In 2010, of the 84,000 people who left Australia with the intention of leaving permanently, just 17,000 spent 12 months or more overseas.
But the figure increased 18 per cent from 2004 to 2010.
New $2 million divestment rule
From 1 July 2016, the government will introduce the Foreign Resident Capital Gains Withholding Payments measure. This stipulates that where the market value of a property is $2 million or more, the purchaser must withhold 10 per cent of the price at settlement and give this amount to the Australian Taxation Office if the vendor does not supply a clearance certificate that is obtainable by Australian residents.
For expats selling their properties and offshore owners, this has significant ramifications as expatriate Australians are considered foreign persons by the new regulations. The ATO suggests most properties will not be affected by this, as across Sydney the majority are under $2 million, but a significant proportion of the eastern suburbs will face this change. It covers all land, buildings, residential and commercial property. In some cases, this could mean selling before moving abroad is appropriate.
The taxation office may also charge less than 10 per cent in scenarios such as a foreign resident not making a capital gain on the transaction or a situation with multiple vendors where only one is a foreign resident.
Changes from the banks
Recently, it’s not just the legislation that has changed but the policies from banks as well, particularly regarding foreign income. For those offshore looking to purchase in Australia, it’s become tougher.
The Commonwealth Bank recently stated it would no longer accept home loan applications from temporary residents not earning an income in Australia, while ANZ Banking Group has also reviewed their practices towards overseas buyers, including temporary and provisional visa holders in Australia.
Smaller tier banks have also made changes. Some of this is due to concerns they cannot accurately determine the validity of offshore paperwork proving income.
Some lenders are still offering loans to foreign buyers, but they must jump through more hoops. Such as NAB, which in May lowered the maximum available loan to value ration from 70 per cent to 60 per cent, effectively requiring foreign buyers to have larger deposits.
Dates to know
From May 2012
If you make a capital gain and are a nonresident, you will not be eligible for the CGT discount, even if you have owned the property for a minimum of 12 months.
From December 2015
The ATO charge a $5,000 fee for properties under $1 million and $10,000 for those over $1 million. Properties in excess of $2 million incur a $20,000 fee, with an extra $10,000 for every million dollars over this amount.
From July 2016
Foreign Resident Capital Gains Withholding Payments measure to be introduced.
Foreign workers treated as non-residents for tax purposes, regardless of the length of stay in Australia. Taxed at 32.5 per cent up to $80,000, substantially increasing the tax owed.
Sydney’s Eastern Suburbs Market Snapshot 2016
A detailed annual assessment of the property market focusing on the Eastern Suburbs of Sydney, Australia.