Macpherson Kelley
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
In response to an active residential market and concern with ownership of essential infrastructure there are restrictions on real estate ownership in Australia, these include:
- an application must be made to the Foreign Investment Review Board for approval and fees paid
- varying thresholds apply to the purchase of agricultural (farming), commercial, industrial and residential property or interests in land holding companies or trusts
- further restrictions proposed under the Federal Government’s Critical Infrastructure Act 2018 applies to ownership and operations of assets classified as critical infrastructure.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
As a general statement there are no restrictions on lending for the purchase of real estate, however under thin capitalisation rules deduction for tax purposes of specified expenses (generally interest) may be disallowed if the debt to equity ratio used to fund Australian operations exceeds certain limits.
Residential loans may be subject to consumer lending requirements and State Property Law legislation.
Some lenders require Government approval before taking (or being granted) security interests over Australian land (predominantly, lenders not in the usual business of banking).
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
A principal cost of purchase is Stamp Duty, a state-based tax which as a result it varies between states and is calculated in a range of 3% to 13.5% of property value or price whichever is higher.
Additional Foreign Acquirers Duty is an extra amount of duty that will also apply to purchase of residential land.
Goods and Services Tax (GST ) may be payable and is currently assessed at 10% of property price, however business and farming exemptions may apply. Where the Buyer intends to undertake a business using the real estate and registers for an Australian Business Number (ABN), the GST may be claimed back as an 'input credit'.
The usual costs of purchase, including due diligence, search and registration fees will also apply.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner)?
Australia operates under three levels of Government - Federal, State and Local. Each level of Government imposes taxes including:
- Federal – Income and Capital Gains
- State – Land Tax which in some States includes a surcharge on foreign ownership. The State of Victoria also imposes a 'vacancy' tax where residential property is acquired and left unused
- Local - Rates and water charges.
Recovery
Recovery of ownership costs is governed by the lease or occupation agreement. In most States it is possible to recover the Local and State (but not Federal) taxes under commercial agreements. Recovery may be limited by specific legislation, for example for retail premises.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so what are they?
As a general rule there are few tax breaks or incentives offered for foreigners to purchase real estate.
If a project is of sufficient size and importance exemptions or incentives may be negotiated at State or Federal level.
It may be possible to adopt a tax efficient structure to minimise taxation.
How is the ownership of Real Estate evidenced in your jurisdiction?
Most commercial, industrial and residential land is freehold or registered Title recorded in the Land Registry of each State.
Agricultural land may be long term leasehold and also recorded in the Land Registry of each State.