Foreign Buyers and Sellers of Property in Victoria

Verification of Identity and Client Authorisation

Verification of identity (VOI) is a government mandated identity check for all parties to a property transaction. This process requires face-to-face verification with an authorised identity agent, at which time you will need to present certain identifying documents.

Foreigners must provide a valid passport, a change of name or marriage certificate (if applicable) and either:

Another form of government issues photographic identity document
Full birth certificate AND another form of government issued identity document

For persons located overseas, you are required to have your VOI completed in an Australian consulate, and the identifying agent must also complete an overseas witnessing certificate (provided to you by your conveyancer).

Both local and foreign vendors are able to have their VOI completed in Australia by a number of different service providers, including ZipID, Australia Post, and we can also complete your VOI check in our office.

The client authorisation form must be completed and witnessed at the same time as your VOI check, and this allows your conveyancer to complete your conveyance electronically (electronic conveyancing has been compulsory in Victoria since 2018).

Foreign Investment Review Board

Any foreign body seeking an interest in land or property in Victoria requires approval from the Foreign Investment Review Board (FIRB). This includes purchasers, foreign lenders providing finance for Victorian properties, and those wishing to lodge a caveat over a property. FIRB approval will also be required for Foreign Vendors engaged in related party transfers (e.g. between a husband and wife). If you are purchasing a property off-the-plan, it is possible that you will not need to apply for FIRB approval if the site developer holds a new dwelling exemption certificate (applications are considered on a case by case basis). Your conveyancer can assist with making an FIRB application.

For more information visit firb.gov.au

Stamp Duty

Foreigners will pay higher stamp duty than Australian tax residents (additional duty rate is 7% as of May 2019). That includes foreigners engaging in related party transfers. A number of exemptions and concessions exist depending on your circumstances, for example, if you are buying property you intend to live in with a spouse or domestic partner who is an Australian citizen, permanent resident or New Zealand citizen (depending on visa restrictions), you may be exempt from paying the additional duty.

It is possible that foreign corporations and trusts could be eligible for an exemption on the additional duty if they were to do a transfer later on, however this would require proving that an Australian tax resident is the primary decision maker, holds the majority share, and is obtaining the main benefits from the decreased stamp duty. Otherwise, an exemption for additional duty may be available if the property in question is benefitting the community it is situated in. However, although both situations are possible, they are extremely difficult to prove.

More information is available here: SRO Foreign Purchaser

Capital Gains Withholding Tax

Any vendor selling property in Victoria for over $750,000.00 is automatically deemed to be a foreigner and will be required to have Foreign Capital Gains Withholding Tax (FCGWT) held at settlement. In this instance, ‘foreigner’ means a non-Australian resident for tax purposes, meaning that even if you hold an Australian passport, if you are living and paying taxes overseas, you will be required to have the FCGWT withheld, currently 12.5% of the sale price as of May 2019. The purchasing party is required by law to collect this tax at settlement.

For vendors of non-Australian tax residency, this tax is something to keep in mind when determining a sale price, as if your loan is over 90% of the sale price of the property, you will be required to pay additional funds out of pocket in order to discharge your mortgage. In addition, the 12.5% withholding tax will impact whether or not you will have early access to your deposit (s27 of Sale of Land Act (VIC) 1962).

For Australian tax residents (Including New Zealand citizens living and working in Australia) who are selling property for over $750,000.00, you will be required to apply for an ATO Clearance Certificate to avoid having the 12.5% tax held at settlement.

Learn more here ATO Foreign resident capital gains

Land Tax, and Vacant Land Tax

If you own a property in Victoria with a site value of more than $250,000.00 that you do not live in, you will be required to pay land tax. For foreigners (non-Australian tax residents) there is a 1% surcharge on top of the standard rate of land tax payable by Australian tax residents.

Vacant land tax is a separate tax imparted upon properties in certain areas of central Melbourne that are left unoccupied for a period of more than six months out of a year; the six months do not have to be consecutive. Vacant land tax is calculated at 1% of the capital improved value (the value of the land plus all structures on that land). If you are living overseas and own a property in Australia, this tax will apply if the property is not rented out(note, it is not enough to have the property listed for rent). There are some exemptions available if the property is undergoing renovations or is not able to be rented out (e.g. if it is not a residential property).

Properties with vacancies of six months or more in the previous calendar year must be declared to the state Revenue Office by January 15^thof the following year, otherwise penalties starting at 5% (up to 90%) of the original amount owing, with consideration for interest, may apply. Failure to declare a vacant property is considered a notification default under the Taxation Administration Act 1997.

For more information on Land Tax, visit SRO Land Tax.

Learn more about vacant land tax and declarations here SRO Vacant Residential Land Tax.