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What are the Costs When Buying Real Estate in Australia?
2021-01-28

Taxes

Stamp duty

Stamp duty is the biggest additional cost when buying a house. Each state in Australia has its own calculation method and discount. For overseas residents to purchase land and villas in Victoria, the stamp duty is about 12.5% of the land price, which must be paid in one lump sum when the land is delivered. The construction part does not need to pay stamp duty.

Some states also have stamp duty concessions and reduction policies. For the specific calculation and policy requirements of the tax and fee, you can log on the official website of each state government for detailed inquiry.

Land tax

Australia's real estate (land and buildings on the ground) is a freehold property (except for the Canberra area). The state does not levy taxes on real estate, but only levies land taxes on land. Land tax, that is, the tax levied on "land value", is collected once a year. This tax is calculated based on the total value of the investment land held by the holder on December 31 or June 30 (regulations are different in different states), regardless of whether there is building on the land The levy party is the State Revenue Office. The land tax is exempted in each state for personal use land and agricultural land.

The state government calculates the land tax on the basis of the "Site Value" provided by the Council, which is usually recorded on the property's Council Rate Notice. For example, the investor has an investment villa or holiday home worth 1.2 million Australian dollars, and the real land value may be 500,000 Australian dollars. The government will also adjust the land price according to market conditions, and then notify the owners through a municipal fee notice. The specific tax rates for land taxes vary from state to state. Take NSW as an example. Since 2019, the threshold for land tax in NSW has been adjusted to $629,000, which means that owners who hold land worth more than AU$629,000 will need to pay a certain amount of land tax. The land tax in NSW adopts the same progressive tax rate as the personal income tax, that is, each time the value of land owned reaches a new level, a higher tax rate will be adopted. And if the holder is not an Australian resident, then starting from 2018, he will need to pay an additional 2% land tax surcharge. In general, the ratio of land tax to the entire housing price is relatively low. After 50 years of commercialization of real estate, Australia has become a completely differentiated market for investment and self-occupation. Today when the Liberal Party is in power, Australia continues to implement the Negative Gearing System (Negative Gearing Systems), so for investors, the land tax can be used to deduct personal income income tax, which will have the opportunity to refund more from the tax bureau Cash, and therefore generate more revenue.

Land tax surcharge

In order to increase government taxes and appease local people’s dissatisfaction with the excessively high housing prices, the state governments began to impose additional stamp surcharges on overseas people. In order to increase their efforts, Victoria and New South Wales have successively introduced land tax surcharges only for overseas people. In other words, while these overseas people follow the land tax policy mentioned above, they must pay additional land tax. By definition, non-Australian citizens or permanent residents, or who did not live in Australia on December 31 of the last fiscal year, or lived in the last fiscal year for a total of not more than six months, are required to pay.

Other Fees

FIRB fee

Overseas home buyers must submit a home purchase application to the Foreign Investment Review Board [FIRB] and pay an application fee. This process is generally assisted by the buyer’s lawyer. For properties with a total price of less than A$1 million, the FIRB application fee is A$5,500. If it exceeds, it will increase in steps.

Lawyer's fee

In Australia, real estate cannot be bought and sold without the involvement of a lawyer. Buyers need to appoint a local licensed lawyer in Australia to handle the signing and exchange of contracts during the signing process. Therefore, the attorney's fee is also an unavoidable procedural cost.

Real estate loan agency fees

Generally speaking, you don't need to pay any consulting fees to the mortgage consultant when consulting and applying for a loan, but there may be an account opening fee and other related handling fees. Customers can compare specific interest rates and fees according to their needs, and then choose the institution they want to borrow. The mortgage consultant will also give relevant professional advice.

Building and pest inspection fee

Before buying a second-hand house (a new house is not necessary), the house structure and pests should be inspected as necessary. This not only protects you from dishonest sellers, it is also usually a procedure required by lenders before issuing loans. Depending on the size of the house, the inspection fee ranges from $250 to $1000. The inspection fee for pests is about $300.

House insurance

In order to prevent any damage to the interior of your house and the loss of property inside the house, for general investment houses, you can consider buying this insurance to ensure that the damage inside the house is protected. If it is an apartment and multiple townhouses in one place, the property The management generally bears the cost of insurance outside the house, and the owner does not need to pay.

Water rate

This fee is used for public facilities and drainage services, which needs to be paid to the government on a fixed annual basis, and is generally collected together with the municipal fee. About 300-800 Australian dollars per year.

Municipal fees

All property owners must pay municipal fees to the Australian government. It usually needs to be paid quarterly to maintain and improve the public environment around the property, including city appearance maintenance, garbage disposal, etc. The cost is approximately AUD 1,000-2,000 per year.

Property management fees

Three or more townhouses and apartments in one place will charge property management fees, which are levied based on the types of public facilities provided by the community or real estate. If the public facilities are very complete, including gyms and swimming pools, the fees will be relatively high.