What Is the Difference in Government Fees for Buying a New and Established House in Australia for a Foreigner?

Foreign buyers looking to invest in Australian property face several government fees, which vary depending on whether the property is new or established. Understanding these distinctions is crucial for foreign investors to budget effectively and comply with local regulations. Below is a detailed breakdown of the key differences in government fees for new and established homes:

1. Foreign Investment Review Board (FIRB) Application Fee

The FIRB requires foreign buyers to apply for approval before purchasing any residential property in Australia. The application fees differ based on the value of the property but do not differentiate significantly between new and established properties. However, there are key differences in the approval process:

• New Homes: Foreign investors are encouraged to buy new or off-the-plan properties as part of Australia’s strategy to boost housing supply. FIRB approval is more straightforward, and developers often pre-approve their projects for foreign buyers, simplifying the application.

• Established Homes: FIRB approval is still required, but foreign buyers face stricter regulations. Generally, foreigners are not allowed to purchase established homes unless they plan to redevelop the property significantly to increase housing stock (e.g., demolishing and building multiple units).

The fees are as follows:

• New Properties up to AUD 1 million: AUD $14,700

• Established Properties up to AUD 1 million: AUD $44,100

• Higher-value properties incur even higher fees, but the structure is consistent for both property types.

2. Stamp Duty (Transfer Duty)

Stamp duty is a significant cost when buying property, and it varies depending on the state and whether the property is new or established:

• New Homes: Some Australian states offer concessions or rebates for foreign buyers purchasing new properties as part of housing incentives. For example:

  • In Victoria, a concession on stamp duty may apply for off-the-plan purchases if they are intended as the buyer’s principal place of residence.

  • In New South Wales, foreign investors still face the surcharge, but the rate may be offset slightly with developer incentives.

• Established Homes: Foreign buyers purchasing established properties typically pay full stamp duty without concessions. Additionally, they are subject to a foreign investor surcharge, which ranges from 7% to 8% in most states. For example:

  • New South Wales charges an additional 8% on top of the standard stamp duty rate.

  • Victoria adds a 7% surcharge for foreign buyers.

These surcharges make purchasing established properties more expensive for foreign investors compared to new developments.

3. Capital Gains Tax (CGT) Implications

While not an upfront fee, it is essential to consider the CGT implications that vary between new and established properties:

• New Homes: If a foreign investor buys a new property and sells it later, CGT applies. However, new homes purchased off-the-plan and held for a specific period may benefit from lower initial costs and depreciation benefits.

• Established Homes: If a foreigner buys and redevelops an established home, CGT will apply upon resale. Non-residents do not benefit from the main residence exemption, and the tax rate is generally higher for foreigners than for Australian residents.

4. Land Tax Surcharge

Foreign investors are also subject to annual land tax surcharges in some states. This surcharge is applied regardless of whether the property is new or established, but it may differ depending on the property type:

• New Homes: In some states, developers negotiate incentives with local authorities to reduce these taxes temporarily or for the first few years.

• Established Homes: These properties usually incur the full surcharge, which can range from 0.75% to 2% depending on the state and property value.

5. Additional Incentives for New Property Purchases

To encourage foreign investment in new developments, Australian developers and some states provide additional incentives that can offset certain fees:

• Off-the-Plan Discounts: Developers might offer rebates that reduce the overall purchase price or cover some stamp duty costs.

• Government Grants and Concessions: Certain states provide grants for buying new properties, especially when they contribute to increasing housing supply.

Conclusion

When purchasing property in Australia, foreign buyers encounter various fees, with a clear distinction between new and established homes. New developments generally offer more favorable terms, including stamp duty concessions, rebates, and a smoother FIRB approval process, making them a more attractive option for foreign investors. In contrast, buying an established home often comes with higher upfront costs and stricter regulations, making it less appealing without plans for redevelopment.

Foreign investors should carefully evaluate their options and consult with legal and financial professionals to fully understand the implications and fees associated with each type of property purchase in Australia.