Over the past 12 months we have seen unprecedented changes in property related tax issues in Australia.
We have prepared this quick summary for your reference so you may see what may impact you as a property investor but feel free to contact us at SMATS with any specific questions.
Federal Fees, Income & Capital Gains Tax Changes
Foreign Investor Buying Fee
Increased to: A$5,500 for acquisitions under A$1m A$11,000 for acquisitions over A$1m, plus A$11,000 for each additional A$1m over A$2m.
Note this fee does not apply to Australian Citizens or Permanent Resident Visa holders.
Any foreign owner leaving their property vacant more than half of the year will be charged A$5,000. We are awaiting confirmation whether this applies to Australian Citizens or not.
Claim for Travel costs removed effective 1st July 2017.
Claim for Depreciation on fixtures and fittings on established property acquisitions after 9th May 2017.
First Home Buyers can now use their Superannuation to assist to save a deposit for their first home. Maximum per person is A$30,000 of which no more than A$15,000 per annum. Note this is additional fund contribution, no access to retirement savings is permitted.
Capital Gains Tax
Foreign owners are required to pay a 12.5% Withholding Tax (WHT) where the sale price is greater than A$750,000 (previous WHT was 10% applied on sales over A$2m). This is an in-advance credit against any potential Capital Gains Tax payable, not in addition to. Australian based owners must obtain a Clearance Certificate prior to settlement to ensure that no WHT is deducted.
Removal of CGT Free status on Principal Residence for Foreign and Temporary Tax Residents (mainly Students, Retirees & Foreign Workers). Current tax free status remains until 30th June 2019.
Downsizers can contribute additional A$300,000 from the sale of their family home into their Superannuation fund which will increase their tax free fund limits.
Tax free discount increased from 50% to 60% for resident taxpayers investing in affordable housing property, which is registered and rented to an approved tenant at 80% of the market value rental.
State Stamp Duty & Land Tax Changes
Foreign Buyer Duty (in addition to normal Stamp Duty)
NSW lifted from 4% to 8% of the purchase price. Victoria lifted from 3% to 7% of the purchase price. Qld unchanged at 3% of the purchase price. SA introduced at 4% of the purchase price. WA awaiting confirmation.
NSW has increased the land tax surcharge for Foreign owners to 2% (previously 0.75%). This applies to the unimproved value and there is no tax free threshold that applies to this levy.
Victoria additional 1.5% Levy and higher starting Land Tax of $4,025 once passed tax free threshold of A$250,000 unimproved value.
Qld additional 1.5% Absentee Land tax
Foreign Buyer Duty & Additional Land Tax does not apply to Australian Citizens or Permanent Residence Visa holders, with the following exceptions:
NSW charges Permanent Residence Visa holders if they have not been in Australia for more than 200 days in the past year. An exemption can be granted if the property is declared as your intended residence for more than 200 days in the year after acquisition.
Qld charges Absentee Land Tax rates to any owner living out of Australia more than 6 months in the year.
It is the owner’s obligation to contact the State Land Tax Department to discover if any Land Tax is payable.
Where a property is acquired jointly with a foreigner and Australian citizen, the Foreign Buyer Fees are usually pro-rata based on the ownership portions.
Victoria Off-Plan Stamp Duty Concession
Effective 1st July 2017, the reduced stamp duty applicable to off-plan purchases has been limited now to only owner occupiers. All investors will now pay full stamp duty based the purchase price.
Effective 1st January 2017, Victoria will introduce a new Vacant Residential Property Tax of 1% of the Capital Improved Value when the property is vacant more than half of the year.
This applies to all owners with limited exemptions if it is a holiday home (but only if actual residence in in Australia), City work pad for commuters or genuine absence due to extended travel or illness.
By Steve Douglas: SMATS Group and Australasian Taxation Services founder and chairman (Registered Australian Tax Agent 6236400)
SMATS GROUP: Australian Property, Tax & Finance Experts since 1995.