3 factors foreign buyers should consider when investing in a Perth residential property

In recent years, the federal and state governments have introduced foreign investor fees, tax surcharges and levies. Here is a summary of the current process for foreign buyers when purchasing, owning and selling an Australian residential property. 

sabina-view-apartment

The Sabina apartments in Applecross, a riverside suburb of Perth features 173 stylish residences and resort style amenities over 30 levels. © Knight Frank Malaysia

#1 Buying 

© Knight Frank Research, Commonwealth Government, WA office of State Revenue

^The transfer duty surcharge will be increased to 7% from 1 January 2019. Many foreign investors will take advantage of the promising market conditions and invest now to avoid this surcharge.

The Australian Government welcomes foreign investment into Australia’s residential property market. The current rules around foreign investment in residential property aim to direct investment into new housing, increasing the housing supply and support local economic activity.

Foreign companies with Australian Businesses that acquire second-hand dwellings for the purpose of providing housing for their Australian-based staff normally meet with no objections subject to the conditions set by the Foreign Investment Review Board (FIRB):

  • The company must sell the property if it is expected to remain vacant for six months or more.
  • In remote and rural locations foreign companies may rent out dwellings acquired under this category only where they are unable to sell the property.

Investment migrants who fall under the Significant Investor Visa (SIV) are required to invest at least AUD$5 million into complying investments in Australia for a minimum of four years before becoming eligible for permanent residency.

Meanwhile, investment migrants who are under Premium Investor Visa (PIV) are required to invest at least AUD$15 million into complying investments in Australia for a minimum of 12 months before becoming eligible for permanent residency; a more expeditious pathway than the SIV.

#2 Owning

© Knight Frank Research, Commonwealth Government, WA office of State Revenue

In Perth, costs and taxes associated with the ownership of a property can vary dependent on the services the building provides.

The general costs for owning a property in Perth include land tax, council rates, income tax and Owners Corporation – a group of elected people manage the operations and decision-making of the common area of the property.

Furthermore, there will be additional costs for a landlord in Perth, such as property management fees, utility and service charges as well as landlord insurance. A foreign owner in Perth will need to bear the additional costs for owning property as well – Foreign-Owned Vacant Residential Property and Land Tax Surcharge.

Every Sabina apartment will boast ducted zoned air-conditioning and double-glazing to all windows, maximising sound and thermal insulation for chilled, comfortable living that achieves an average 8-star NatHERS rating for energy efficiency. © Knight Frank Malaysia

#3 Selling

© Knight Frank Research, Commonwealth Government, WA office of State Revenue

There are costs and taxes to consider when selling residential property in Australia, such as legal fees, real estate agent fees, marketing costs and capital gains tax. The capital gains tax is a federal tax levied on the gain or loss upon the sale of an investment property, it is implemented on the difference between the cost of acquiring the property, and the value when sold.

sabina-facilities

At Sabina, one can unwind in the sparkling 25m heated pool, relax in the cabana or dine with friends in the outdoor kitchen. The list of facilities goes on – Gymnasium, wellness room, cinematic/media hub, private dining room, business lounge, music room and games room. © Knight Frank Malaysia

Foreign and temporary tax residents are no longer entitled to access the CGT main residence exemption from 7.30pm (AEST) on 9 May 2017. A CGT withholding rate for foreign investors is applicable for all contracts with a market value over $750,000 when signed on or after the 1st July 2017.

For further information regarding taxes, contact Dominic Heaton-Watson, Associate Director, BSc (Hons) MRICS, REN 12272 on +6010 438 9169 or dominic.hw@my.knightfrank.com.

 

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