Our previous blog dealt with whether or not you are able to buy property in Australia while you’re on a visa. But if you’re ready to start looking at purchasing property, there are a few more things you need to consider …
Borrowing money
Not all Australian banks will lend to foreign investors, as it is quite risky business. However, if you live in Australia (whether you’re here on a temporary or permanent visa) then you are not considered a foreign investor, and your application will be reviewed the same way as a citizen’s application would.
There are a few conditions though:
- People who hold temporary visas will be able to borrow up to 70% of the purchase price of a new property in Australia. This means that your deposit is going to be around 30% at purchasing time. There is a maximum borrow of 80% of your purchase.
- Permanent residents can borrow more, and will usually be offered the same as Australian citizens, which is normally 10%. This will, however, vary between banks so it always best to seek advice from a trusted agent.
Stamp duty
Now you’ve secured your home with a deposit, you can't forget about stamp duty - the tax imposed on certain acquisitions and transactions, including those associated with real estate. Stamp duty rates vary between States, so it can be quite confusing. To help you out, we’ve prepared a brief summary of stamp duty surcharges for people purchasing property on a visa, but please note that it is a guide only:
New South Wales
8% stamp duty surcharge + 2% land tax surcharge on residential property
BUT the surcharge doesn’t apply to permanent residents or citizens
Victoria
7% additional land transfer duty
BUT the surcharge doesn’t apply to permanent residents or citizens
Victoria has also announced a Vacant Residential Property Tax that will apply from 1 January 2018 to dwellings that are vacant for more than six months per calendar year
Queensland
3% stamp duty surcharge + 1.5% ghost tax surcharge
Applies to owned (not leased) land valued at over $350,000
BUT does not apply to permanent residents or citizens
Western Australia
The WA government has announced that from 1 January 2019 a 4% foreign citizen surcharge will be introduced on the purchase of new properties
South Australia, Tasmania, Northern Territory, Australian Capital Territory
These States and Territories don’t currently impose a surcharge on citizens of foreign countries, but may introduce a surcharge if foreign investment continues to increase
First Home Owners Grants
Australia has introduced a First Home Owner Grant (FHOG) scheme, which is designed to offset the effect of Australia’s Goods and Services Tax (GST) on home ownership. To take advantage of the FHOG scheme, you generally must: be an Australian citizen or permanent resident; not have held an interest (ie owned or part-owned) an Australian property on or after 1 July 2000; and the total value of the property (including both land and building/s) must be less than $750,000.
If you’re eligible for a FHOG, then you may also be eligible for certain tax and stamp duty offsets, depending on the State or Territory where the property is located. Each Australian State and Territory has a different scheme, which we briefly outline for you below, but please remember that this is a guide only:
New South Wales
To benefit from NSW’s First Home Buyers Scheme, at least one purchaser must live in the property for at least 6 months, which must start within the first 12 months of the purchase.
If you receive the NSW grant, you’ll also become eligible for a concession on your stamp duty – the value of the concession depends on the type of home purchased, and the purchase price
Victoria
Victoria’s FHOG Scheme isn’t available for ‘established homes’, but if you’re buying an established home you might be entitled to a duty concession of up to 50%.
If you are eligible for the FHOG, you may still be eligible for a duty concession. However, at least one purchaser must live in the property for 12 months, starting within the first 12 months of the purchase. Importantly, if you buy an off-the-plan property, the property must become your home if you’ve purchased it after 1 July 2017
Victoria also offers concessions on stamp duty for people receiving a FHOG
Queensland
Queensland doesn’t offer grants for purchases of existing homes – therefore you must buy or build a new home (though a purchase of a ‘substantially renovated home’ may also be eligible). All purchasers must live in the home for 6 months, which must commence within 12 months of the purchase.
Western Australia
Western Australia offers two types of FHOG – one for properties located south of the 26th parallel (property must be valued at $750,00 or less), and another for properties located north of the 26th parallel (property must be valued at $1,000,000 or less)
Whichever grant you receive, you must live in the property for at least 6 months, starting within the first 12 months after the purchase
South Australia
South Australia’s FHOG is only available if you’re purchasing or constructing a new residential property, and the property value is $575,00 or less. All purchasers must occupy the home for at least 6 months, starting within 12 months of the purchase.
Australian Capital Territory
The ACT’s FHOG Scheme only applies if you’re buying or building a new home, a substantially renovated home, or an off-the-plan home.
Further, at least one purchaser has to move into the home within 12 months of the purchase, and that person must live there for at least one continuous year.
Northern Territory
The NT’s scheme is only available for people building or purchasing a new home, though people purchasing an established home may be eligible for a stamp duty concession. At least one purchaser must occupy the house for 6 months, starting within the first 12 months after purchase.
The NT also offers other incentives and grants for FHOG recipients, including discounts on stamp duty, and a household goods grant
Tasmania
Tasmania’s FHOG is available to people either building a new homes, or purchasing a new home (including an off-the-plan new home). At least one purchaser must occupy the home for at least 6 months commencing within the first 12 months after the purchase.
Interest rates
As a temporary or permanent resident, you are entitled to the same competitive interest rates as Australian citizens. Interest rates will vary depending on the housing market but if you play your cards right you can secure them as low as 5.40%. Whether you choose to use a new dwelling as an investment or as a home will not generally vary your investment rate.
It is important that you are doing your homework and using trusted agents to secure the best solution for your needs. The friendly team at Pathway Lawyers & Migration Agents can provide comprehensive guidance and advice on all your Australian legal concerns, including purchasing property – contact us today
