Navigating Property Investment in Victoria, Australia: A Guide for Foreign Investors

Introduction

Are you eyeing a property investment in Victoria, Australia? Exciting as it may seem, foreign investors should tread cautiously through the intricate web of regulations and tax implications that govern such transactions. Here is a brief overview of the relevant issues to help you navigate the nuances of buying property in Victoria.

1. Foreign Investment Review Board (FIRB)

Before diving into the property market, it's important for foreign investors to familiarise themselves with the regulations set out by the Foreign Investment Review Board (FIRB). These regulations are designed to ensure that foreign investment aligns with Australia's national interests, particularly in the realm of residential and commercial property.

Residential Property

• Foreign investors are generally restricted to purchasing new dwellings.
• If investing in vacant land for residential development, stringent conditions apply, including completing construction within four years and refraining from selling the land until construction is finalised.
• Established dwellings can only be purchased by temporary residents intending to use them as their primary residence or by investors planning genuine redevelopment to increase Australia's housing stock.

Commercial Property

• Foreign investors are generally required to notify the Treasurer before acquiring an interest in commercial land, where the value of that investment is above a certain monetary threshold. Accordingly, you should verify the type of commercial land and the relevant threshold prior to purchasing a commercial property.

2. Stamp Duty - Foreign Purchaser Additional Duty (FPAD)

Stamp duty, a tax levied on property transactions, poses an additional financial consideration for foreign investors. Since July 1, 2019, foreign purchasers in Victoria are subject to an 8% Foreign Purchaser Additional Duty on top of the standard stamp duty if they buy residential property (see table below).

3. Land Tax and Land Tax Additional Surcharges

Foreign investors should also be mindful of Land Tax, an annual tax based on the total taxable value of all the land you own in Victoria. Land Tax is calculated using the site values of all taxable land you own as at midnight on 31 December of the year preceding the year of assessment.

In addition to the Land Tax, there may be additional Land Tax surcharges that may be applicable to foreign investors such as:

• Absentee Owner Surcharge (additional 4% of the total taxable value of properties owned by you). This tax surcharge is imposed on individuals who are not Australian citizens or permanent residents and do not ordinarily reside in Australia. If absent for more than six months in a tax year, they may incur this surcharge.
• Vacant Residential Land Tax: If a residential property is left unused or unoccupied for a continuous or aggregated period of six months or more in a given year, your residential property may attract this tax. For more information on Vacant Residential Land Tax, please see our article Vacant Residential Land Tax: Is your property portfolio caught in the net?

How Sharrock Pitman Legal can help?

While investing in Victoria's property market offers promising opportunities, foreign investors must approach with caution and thorough understanding of regulatory requirements and tax obligations. With a team of experienced lawyers in property law – including an Accredited Specialist in Property Law - if you find yourself needing advice on how these issues would affect you or you need advice on purchasing property in Victoria, Australia, we are here to help.  

Please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.

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‍The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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