The 2017 Federal Budget addressed issues such as housing affordability and property vacancy in a bid to ease the pressure off Australia’s rental market.
Overseas property investors are one of the groups who have been hit hardest by the new budget. From increased application fees to capped ownership in new developments, here’s everything foreign property investors need to know about the latest changes to overseas property investment in Australia.
Capital Gains Tax
Typically, Australian property owners are not required to pay capital gains tax (CGT) upon the sale of a property that is considered their Primary Place of Residence. However, the same rule no longer applies to overseas property investors. Because of the new Federal Budget, foreign property owners will now have to pay CGT upon the sale of their main residence in Australia.
For existing foreign property owners, CGT exemption on their main residence will remain in place until June 2019. In addition to this new legislation, the CGT withholding rate for foreign investors in Australia will also increase from 10 percent to 12.5 percent, while the CGT withholding threshold will be lowered to the sale of properties worth $750,000 or more, compared to the previous $2 million.
As of May 2017, new overseas property investors in Australia are being hit with an annual vacancy charge for any investment properties left unoccupied or unavailable for rent for six months or more of the year. Those who leave their Australian property vacant will face a charge equal to the foreign investment application fee imposed on the property at the time it was acquired (at least $5000). The aim of this new legislation is to encourage overseas investors to rent out their investment property when it’s not in use, thus freeing up more rental properties in the Australian rental market.
In addition to annual vacancy charges, overseas investors will see a 10 percent increase in application fees when they purchase a residential property valued below $10 million. These additional fees will come into effect as of July 2017.
Foreign ownership cap
The Federal Budget has imposed greater restrictions on foreign ownership of new developments. As of May 2017, developers will only be able to sell 50 percent of new homes to overseas investors (a figure previously set at 100 percent). This foreign ownership cap will be included in the conditions of New Dwelling Exemption Certificates, which are provided to developers as a type of pre-approval for property sales.
Rentwest Solutions property management solutions
Whether you’re an experienced property investor or looking to invest in Perth rental properties for the first time, the property management team at Rentwest Solutions can provide the advice and solutions you need to make the most out of your overseas property investment strategy. From maintenance and management to advice on how to succeed in Perths rental market, our specialist property management team have you covered.
To find out more about our property management solutions, get in touch with our Perth team on 9314 9888 or email us at [email protected]
Note: The information provided in this article has been sourced from the government’s Federal Budget website. For more information on changes to overseas property investment please visit the following factsheet.