Australia recently held a Federal election on 18 May 2019.
The Labor opposition had been widely tipped to win the election and was proposing a number of sweeping changes that would have been extremely adverse on property investment. This included removing negative gearing and reducing the tax-free capital gains tax allowance. Labor’s proposed changes to property taxation were rejected by the general community.
In the end, these changes were rejected by the Australian people, who returned the Liberal Morrison Government.
Despite these major measures now being scrapped by the Labor Party, there has been some changes to taxation of property investment in recent times which are summarised below:
- Travel Expenses to visit and inspect your property can no longer be claimed.
- The write off of fixtures in an investment property can now only be made if it is a new property. If you buy an established property then no claims can be made unless you actually did the improvements yourself.
For owners living out of Australia, there is a 12.5-percent withholding tax kept from the sale proceeds pending the lodgement of your tax return to establish the actual tax payable.
- The Liberal Parties’ proposed changes to remove the tax free residence exemption period of any expat that sells their former home when living out of Australia has been stalled and the legislation lapsed. However, there is yet to be a formal confirmation that this proposed change will not be resubmitted.
There have also been substantial changes to State Government taxation for property investors including:
- A Foreign Buyer Surcharge applies in addition to the stamp duty on purchase. This is not charged if you are an Australian Citizen. You are also exempt if you have an Australian Permanent Resident (PR) Visa in all States except New South Wales (NSW) which only exempts PRs if they have lived in Australia more than half the year. The surcharge is currently 8 percent of the purchase price in NSW and Victoria, and 7 percent in Western Australia (WA) and Queensland.
- In Queensland, the Land Tax Rates have been reduced for anyone holding Australian Citizenship or Permanent Residency who are no longer considered to be “Absentees” under their rules.
Also, remember to lodge an annual Australian Income Tax Return if you live overseas and own a property in Australian collecting rent. Even if your expenses and interest are more than your rental income, you must still lodge a return each year. Failure to do this will result in a fine of A$1,050 per year, per person.
If you lodge your own return, the submission deadline is 31 October, however if you use a Tax Agent like ATS, then you have an extension to lodge through to May the following year.
Steve Douglas is the co-founder and Managing Director of Australasian Taxation Services (ATS), established in Singapore in 1995. ATS provides specialist taxation services to people of any nationality investing in Australian property, as well as Australian expatriates living overseas. Areas of specialisation include the Australian taxation aspects of property investment, as well as expatriate and migration planning. For more information, visit its website here.
From The Finder (Issue 300), September 2019
More on The Finder:
Ask The Expert: What Do I Need To Know About Tax-Free Insurance Bonds In Australia?
Ask the Expert: Here’s How The Australian Capital Gains Tax CHANGES Will Affect You
Ask The Expert: IMPORTANT 2019 Financial Updates For ALL Australian Expat Property Owners