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Land Tax
Land tax is calculated on the total site value of all of your properties.
Unlike other taxes, such as capital gains tax, income tax or GST, land tax raises a liability on an unrealised gain.
The tax is owed on paper, regardless of whether or not you receive any income.
This makes land tax a financial burden if it is not factored into your investments.
NOTE: you are exempt from land tax if your land is used for rural purposes.
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Guide for Overseas Buyers
Special Australian government rules apply to "foreign investors."
If you are not an Australian citizen and do not have a permanent resident visa for Australia, there are Federal Government limitations on your ability to buy property here.
Your acquisition of real estate in Sydney will have to be approved by the Foreign Investment Review Board (FIRB).
You will generally not be able to buy established property, that is houses or apartments that have been sold or lived in before. Approval is normally given for foreign investors to buy properties in the following two categories only.
1. Brand New or 'Off-The-Plan'
That is, a house, villa, townhouse or apartment that has been newly built, has never been lived in before, and has never been sold before. Or that hasn't even been built yet (this is what is known in Australia as buying ‘off the plan’).
Usually, with foreign investment property, this means buying into a new apartment development. Often the developers will get pre-approval from FIRB to sell up to a maximum of 50% of the apartments to foreign investors, which means each buyer doesn’t have to go through the FIRB approval process individually.
2. Vacant Residential Land
This is not, however, a particularly good or practical option for overseas buyers as FIRB’s approval to buy is given on the condition that construction of a residential dwelling starts within 12 months, and trying to supervise and monitor building from the other side of the world is not for the inexperienced.
Details of the FIRB requirements can be found at www.firb.gov.au or by clicking on the link at the bottom of this page.
Image: The Sydney Harbour Bridge as viewed from North Sydney, NSW
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Purchasing Residential Real Estate
Residential real estate means all Australian urban land other than commercial properties (that is offices, factories, warehouses, restaurants, shops). Acquisitions of 'hobby farms' and 'rural residential' blocks by foreign interests are included in the residential real estate category.
Foreign purchasers intending to acquire real estate in Australia must seek prior approval from the Government through the Foreign Investment Review Board (FIRB) unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations.
Image: Flinders Street Station, Melbourne VIC
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Entering into a Contract
All contracts by foreign persons to acquire interests in Australian real estate must be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract.
For properties to be purchased at auction, prior foreign investment approval must still be obtained and advice provided whether the parties were successful or not, and if so, a copy of the signed contract forwarded to the Foreign Investment Review Board (FIRB) after the auction.
Image: Anzac Bridge, Sydney NSW
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Who is Exempt?
Exemptions include:
• acquisitions by Australian citizens resident abroad;
• acquisitions of property zoned residential by foreign nationals who hold permanent resident visas or hold, or who are eligible to hold, a 'special category visa' (eg a New Zealand citizen); and
• foreign persons purchasing, as joint tenants, with their Australian citizen spouse property that is zoned residential.
Under the Act, a foreign person is:
• a natural person not ordinarily resident in Australia;
• a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
• a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
• the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
• the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.
A substantial foreign interest (ie, a controlling interest) occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.
Image: 12 Apostles, Great Ocean Road VIC
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Australian Federal Government Objectives
The Government seeks to ensure that foreign investment in residential real estate increases the housing stock.
The Government, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments - house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.
The policy on developed residential real estate is negative. The effect is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent, therefore maintaining greater stability of house prices and the affordability of housing for Australians.
Image: Darling Harbour, Sydney NSW
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How to Apply
We strongly encourage you to refer to the How to Apply section of the FIRB website to download the applicable forms or refer to the Urban Land Policy Guidelines for further information on restrictions and applications.
For your convenience we have, however, provided links to the application forms below.
These include:
R3 - Application for Approval to Purchase Residential Real Estate in Individual Names
C1 - Application for Approval to Purchase Residential Real Estate by a Company or Trust
Statutory Notices
Image: West of the Great Dividing Range, Southern NSW
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The Buying Process
Once an offer to buy is accepted by the vendor, it is standard practice to ‘exchange’ contracts almost immediately and certainly within a few days. Once that happens, apart from a cooling-off period (unless this is waived), you, as the buyer, are committed to completing the purchase.
Not only is the process different to that in countries such as the UK, practices also vary from state to state within Australia. Buyers are advised to seek independent legal advice from a solicitor or licensed conveyancer in the area where they are planning to buy.
Marquette Turner is one of the only agency’s who has agents licensed to operate in both New South Wales and Victoria.
Image: Circular Quay, Sydney NSW
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Finance & Lending
You’ll be in a much better position to negotiate or bid with confidence if you have pre-arranged finance for your property purchase.
Unlike in some states and countries, Contracts of Sale are usually exchanged unconditionally (and, in New South Wales at least, often without any ‘cooling-off’ period), and you’ll then be obliged to complete the purchase.
Image: Jervis Bay, VIC
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Other Points
Legals & Conveyancing
You must get a copy of the Contract of Sale for a property and have it reviewed by a solicitor or licensed conveyancer.
Property Inspections
We strongly recommend a professional building and pest inspection for houses or a strata search for apartments.
Establishing the Purchase Terms
Negotiations often start at the same time, or even before, we complete the due diligence above. If there are any special conditions for the purchase, they should be addressed early. This is particularly true when buying at property auctions.
Image: Armidale, NSW
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Overseas Buyers
Australia has long been a favourite destination for immigrants and frequently rates first in virtually every poll you will ever read of countries to where foreigners would most like to emigrate.
Whether you realise it or not, there are generally three factors people consider when deciding what to invest in overseas – the level of risk, the level of reward and effort involved. People often focus heavily on the level of reward, forgetting to account for the other two.
So, in order to find the right balance for you, there are two key decisions to make. The first is deciding where in Australia to buy, which can be difficult and requires a high level of research.
The second decision is what to buy, which is largely determined by Australian Federal Government legislation. The buying process in Australia is significantly different to that of overseas markets, including the UK. Generally it is pretty difficult for foreign buyers to purchase anything, owing to the legal restrictions placed upon you, and the relative shortage of the types of properties that you are permitted to buy.
As such, this article aims to provide as much factual and useful information for those who are looking to purchase property in Australia but are neither Australian citizens or permanent residents.
Image: Sydney Harbour
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| How to Apply to the FIRB |
| R3 - Application for approval to purchase residential real estate in individual names |
| C1 - Application for approval to purchase residential real estate by a company or trust |
| Statutory Notices |
| Foreign Investment Review Board (FIRB) |
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