What are the Property Taxes for Non-Residents in Australia

Owning a house comes with a lot of hidden costs. One of which is Australian taxes. Australian residents and non-residents pay different amounts of tax on their property.

There are two definitions of non-resident that we need to clarify. Firstly, you might be a non-resident for tax purposes – this covers expats who only pay tax on their Australian-sourced income. You’re an Australian citizen but not for tax. Secondly, you might be a foreign national living in Australia and treated as a resident for tax purposes.

Different Types of Property Taxes

Non-residents for tax purposes and foreign residents must pay a range of taxes on their property. We’ll clarify who has to pay and how much for each one.

Income Tax

Anyone earning an income in Australia must pay taxes, including rental properties. If you’re a tax resident, you must pay at the resident marginal tax rates. If you’re an expat (non-tax resident), you must pay the foreign resident tax rate, which is fairly high. Non-tax residents must pay 32.5% on all earnings below $120,000.

Remember, you can deduct property-related expenses from your income tax return. These include:

• Advertising costs for tenants
• Bank charges
• Body corporate fees
• Borrowing expenses (home loan interest and other fees)
• Council rates
• Depreciation (the declining value of assets)
• Insurance
• Land tax
• Property management fees
• Repairs and maintenance
• Gardening
• Pest control

Capital Gains Tax

You pay capital gains tax on the sale of assets. Australian citizens are eligible for the main residence exemption – they don’t pay CGT on their primary residence if they have lived in it for more than 12 months. Unfortunately, the main residence exemption isn’t available for non-residents or expats.

Therefore, you must pay capital gains tax if selling your property. CGT is the same tax as your income tax. You must add your capital gains to your Australian income on your tax return for that financial year.

Australian tax residents must be careful of CGT if selling a property abroad. As tax residents pay Australian tax on all worldwide income, foreign assets are liable for CGT. Seek professional advice to avoid paying CGT.

Stamp Duty

You pay capital gains tax when selling, whereas you pay stamp duty when purchasing a property. Stamp duty rates differ between states – it’s typically between 4% – 5% of the property value.

Australian citizens – including expats – have to pay stamp duty on all property purchases. However, foreign citizens must also pay a stamp duty surcharge in most states. The surcharge ranges between 7-8%. The Northern Territory and ACT don’t impose a surcharge.

If you’re an expat buying property with a foreign spouse, you must pay the surcharge. Therefore, it’s worth considering if you should keep your partner off the property title.

Land Tax

Land taxes are an annual tax on all properties. As with stamp duty, most states offer main residence exemptions. Additionally, primary production land and charity land are exempt. However, as an expat, land tax applies to Australian investment property. State governments calculate land tax on the total taxable value of your property.

Land tax laws differ between states – the Northern Territory doesn’t charge land taxes.

Who Pays Land Tax?

Anyone who owns or jointly owns the following might have to pay land tax to their local council or Australian state government:

• Vacant land and rural land
• Residential properties (both houses and units)
• A holiday home
• An investment property or properties
• Residential, commercial, or industrial units – including car spaces
• Commercial properties, such as factories, shops, or warehouses
• Land leased from the local government.

You must pay land tax whether or not you earn an income. For instance, if your rental property or holiday home is empty, you must still pay land tax.

What Do You Do Not Pay Land Tax On?

Generally speaking, you don’t need to pay land tax on:

• Your principal place of residence, i.e., your home
• A farm
• Any charity land use
• Land with a total taxable value below the land tax threshold

However, check specific exemptions for your state as they’re not all the same.

Land Tax Threshold: State by State

So, what are the different land tax laws for each state?

New South Wales

The Valuer-General determines land value in New South Wales at the beginning of each tax year. NSW defines land value as the unimproved value of the land.?

The valuer assesses the taxable value on the average value of the last three years. The minimum threshold for 2022 is $822,000. The NSW land tax rate is 1.6% of the total value.?

Land valued above $5,026,000 must pay a 2% tax rate.

Additionally, NSW offers a discount for new build-to-rent properties until 2040 to boost the housing supply.

Victoria

You must pay land taxes on Victorian property and land above $300,000. Victoria imposes a marginal tax rate:

• Land value between $300,000 and $600,000 must pay $375 plus 0.2% of the amount below $300,000
• Land value between $600,000 and $1,000,000 must pay $975 plus 0.5% of the amount below $600,000
• Land value between $1,000,000 and $1,800,000 must pay $2975 plus 0.8% of the amount below $1,000,000.

And so on.

Western Australia

Western Australia also uses a marginal tax rate. Property valued below $300,000 does not have to pay land tax. For properties valued between $300,001 and $420,000, there is a flat rate of $300. Land between $420,000 and $1,000,000 must pay $300 plus 0.25% over $420,000.

South Australia

South Australia has a no-land tax threshold of $482,000.

• Between $482,000 and $774,000, landowners must pay 0.5%
• Between $774,000 and $1,126,000, landowners must pay $1,460 plus 1.25%

Tasmania

• No land tax up to $49,000
• Land value between $50,000 and $399,999.99 – $50 plus 0.55% above $50,000
• Land value $400,000 and above – $1,975 plus 1.5% above $400,000

Queensland

• No land tax up to $599,999
• Land value between $600,000 and $999,999 – $500 plus 1% above $600,000
• Land value between $1,000,000 and $2,999,999 – $4,500 plus 1.65% above $1,000,000

Northern Territory

You don’t have to pay land tax at all in the Northern Territory.

ACT

Land tax is assessed quarterly rather than yearly in the ACT. They have a fixed charge of $1,392.

• Land up to $150,000 – 0.54%
• Land value between $150,000 and $275,000 – $810 plus 0.64% above $150,000
• Land value between $275,001 to $2,000,000 – $1,610 plus 1.12% above $275,001

Foreign Ownership Surcharge

Many states also implement a foreign ownership surcharge. This only applies to foreign nationals, not expats. The surcharge ranges between 0.75% (ACT) to 2% (NSW).

As with the foreign resident stamp duty surcharge, it adds a hefty sum to the purchase of your property. If you can avoid paying the foreign ownership property tax, it could save you significant amounts.

Key Takeaways

• Non-residents must pay income tax, capital gains tax, stamp duty, and land tax on their Australian property
• Australians and non-residents must pay land tax on any land with residential properties, holiday homes, company units, and even vacant land.
• Land tax is calculated on the value of your land and differs between states
• Main residents, farms, and charity land are typically exempt
• Non-residents must pay foreign surcharges on stamp duty and land tax in most states

Frequently Asked Questions

How much are property taxes in Australia?

Property owners in Australia must pay income tax (on rental properties), capital gains tax, stamp duty, and land tax. The land tax rate differs between states and doesn’t exist in the Northern Territory. Land tax is based on the value of the land, determined on a yearly basis (quarterly in the ACT).

What taxes do you pay in Australia?

Australian and non-resident taxpayers must pay tax on all income earned in Australia (and worldwide income if you’re an Australian resident). If you own property in Australia, you must also pay stamp duty, capital gains tax, and land tax. Foreign residents might also pay stamp duty and land tax surcharges.

How much is land tax in Australia?

Each state has different marginal land tax rates in Australia. Most have a tax-free threshold, except for ACT. For example, in New South Wales, you don’t need to pay if the land value is below $822,000. Above that, you must pay 1.6% of the value.

Who pays land tax in Australia?

All landowners must pay land tax in Australia. The only exceptions are:

• If your land is valued below the threshold
• If your land is your primary place of residence
• If your land is a farm
• If your land is used for charity purposes

How much tax do you pay when you buy a house in Australia?

When you buy a house in Australia, you must pay stamp duty and land tax. You might also need to pay a surcharge if you’re a foreign national. If you rent out your property, you will need to pay income tax. When you sell, you pay capital gains tax.