Property taxes in Australia: is it expensive to buy property?

This guide looks at property tax in Australia including capital gains tax on property when you sell and how where your property is located can change the costs of your new Australian home.

What are the main property taxes in Australia?

So – what is a property tax, and when is it paid? Property taxes do vary a lot from one country to another so getting familiar with Australia’s costs is important if you intend to buy or sell a place there.

Types of property taxes in Australia include:

• Stamp Duty – also called land transfer tax – when you buy a property
• Capital gains taxes when you sell a property that’s not your main home
• Council rates, locally paid and based on property value
• Land tax, locally paid and levied on undeveloped land which is not your primary residence
• Rental income taxes for owners renting an Australian property

Many of the property taxes which apply in Australia are locally calculated and so the location of your property makes a big difference. There are also some exemptions which may apply, particularly when thinking about buying or selling your primary residence. As this can make calculating your taxes somewhat complicated, you may benefit from local specialist advice to help you navigate the legal requirements – we’ll look at this in more detail later.

Who is subject to these taxes?

Generally people considered to be Australian residents for tax purposes will be liable for Australian tax on their worldwide income. Non-residents of Australia may still be liable for some Australian taxes if they derive income or gains in Australia. As tax is complex – particularly when dealing with taxes across different countries and jurisdictions, you’ll need to get advice if you’re unsure about your liabilities in Australia or anywhere else in the world.

This guide is for information only. Details can change and depend on your personal situation. Take professional advice when buying or selling an Australian property to ensure you comply with all tax duties in Australia and wherever you are a resident.

Taxes on buyers

Stamp duty (land transfer tax) is the key property tax paid by buyers of a property in Australia. This is a state level tax, which means the amount you pay depends on the location of your property. Because this can be complicated, there are many tools available to allow you to digitally calculate your taxes, such as the Commbank stamp duty calculator. Just enter your property information to see the amount you’ll need to pay.

If you’re trying to get a feel for the sort of cost by location you may also find PWC‘s maps of property taxes by location a helpful tool. This shows the highest effective rates for stamp duties based on state – from 4.5% to 6.5% depending on where your new home is.

Here’s where to find more and calculate your stamp duties on the official state tools:

• Australian Capital Territory — Revenue Office: Conveyance duty calculator
• New South Wales — Revenue NSW: Calculators — for land and property transfers
• Northern Territory — Department of Treasury and Finance: Stamp duty calculators
• Queensland — Office of State Revenue: Transfer duty calculator
• South Australia — RevenueSA calculator: Stamp duty on conveyances
• Tasmania — Tasmanian Government: Property transfer duty calculator
• Victoria — State Revenue Office: Land transfer (stamp) duty calculator
• Western Australia — Office of State Revenue: Calculators

Exemptions:

State level exemptions may apply – for example, some first time buyers in Victoria can have their stamp duty waived or reduced, subject to meeting residency and property price requirements. Check your own state’s policy to see if you can qualify for any exceptions to fees.

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Taxes on sellers

The key tax when selling a property is capital gains tax (CGT). This tax does not usually apply when you sell your main residence.

If you’re selling a property which you did not live in, you may need to report and pay CGT. If you’ve owned the property for over 12 months there may be a discount of 50% on the tax. This means that if you made a profit of 100,000 AUD you only pay CGT on 50,000 AUD of the gain.

Calculating your CGT can be tricky. The ATO has helpful explainers and tools to allow you to understand what gains you must report and how much your CGT may be. You can also get the advice of a tax accountant to help you navigate the system. To use the formal ATO CGT calculator tools you’ll need to log into your MyGov account or use the website version of the calculator.

Exemptions:

If you’re selling your main residence and meet qualifying criteria you may not need to pay CGT. Generally this means you must have lived in the property for the whole time you owned it, and have not made a profit out of the property – by renting it out for example. The property must also be on land under 2 hectares.

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Taxes on homeowners: recurring payments

Council rates are arranged by local authorities and vary a lot based on the location. The final amount you pay is calculated based on the value of the property you own and the rate the council sets. Rates are used for infrastructure, facilities and services, from your local library or park, to your waste collection.

Exemptions:

Some local authorities will offer payment deferrals, waivers or reductions for residents who are in financial hardship.

Is rental income taxed?

Yes. Rental income in Australia is treated as personal income and may be subject to income tax reporting requirements. You might have to pay tax on the money you make from renting out your home.

Exceptions:

When reporting your rental income you may be able to take into consideration certain deductions and expenses to calculate your taxable income. Investment property tax deductions can often include property agent and advertising fees, maintenance, taxes and rates, legal fees, and insurance. Check with your tax advisor to make sure you’ve taken all possible expenses and deductions into account when completing your tax return.

First vs second home: tax implications

There are a couple of things to consider if you own more than one property in Australia:

• Some first time buyers may get exemptions or deductions on stamp duty tax – this is not likely to be available if you purchase a second home
• Second homes are normally subject to capital gains tax upon sale
• You may pay land tax in some states if you own a second property

How to save money on your property purchase

Funding your property in Australia from abroad? Why not use Wise to move money internationally for the property purchase and save on currency conversion costs?

Wise offers international transfers which are secure, quick and use the mid-market exchange rate with low, transparent fees. You could use Wise to pay your solicitor for the sale directly, or if you’ve got an Australian bank account, you can use Wise to move money between your overseas and Australian accounts to pay your dues in dollars. In either case you’ll get a fair exchange rate and low costs with progressive fee discounts on high value transfers.

Wealth taxes in Australia

There are no specific wealth taxes in Australia. The main tax related to property you’re likely to encounter would be capital gains tax which applies if you own more than one home.

How to pay your taxes

National tax in Australia is managed by the Australian Taxation Authority – the ATO. For standard tax returns you’ll usually start your submission in mid-July when forms with pre-filled data become available. The final filing date is normally at the end of October.

You can pay the ATO using digital payment channels like BPay, direct debit or the ATO online payment system, or you can pay in person at a post office, or by mail.

If you’re paying stamp duty you’ll need to make your payment to your local authority. While the payment process can vary depending on the state your property is located in, you’ll normally have to pay within 30 days of buying your new home. Check the details for your state in good time so you’re not caught out by the deadline.

When to speak to a tax professional

It can help to speak to a tax professional when buying or selling a house in Australia, to make sure you’ve covered all your duties regarding taxes – and to make sure you’ve taken advantage of any deductions or benefits you may be eligible for. Getting tax advice might cost you – but it’ll give you peace of mind and it may even mean you can reduce your overall liabilities in the end.

Useful resources

• Moneysmart – government resource about buying a home
• ATO – taxes on property landing page
• ATO – capital gains taxes on investment and rental properties
• Business.gov – business tax on property
• PWC – maps of property taxes by location
• Commbank – stamp duty calculator