Non-Resident Property Owners Face New Challenges in Australian Real Estate

Non-resident property owners in Australia are bracing for significant changes in the real estate landscape come January 1, 2025.
These changes will introduce new surcharges and increased tax rates that could dramatically impact the financial viability of overseas investments.

We were again featured in The Sun newspaper (Malaysia) alongside our expert partners. Please read the full article here: https://thesun.my/business-news/surcharge-blues-await-malaysian-property-owners-in-australia-AD13233074

Land tax and surcharges for foreign, non-resident property owners set to upset many

Here is the article revised for this blog: 
According to the register of foreign ownership, 1,703 property purchases by overseas buyers in Victoria during the 2022 financial year suggest a substantial number of non-resident property owners will be affected.
The new regulations are set to put enormous financial pressure on these investors, especially those from Malaysia.Dominic Murphy, an international taxation specialist at TJD Accounting Services, highlights the severity of the situation for non-resident property owners.

“In Victoria, an absentee property owner with a land value of A$750,000 will be required to pay A$33,150 annually in land tax and absentee surcharges under the new policy,” Murphy explains. He adds that when converted to Malaysian Ringgit, these figures almost triple the financial burden on investors.

The challenges for non-resident property owners extend beyond Victoria. In New South Wales, foreign investors currently pay A$30,000 annually for a property with a land value of A$750,000. However, starting January 1, 2025, the land tax surcharge will increase from 4% to 5%, raising the annual payment to A$37,500.

Queensland presents a slightly less daunting scenario, with absentee owners paying A$20,250 annually for the same land value.
Murphy warns that many non-resident property owners find it increasingly unaffordable to keep their properties, especially as these taxes must be paid in Australian dollars. He advises investors to be diligent and check their ownership status before being notified of non-compliance, as penalties can add an extra sting to those unaware of these surcharges.

The situation has spurred more non-resident property owners to consider selling. However, they face another hurdle in the form of the Foreign Resident Capital Gains Withholding Tax. This tax, currently at 12.5% for properties sold at A$750,000 or above, will increase to 15% for all property sales starting January 2025.

Patrick Sia, commercial and residential director of Melbourne-based Tiga, emphasizes the importance of due diligence for non-resident property owners. “Engaging a reliable solicitor, financial adviser, and mortgage broker is crucial,” Sia states. He notes a growing interest in strata properties, which often have lower land tax than standalone properties, reflecting a shift towards more affordable investment options.

For non-resident property owners looking to navigate these changes, experts recommend exploring alternative solutions. Murphy suggests considering trusts, which can offer more favorable tax treatment in certain circumstances. Meanwhile, foreign lending specialist Tim Robinson advises seeking professionals familiar with the complex market of foreign loans to potentially reduce repayments significantly.

Lisa Loh, a mortgage broker with several international clients, stresses the importance of regular reassessment for non-resident property owners. “In this ever-changing tax and property landscape, taking proactive steps can ease financial pressure and open up new opportunities to get the most out of your investments,” Loh advises.

As the Australian government implements these measures to strengthen tax integrity and improve housing affordability for Australians, non-resident property owners must stay informed and seek expert advice to navigate the evolving landscape of foreign property investment in Australia.

Disclaimer: While the information in this blog post is based on the recent announcements made, the interpretation and analysis presented are our own. 
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Our team at TJD Accounting Services has over 40 years of experience in handling non-resident tax returns and providing financial guidance to overseas (foreign) investors. Let us help you make informed decisions to help protect your assets and finances.  

Email us at info@tjdaccounting.com.au or call +61 3 9379 4040. 

You may also be interested in our article about Capital gains tax for foreign property investors: 
https://tjdaccounting.com.au/capital-gains-tax-for-foreigners-australia/

Please watch this video on how certain structures could help reduce your tax burdens: 
https://www.youtube.com/watch?v=FSdXTlTRcrA&list=PLexF0GlC0kOFl0fAcrzSxuTud5rr1QP59&index=1