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

Whether you are buying a beachside apartment in Sydney or a family home in Melbourne, you should expect to pay between 3% and 5% of the property’s value in upfront taxes alone.

When you factor in ongoing land taxes and potential capital gains obligations, the total cost of owning property in Australia can be high, especially for non-residents who face additional surcharges.

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What are the main property taxes in Australia?

Property taxes in Australia are collected at both the state and local government levels. The most significant upfront cost is stamp duty (or transfer duty), a one-off tax paid when you buy a property.

Once you own the property, you will face two main recurring costs:

• Council rates: Periodic fees paid to your local government for services like waste collection and road maintenance.
• Land tax: An annual state-based tax calculated on the “unimproved” value of the land you own.

Who is subject to these taxes?

Most individuals and entities that own property in Australia are subject to these taxes, but the rates vary.

• Residents: Pay standard stamp duty and land tax rates, often benefiting from exemptions for their primary home.
• Non-residents: Generally pay higher rates of stamp duty and land tax through “foreign owner surcharges”.
• Corporations and Trusts: Often have different thresholds and may be subject to the highest tax brackets.

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Taxes on buyers

Buying property in Australia involves significant one-off costs. The specific amount often depends on the state where the property is located.

• Stamp Duty (Transfer Duty): This is the largest upfront tax. It is calculated on the property’s market value or sale price. For a AUD 1,000,000 home, stamp duty can range from approximately AUD 30,000 to over AUD 55,000 depending on the state.
• Foreign Buyer Surcharges: Most states impose an additional surcharge on “foreign persons” (non-citizens and non-permanent residents). In New South Wales, for example, this surcharge is currently 9% in addition to standard duty.
• GST (Goods and Services Tax): A 10% tax usually applies only to new residential properties or “off-the-plan” purchases. It is generally not charged on the sale of established (second-hand) homes.

Exemptions:

• First-home buyers: Many states offer full or partial exemptions for first-time purchasers of properties below a certain value (e.g., up to AUD 800,000 in NSW).
• Spousal transfers: Transfers between spouses or domestic partners (including during a divorce) are often exempt.
• Inheritance: Property passed through a will is typically exempt from stamp duty.

Taxes on sellers

When you sell property in Australia, your main tax concern is the profit you make.

• Capital Gains Tax (CGT): If you sell an investment property for more than you paid, the profit is added to your assessable income and taxed at your marginal rate.
• FRCGW (Foreign Resident Capital Gains Withholding): As of 1 January 2025, the withholding rate for foreign residents selling property has increased to 15% of the contract price. This applies to all property sales regardless of the price, as the previous AUD 750,000 threshold has been removed.

Exemptions:

• Main Residence Exemption: Your primary home is generally exempt from CGT if you have lived in it for the entire ownership period.
• 50% CGT Discount: Australian tax residents who hold an investment property for more than 12 months only pay tax on half of the capital gain.
• Six-year rule: You can move out of your home and rent it out for up to six years while still claiming it as your main residence for CGT purposes.

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Taxes on homeowners: recurring payments

Owning property in Australia brings annual financial obligations.

• Council Rates: These vary by local government area but are typically based on the property’s valuation. They are usually paid in quarterly instalments.
• Land Tax: This is an annual tax on the value of the land. Most states have a “tax-free threshold,” meaning you only pay if the total value of your landholdings exceeds a certain amount (e.g., AUD 1,075,000 in NSW for 2025).

Exemptions:

• Primary Place of Residence (PPR): In almost all states, your primary home is exempt from land tax.
• Primary Production: Land used for commercial farming often qualifies for exemptions.
• Charitable organizations: Land owned by religious or charitable groups is usually exempt.

Is rental income taxed?

Yes, if you rent out an Australian property, the income is taxable.

You must declare all gross rental income on your annual tax return. However, you can deduct expenses such as mortgage interest, repairs, and property management fees.

If your expenses exceed your income, you may benefit from negative gearing, which allows you to use those losses to reduce the tax on your other income (like your salary).

Exemptions:

• Domestic arrangements: Renting to family members at a nominal rate (not for profit) is generally not considered assessable income, though you cannot claim deductions for it.

First vs second home: tax implications

Australia incentivizes homeownership but penalizes speculative investment through surcharges.

• First-time buyers: Access to state grants and stamp duty waivers makes the initial purchase significantly cheaper.
• Second homes and investments: These properties are subject to land tax once thresholds are met and do not qualify for the main residence CGT exemption.
• Absence surcharges: Some states (like Victoria) charge a “Vacant Residential Land Tax” if a second home is left empty for more than six months a year.

How to save money on your property purchase

One of the largest hidden costs for expats is the fee for moving money across borders. When paying a deposit or the final settlement for an Australian home, traditional banks often charge high exchange rate markups.

You can use Wise to move money to Australia for your property purchase and save on currency conversion costs. Wise uses the mid-market exchange rate – the same one you see on Google – without hidden fees.

Whether you need to pay the seller directly or move funds between your overseas and Australian bank accounts, Wise offers a transparent and often cheaper alternative for large transfers.

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Wealth taxes in Australia

Australia does not have a “wealth tax” in the sense of a flat tax on your total net worth. Instead, land tax acts as a proxy for a wealth tax on property assets.

There are proposed reforms for 2025 that may affect high-wealth individuals, including potential changes to how family trusts are taxed and reductions in certain CGT discounts for very large portfolios.

How to pay your taxes

Tax collection is divided between federal and state authorities.

• Income Tax and CGT: Managed by the Australian Taxation Office (ATO). These are usually handled through your annual tax return, due by 31 October each year.
• Stamp Duty and Land Tax: Managed by individual State Revenue Offices (e.g., Revenue NSW, SRO Victoria).
• Deadlines: Stamp duty is usually due within 30 days of settlement. Land tax is assessed annually, and you will receive a Notice of Assessment with payment options.

When to speak to a tax professional

Australian tax laws are famously dense and change frequently. It is usually a good idea to speak to a tax professional when buying or selling property, especially if you are an expat or have a complex residency status. This helps ensure you are claiming all available deductions and avoiding costly surcharges.

Useful resources

Australian Taxation Office (ATO) – The official federal resource for income and capital gains tax.

Foreign Investment Review Board (FIRB) – Guidance for non-residents buying property in Australia.

Revenue NSW – An example of a state authority managing land tax and duty.

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