Purchasing Practicalities

Find out more about Australian types of property ownership, potential restrictions, the Foreign Investment Review Board and any additional taxes for foreign buyers.

Types of property ownership

Most Australian land is held under the Torrens title system. This guarantees title to the person who is recorded on the register as the owner of both the property and the land it sits on.

Strata title is the second most common form of ownership of residential property, usually for properties that are adjoining in some way, such as apartments and townhouses. The buyer is given ownership of the inside of the property and co-ownership of common areas with joint responsibility to maintain them. The maintenance is covered by a quarterly strata fee paid by each owner into a common fund administrated by elected owners.

Overseas ownership restrictions

In Australia, foreign persons are normally given approval to buy:

  • Vacant land for development including house and land packages where construction has not commenced, provided that continuous construction commences within 24 months.
  • New dwellings purchased ‘off the plan’ that are, under construction or newly constructed, but never occupied or previously sold.

Temporary residents can apply to buy an established dwelling to live in while they are in Australia, although the property must be sold when it is no longer their principal place of residence.

For high net worth individuals, the Significant Investor Visa (SIV) and Premium Investor Visa (PIV) provide a pathway to permanent residence. The SIV is for individuals investing AU$5 million into complying investments over four years and the PIV is for individuals investing AU$15 million over 12 months.

Foreign Investment Review Board

Foreign buyers are required to make an application to the Foreign Investment Review Board (FIRB) for the proposed acquisition of residential real estate. Approval is usually required prior to exchange of contracts. Application fees must be paid before the application will be assessed.

Property developers can apply for an exemption certificate to sell new dwellings and near-new dwellings in a development to foreign persons. When the developer holds an exemption certificate, the individual foreign investor will not be required to seek their own foreign investment approval to purchase a new dwelling or near-new dwelling in that development. A near-new dwelling means a dwelling that has never been lived in, was sold but the sale then failed to settle on completion.

Additional taxes for foreign buyers

Stamp Duty: Stamp duty is a tax imposed at the state/territory level. In NSW and VIC, there is an eight and seven percent surcharge respectively for foreign buyers of residential property in addition to the existing stamp duty.

Land Tax: Land tax is also imposed at the state/territory level. Foreign buyers of residential property in NSW are now subject to an additional 0.75 percent land tax surcharge in addition to the existing land tax. From the 2018 tax year, the surcharge land tax rate will increase from 0.75 percent to 2 percent. In VIC, there is an absentee owner surcharge, which applies to Victorian land owned by someone who is not an Australian citizen or permanent resident and does not ordinarily reside in Australia. This surcharge is 1.5 percent in addition to the existing land tax.

Vacancy Charge: The Government has introduce an annual vacancy charge on new foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months each year. The charge will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired by the foreign investor. VIC is planning to introduce an additional Vacant Residential Property Tax of one percent on the capital improved value of the taxable property from 1st January 2018. This will only apply to vacant properties located in the inner and middle suburbs of Melbourne.

 

Buyer profile

The purchaser is not an Australian citizen or permanent resident and does not ordinarily reside in Australia. They are a cash buyer purchasing their first property in Australia as an individual. The property is occupied by a tenant for five years and then sold completed into the secondary market at the same price they purchased.

Click the image below to enlarge.

Costs of buying, owning and selling

A typical example

Click on the image below for a timeline of what to expect when purchasing either an off the plan property or established dwelling in Sydney and Melbourne.

Example Timeline

Key contacts

Ged Rockliff

Ged Rockliff

Head of Residential

+61 (0) 2 8215 8861

 

Sophie Chick

Sophie Chick

Head of Research, Residential

+61 (0) 2 8215 6097

 

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