture and fittings on established property acquisitions have been removed as of July 1, 2017.

Capital gains changes

First-time home buyers can now use their superannuation to assist to save a deposit for their first home, up to a maximum of A$30,000 per person, while foreign property owners are now required to pay a 12.5- percent withholding tax (WHT) when the sale price exceeds A$750,000. This is an in-advance credit against any potential capital gains tax (CGT) payable, and not in addition to.

CGT Free status on principal residence for foreign and temporary tax residents has been removed, however, the current tax free statute remains until June 30, 2019.

Those downsizing their property can contribute an additional A$300,000 from the sale of their family home into their superannuation fund which will increase their tax free funds limit.

The CGT discount has been increased from 50 percent to 60 percent for resident taxpayers investing in affordable housing property, which is registered and rented to an approved tenant at 80 percent of the market value rental.

State stamp duty and land tax changes

The Foreign Buyer Duty, which is paid in addition to normal stamp duty, has been changed in different Australian states. New South Wales has increased it to 8 percent of the purchase price, Victoria to 7 percent, and South Australia to 4 percent.

The land tax in New South Wales has also increased to 2 percent, and this applies to the unimproved value of the land. Victoria now imposes an additional 1.5-percent levy and a higher starting land tax of A$4,025 once the tax free threshold of A$250,000 has been exceeded.

Queensland now charges an additional 1.5-percent in absentee land tax. Victoria has also introduced a new vacant residential property tax of 1 percent of the capital improved value when the property is left vacant for more than half a year. This applies to all owners with some exceptions.

SMATS - Australasian Taxation Services

10 Jalan Besar, #17-01, Sim Lim Tower, Singapore 208787

Tel: 6293 3858

Web: http://www.smats.net

 

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