Owning property has been a staple part of an Australians wealth building strategy since the dawn of our country.
Whether it’s the dream of owning a quarter acre block or making the pilgrimage to Bunnings on a Saturday morning to buy paint to renovate a room, property ownership has been part of Australian culture for many years.
Many years ago the motivations for purchasing and holding property didn’t change when you moved overseas and became an expat however since May 2012 the financial reasoning behind property investing as an Australian expat has diminished rapidly since both the Federal and state governments started actively targeting expat property owners.
In today’s world the motivations to own property as an Australian resident are very different to that of a non-resident and we’ve highlighted below some of the key issues that Australian expats need to be aware of:
No Capital Gains Tax (CGT) Relief
Up until May 2012 Australian expats, like Australian residents, we able to take advantage of the 50% CGT discount. How this worked is that if you were to hold a property for longer than 12 months and then sell it, you would only be liable to pay CGT of 50% of the capital gains. In the 2012 Federal budget the government removed this relief and Australian expats now need to pay 100% CGT of the gains a property accrues whilst they are a non-resident. The CGT applicable is also calculated at the non-resident marginal tax rate which starts at 32.5% on the first dollar.
Increases in State Taxes
Recently we have seen Australian state governments introducing higher taxes on properties that are owned by non-resident Australian citizens. These state taxes have become such a high expense for expats that we have seen income yields drop as far down as to 1% which makes very little investment sense.
Banks Are Reluctant to Work with Australian Expats
In the past expats were seen as a model client for Australian banks however that all changed in 2017 when one by one the major banks either stopped lending or introduced stringent lending criteria should an expat want a loan. Some of the criteria including discounting the expats income by up to 40%, applying Australian tax rates on overseas income when calculating the expats ability to service the income even though their local tax rate might have been a lot lower than Australia (Singapore and Hong Kong as an example) or no tax rate at all (like the United Arab Emirates, Qatar and Saudi Arabia).
9 Ways We Can Help
General Advice Disclaimer
The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Atlas Wealth Management Authorised Representative before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Atlas Wealth Management nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.