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Frequently Asked Questions

BUY

How much is Land transfer duty (Stamp Duty) ?

When you buy or acquire property in Victoria including your home, you pay duty on your purchase.

More information

Land transfer (stamp) duty calculator

Will I be eligible for the FHOG (First Home Owner Grant)?

Will I be eligible for the HomeBuilder Grant?

HomeBuilder provides eligible owner occupiers with a grant of $25,000 to build a new home, substantially renovate an existing home or buy an off-the-plan home/new home. A new home is one that has not previously been sold or occupied as a place of residence (e.g. a spec build) and where construction commenced on or after 4 June 2020.

HomeBuilder Grant guidelines

Do I have to withhold GST at settlement when I purchase new residential premises or potential residential land?

On or after 1 July 2018, certain purchasers of new residential premises or potential residential land will be required to withhold an amount from the price of the supply for payment to ATO.

Note: When we refer to purchasers we are also referring to lessees under long-term leases.

The withholding amount is due on or before the day that consideration for the supply (other than a deposit) is first provided. If the contract is an instalment contract that will be the day the first instalment is paid otherwise it will be the day of settlement.

Suppliers will be required to assist their purchasers to comply by notifying them whether or not they have a withholding obligation on supplies of certain kinds of residential premises and potential residential land. Where there is a withholding obligation, the supplier must notify the purchaser of the amount they must withhold, when they must pay it to us, and of certain other particulars.

The amount a purchaser must withhold and pay to us is generally either:

• 1/11th of the contract price (for fully taxable supplies)
• 7% of the contract price (for margin scheme supplies), or
• 10% of GST exclusive market value of the supply (for supplies between associates for consideration less than GST inclusive market value).
• Purchasers do not need to register for GST just because they have a withholding requirement.

Transitional arrangements apply to contracts entered into before 1 July 2018.

Check ATO: How the measure will work from 1 July 2018

How does Electronic conveyancing and PEXA settlement work?

FIRB

Do I need to apply for FIRB approval?

Foreign persons (including temporary residents or foreign non-residents) who plan to invest in Australian real estate may need to apply for foreign investment approval before they purchase residential real estate in Australia.

Residential property investment: fact sheet for foreign owners

If you are a foreign person who has invested in, or plans to invest in Australian residential real estate, there are obligations you will need to meet under Australian law.

Step 1. Obtain FIRB approval
Before you purchase residential real estate, you must obtain Foreign Investment Review Board (FIRB) approval and pay a fee.
Incorrect applications or information may result in delays in processing and additional charges.

Step 2. Review your FIRB approval conditions
You will generally receive your FIRB approval within 30 days. The approval letter will tell you any conditions you must follow when you purchase your property and after settlement (the date that ownership of the property transferred to you, not the sale date).
If you do not comply with these conditions, you may be liable for an infringement notice, criminal prosecution or civil penalty.

Step 3. Record your property on the ATO Land and water register
The ATO records details of purchases of residential property by foreign persons on the ATO Land and water register. As a condition of your FIRB approval, you are required to enter your purchased property on the ATO Land and water register within 30 days of settlement.

Step 4. Lodge your Vacancy fee return
If your land has a residential dwelling on it, you must lodge an annual Vacancy fee return within 30 days of the end of every 12 month period you own it. This is called the ‘vacancy year’.
In the Vacancy fee return, you need to tell ATO how the dwelling was used over the previous 12 months.
ATO will email you a reminder to lodge your Vacancy fee return when it is due, to the email address you gave ATO in your ATO Land and water registration. You will need your ATO land registration number to lodge your Vacancy fee return.

If your situation changes
Make sure you tell ATO if your details change so that we can contact you about your property.

More information.

How to apply for FIRB approval ?

How much is the FIRB application fee?

How to register Land and Water?

You must register your residential real estate purchase with us using the Land and Water Registration form no later than 30 days after the date of settlement. There is no cost involved in registering.

See also:

How to lodge Vacancy fee return by foreign owners?

In December 2017 the Australian Government introduced a vacancy fee for foreign owners of residential dwellings.

Under the legislation, foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee if their dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year.

If you’re a foreign owner of a residential dwelling you may be liable to pay the vacancy fee.

If your property has a residential dwelling on it, you must lodge an annual Vacancy fee return within 30 days of the end of every 12 month period you own it telling ATO how the dwelling was used.

See also:

RENT

How does land tax work??

You pay land tax if the total taxable value of all the Victorian land you own, individually or jointly, as at 31 December, is equal to or exceeds $250,000 ($25,000 for trusts). Exempt land is not included in the total taxable value of land you own. The rate of tax you pay depends on the total taxable value of all your taxable land.

More information

What is Vacant residential land tax?

From 1 January 2018, homes located in 16 specific council areas that are left unoccupied for more than six months in the previous calendar year, attract the Victorian Government’s vacant residential land tax.

More information

What is Absentee owner surcharge?

From the 2020 land tax year, an absentee owner surcharge of 2% applies to Victorian land owned by an absentee owner. The surcharge was 1.5% from 1 January 2017 and 0.5% for the 2016 land tax year.

The absentee owner surcharge is an additional amount that applies over the land tax you pay at general and trust surcharge rates.

More information

What do you need to know when you own a rental property

Do I have to pay GST for my residential rental properties?

You’re not liable for goods and services tax (GST) when you sell a rental property and you can’t claim GST credits on any costs associated with buying or selling it, as the sale of existing residential premises is generally input taxed.

However, if you build new residential premises for sale, you may be liable for GST on the sale and entitled to GST credits on construction and sale costs, even if the premises have been rented for a period before being sold.

How are Council Rates and Charges calculated?

Council rates are a property tax. Nationally, council rates raise 3.6 per cent of taxes collected by all levels of government.

Rates are paid by all property owners within a municipality to help pay for more than 100 services provided by councils, and maintain local roads, council facilities and public open spaces such as parks and gardens.

Councils use property values as the basis for calculating how much each property owner pays in rates.

More information.

Know Your Council: Council rates and charges

How to calculate rental yield?

SALE

Do I have to pay Capital Gain Tax if I sell my home?

Generally, you don’t pay capital gains tax (CGT) if you sell the home you live in (under the main residence exemption). You also can’t claim income tax deductions for costs associated with buying or selling your home.

But you should keep all the records relating to your home so that if things change – for example, you start to rent it out or otherwise use it to produce income (such as flipping the property) – you don’t pay more tax than necessary.

A second property, such as a holiday house or hobby farm, is subject to CGT.

If you are a foreign resident when a CGT event happens to your residential property in Australia you may no longer be entitled to claim the main residence exemption.

What is my “main residence”?

Generally, a dwelling is considered to be your main residence if:

  • you and your family live in it
  • your personal belongings are in it
  • it’s the address your mail is delivered to
  • it’s your address on the electoral roll,
  • services such as gas and power are connected.

How to be eligible for a full main residence exemption?

You’re eligible for a full main residence exemption if the dwelling:

  • has been the home of you, your partner and other dependants for the whole period you’ve owned it
  • has not been used to produce assessable income – that is, you’ve not run a business from it, rented it out or flipped it, and
  • is on land of two hectares or less.

If the full exemption applies your capital gain or loss is disregarded – you don’t pay tax on any capital gain, but nor can you use any capital loss to reduce your assessable income.

Alternatively, you may be entitled to a partial exemption.

Do I have to pay Capital Gain Tax for my rental property?

If you invest in a rental property or rent out your current property, you’ll need to keep records right from the start, work out what expenses you can claim as deductions, and declare all your rental-related income in your tax return.

Any capital gain you make when selling or otherwise disposing of the property will be subject to capital gains tax (CGT) except in some circumstances where you rent out the home you’ve been living in.

Do I have to pay GST for my residential rental properties?

You’re not liable for goods and services tax (GST) when you sell a rental property and you can’t claim GST credits on any costs associated with buying or selling it, as the sale of existing residential premises is generally input taxed.

However, if you build new residential premises for sale, you may be liable for GST on the sale and entitled to GST credits on construction and sale costs, even if the premises have been rented for a period before being sold.

How to work out Capital Gain or Capital Loss when I sell a rental property?

You’re likely to make a capital gain or capital loss when you sell or otherwise dispose of a rental property. If you make a net capital gain in an income year, you’ll generally be liable for capital gains tax (CGT). If you make a net capital loss you can carry it forward and deduct it from your capital gains in later years.

 

Proceeds − Cost base = Capital gain outcome

 

A + B + C − D − E + F = Cost base

 

Where:

  • A is the purchase price
  • B is the costs of the purchase
  • C is the cost of property improvements
  • D is the decline in value deductions
  • E is the capital works deductions
  • F is the legal fees

 

You may be able to include capital expenses when calculating the ‘cost base’ of your property. This can help you reduce the amount of CGT you pay when you sell your property. Expenses you incur when purchasing or acquiring and selling or disposing of your rental property are capital expenses.

 

Capital expenses include:

  • conveyancing costs paid to a conveyancer or solicitor
  • title search fees
  • valuation fees (when it is a private valuation conducted by your solicitor)
  • stamp duty on the transfer of the property.

Do I have to pay CGT or GST for the Vacant Land?

If you’ve acquired vacant land (either for private purposes or as an investment) it’s usually considered a capital asset which is subject to capital gains tax (CGT) when you sell the land.
If you buy vacant land with the intent to build a rental property on it, you may be able to claim tax deductions for expenses incurred in holding the land. you are not liable for GST on the rent you charge and you will not be able to claim credits for the GST included in anything you purchase.

But if you purchase land for use in a business or profit making activity that deals in land, any sale proceeds are treated as ordinary income, and you may need to register for goods and services tax (GST).
Business activities that involve dealing in land include either:
• acquiring land to develop or subdivide and sell
• acquiring land for the purpose of building a dwelling or commercial property and selling the developed property.
Once registered, you need to include the GST in the price of the goods you sell, including vacant land, commercial and commercial residential premises and new residential premises. You’ll be able to claim credits for the GST included in the price of most of your business purchases, subject to normal GST rules. You’ll also need to report these transactions by completing a business activity statement.

Do I have to pay CGT or GST for subdividing land?

If you subdivide a block of land – such as the land on which you live – and sell the newly created block, any profit is generally treated as a capital gain subject to capital gains tax.

However, any profit is treated as ordinary income (not a capital gain) if both of the following apply:
• your intention or purpose in entering into the transaction was to make a profit or gain
• you entered into the transaction, and the profit was made, in the course of carrying on a business or carrying out a business operation or commercial transaction.
In this case you’ll probably have GST obligations and entitlements.

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