Property Tax for Non-Residents and Expats in Australia

The tax rules for non-residents and Australian expats who own property at home are materially different from the rules for residents. Some of these differences have been in place for years. Others changed in 2017 and are still regularly missed by property owners who moved overseas without taking specific advice at the time.

Understanding these rules before selling — not after — is the difference between a significant and an avoidable tax liability.

The Main Residence CGT Exemption: What Changed in 2017

Australian residents who sell their primary home generally pay no capital gains tax. This is the main residence exemption — one of the most valuable tax concessions in the Australian system.

In 2017, the government removed this exemption for foreign residents at the time of sale.

The practical consequence: if you are a foreign resident for tax purposes on the day you sell your Australian home, the main residence exemption does not apply. The entire capital gain — from the original purchase price to the sale price — may be subject to CGT at the non-resident rate.

This catches returning Australians in a specific and common situation: they owned their home for many years, moved overseas for work, and plan to sell before or after returning. If they sell while classified as a foreign resident for tax purposes, the exemption is lost.

The rule applies based on your tax residency status on the date of sale — not on how long you lived in the property or whether it was your primary home. The 15-year history of owner-occupation provides no protection if you are a foreign resident at settlement.

Tax treatment varies by individual circumstance — speak with your accountant before making any decisions based on tax considerations.

Foreign Resident CGT Withholding

On the sale of any Australian real estate with a market value of $750,000 or more, the purchaser is required to withhold 12.5% of the purchase price and remit it to the ATO on behalf of a foreign resident vendor.

This withholding is applied against the vendor's final CGT liability. If the actual tax owed is less than the withheld amount, the excess is refunded through the tax return process.

Key points:

• The $750,000 threshold applies to the market value, not the contract price — confirm the current threshold with the ATO at ato.gov.au as thresholds are subject to change
• The withholding is the purchaser's obligation — the purchaser's solicitor withholds at settlement
• To avoid withholding, a foreign resident vendor can apply to the ATO for a variation or a clearance certificate confirming reduced or nil withholding — this must be applied for before settlement

Eligibility criteria and thresholds are subject to change — confirm current rules with the relevant authority.

Talk to Key Choice Lending about your options.

Key Choice Lending has access to 72+ lenders and has supported Australian borrowers through more than $1 billion in transactions. Founder Matthew Clark is a two-time Amazon bestselling author and Better Business Awards winner. Book a Strategy Session — no obligation, focused on your situation.

Land Tax Surcharges for Foreign Owners

In addition to federal tax obligations, state governments impose annual land tax surcharges on foreign owners of Australian residential property. These surcharges apply to the unimproved land value and are separate from standard land tax.

Current surcharge rates by state (confirm current rates with each state's revenue office — rates change and these are subject to update):

| State | Foreign Owner Land Tax Surcharge |

|-------------------|--------------------------------------|

| New South Wales | 4% per annum |

| Victoria | 2% per annum |

| Queensland | 2% per annum |

| South Australia | 2% per annum |

| Western Australia | No surcharge currently |

| ACT | 0.75% per annum |

On a $1,000,000 residential property in New South Wales, a foreign owner pays an additional $40,000 per year in land tax surcharges on top of standard land tax. This is a recurring annual holding cost, not a one-time transaction cost.

Surcharge land tax is assessed separately from income tax and CGT. It is payable whether or not the property is rented.

Annual Vacancy Fees for Foreign-Owned Property

Foreign owners of residential property who leave that property unoccupied or not genuinely available for rent for more than half the year are subject to an annual vacancy fee. The fee is equivalent to the FIRB application fee paid at purchase.

The vacancy fee is assessed annually. Foreign owners must lodge an annual vacancy fee return with the ATO confirming occupancy or rental status.

Properties that are rented on arm's length terms for the majority of the year are not subject to the vacancy fee. Properties used as principal residences by temporary residents are also exempt during the period of occupancy.

Double Tax Agreements: Potential Relief

Australia has double tax agreements (DTAs) with many countries. These agreements can reduce or eliminate the Australian tax liability where the same income or gain would otherwise be taxed in both countries.

The DTA applies differently depending on:

• The country of your tax residence
• Whether the income is classified as rental income or a capital gain
• Whether the relevant DTA gives primary taxing rights to Australia or the other country

Not all DTAs provide relief on Australian property gains — many explicitly preserve Australia's right to tax gains on Australian real estate. Confirm the specific provisions of the DTA between Australia and your country of tax residence with your accountant before assuming any relief applies.

The One Conversation Worth Having Before You Move Overseas

If you own Australian property and are considering moving overseas — or have recently done so — the most valuable professional conversation is with a tax adviser who understands both Australian tax law and the tax rules in your destination country.

The questions to answer before you leave, not after you have already left: What is the CGT consequence of selling while classified as a foreign resident? Is there a timing advantage in selling before establishing foreign residency? What is the annual land tax surcharge cost of holding the property? What does the relevant DTA provide?

These questions have answers that vary by individual circumstance. The time to ask them is before the overseas move changes your tax residency status.

Book a Strategy Session. Make the Move.