- Real Estate
Property Issues for Expatriates
There are a great many issues surrounding property, whether it is located in Australia, or overseas. Many are addressed within Exfin, but there are a number that we encounter routinely, sometimes on a daily basis. These are summaries only, and we strongly recommend you seek professional advice to determine your own individual position.
- You need to submit an Australian tax return if you generate rental income from an Australian property - regardless of whether you are an Australian tax resident or not. If the property is generating a tax loss, then those losses accrue and can be used to offset income tax or capital gains tax (CGT).
- If your Australian rental property generates a net taxable income, then non-resident rates of tax will apply - starting at 32.5%, without a tax-free allowance. Generally, this is the reason why accelerating the payment of your mortgage in Australia while an expatriate is not necessarily a good idea. Talk to your tax advisor first and note that there are some approaches that can reduce your tax payable in these situations..
- You will be liable for CGT on the sale of an Australian property, regardless of whether you are an Australian resident, or not. If the property was your main residence before you proceeded overseas, then the CGT exemption will continue forever if the property is not rented out, and for a period of six years if it is. Note that since May 9, 2012 non-residents have been unable to cliam the 50% CGT discount that normally applies to assets held more than 12 months - in many cases expats should have organised a property valuation of their property at that date to "lock in" their access to the CGT discount applying up until that date.
- Offshore investors in the Australian property need to remember that there are restrictions on their ability to buy Australian property. They will normally need to seek approval from the Foreign Investment Review Board (FIRB) and they will not normally be allowed to buy established (i.e. second hand) Australian residential property.
- We advise against expatriates or offshore investors buying "off the plan" through developers who undertake travelling roadshows through Asia and other parts of the world. Some of savings may be real, such as stamp duty, but you will be "paying" indirectly for any lease guarantees. We believe that you should never purchase without physically visiting the site or location and why limit yourself to a narrow part of the new property market. Finance should definitely not be arranged through developers - unless independent finance advice has been obtained. Note that "off the plan" stamp duty savings will cease in Victoria from July, 2017.
- Echoing the advice above, we do not believe that anyone should buy property without first reviewing the site and location. It is hard to believe how often we find that individuals have invested in "unsuitable" property which has been beautifully marketed, sight unseen.
- Legalities are absolutely crucial. Particularly in countries where freehold purchase is not available, it is essential to ensure that you have good effective title to your property - that means ensuring that your local legal advice is of good quality, and not necessarily relying upon the advice of agents.
- Expatriates will often have the choice of financing properties through a local currency loan, or foreign loan in the currency of their income. The latter may be a good choice if you are going to be overseas for a prolonged period and paid in the currency, but be wary of the foreign currency risks attaching to these loans.
- Finally, avoid buying property on the premise that you will retire into it, years in advance. Many things can happen in the intervening period and property - particularly foreign property - is not a highly manoeuverable, liquid asset.