Australian Property – Non-Tax Resident Ownership Of Real Estate – such as Houses, Apartments, Units, Commercial Property, Farms, Pastoral leases & Mineral & or Petroleum tenements.
In recent years a number of tax measures have been introduced, mostly by the Federal Government which have an impact on the Australian Taxes that must be paid by Non-Tax Resident investors on Australian Real Property. This also includes persons who live in Australia on section 457 employer sponsor and similar visas. These temporary residents although physically present in Australia have concessional tax treatment on their Australian & worldwide income including capital gains and are effectively taxed as Non-Tax Residents by the Australian Taxation Office.
12.5% Non-Tax Resident Withholding Tax On Sale Of Property
This tax applies to sales of over $750,000 per asset and also to INDIRECT INTERESTS of 10% or more through companies or trusts where the contract of sale is entered into after 1st July 2017. The withholding tax may be credited and/or refunded against any tax liability the Non-Resident may have once it has lodged its Australian Income Tax Return for that year which includes the capital gains tax calculation on sale of the property. Prior to settlement the Non-Resident taxpayer might apply to the Tax Office with supporting evidence to vary the 12.5% amount downwards if there is no capital gain, a capital gains tax concession applies or a lower capital gains tax amount is calculated.
The purchaser has the obligation to withhold if they know or have reasonable grounds to believe a vendor is a foreign resident or is not an Australian resident and has a record about the purchase that the vendor has an address outside Australia or is authorised to provide a financial benefit to a place outside Australia. If in doubt the purchaser may request a vendor declaration that they are not a relevant foreign resident which if not provided by settlement will require the 12.5% tax to be withheld. This declaration requires approval by the Australian Taxation Office and will require a tax file number & other administration that may take at least several weeks, so allow plenty of time prior to settlement.
Non-Tax Residents – No 50% Capital Gains Tax Discount After 8th May 2012
Properties acquired after this date get no 50% discount at all. Properties held at this date may get a 50% discount on the property’s value at this date requiring a retrospective valuation to be done. There is no discount for any increase in value after this date. This measure also affects Capital Gains that may flow through trusts to Non-Resident beneficiaries.
Non-Tax Residents Can Not Access the Main Residence Exemption from 9th May 2017 (proposed)
From 9th May 2017 Non-Residents of Australia for tax purposes cannot access the Capital Gains Tax Main Residence exemption on new properties acquired and lived in as the main residence. Existing properties held at that time are grandfathered until 30th June 2019 so may be sold before this and the main residence exemption would apply. After this time the main residence exemption no longer applies. A recent amendment was proposed that would exempt from these measures temporary tax residents, normally treated as Non-Residents for tax purposes i.e.: holders of employer sponsored visas former s.457 and similar.
Western Australia Foreign Buyers Stamp Duty Surcharge Of 4% from 1st Jan 2019 (proposed)
Other Australian states have similar surcharges on their stamp duty rates and also land taxes for non-tax residents.
Residential Rental Property No Deduction for Travel Expenses After 1st July 2017
This affects only property investors (Individuals, Trusts, etc) so that travel expenses will not be deductible nor form part of the cost base of the property. This would deny your claim for airfares to inspect your Gold Coast unit in the same way as travel to your suburban rental property in your car to repair a fly screen. Expenses of Institutional investors, managed funds, property trusts, property managers and the like are unaffected.
Residential Rental Property No Depreciation Deductions for Previously Used Assets After 1st July 2017
This would apply to Plant and Equipment that was being claimed by the previous owner or ascertained by a quantity surveyor as being part of the purchase price or previously used for another purpose by the taxpayer. New assets acquired after purchase by an investor, institutional investors and the like are unaffected.
Vacancy Fees for Foreign Owned Residential Premises (proposed from 9th May 2017)
A fee applies if the property is not occupied or available on the rental market for at least 6 months p.a. ascertained by lodgement of an annual Vacancy Fee Return. The fee is set at the same rate as a Foreign Investment Review Board application i.e. starts at $5,500.
If you think some of these tax issues may affect you, please call us on (08) 9321 2642 to discuss. The first 30 minutes discussion are complimentary!