Australia Property Tax Guide
Australian property taxation. The guide covers: the negative gearing (the "negative gearing") — the negative gearing is the strategy where the rental property expenses exceed the rental income (the "net rental loss"); the net rental loss is offset against the other income (the salary, the business income, the capital gains) to reduce the total tax liability; the rental property deductions include: (a) the interest on the investment loan (the "interest deduction" — the interest on the loan used to acquire the rental property or to finance the renovations), (b) the council rates (the "council rates"), (c) the water charges (the "water charges"), (d) the property management fees (the "property management fees"), (e) the repairs and the maintenance (the "repairs and maintenance" — the repairs that restore the property to the previous condition), (f) the insurance (the "landlord insurance"), (g) the strata fees (the "strata fees" or the "body corporate fees" for the apartments and the units), (h) the depreciation on the building (the "capital works deduction") — the "capital works deduction" under the Division 43 of the ITAA 1997: the buildings constructed after 15 September 1987 can claim the deduction at 2.5% per year (the "2.5% capital works deduction") for 40 years; the buildings constructed after 26 February 1992 can claim the deduction at 4% per year (the "4% capital works deduction") for 25 years (the industrial buildings), (i) the depreciation on the plant and the equipment (the "Division 40 deductions") — the "plant and the equipment" (the "Division 40 assets" — the carpets, the blinds, the air conditioners, the hot water systems, the ovens, the dishwashers) can be depreciated over the effective life; for the properties acquired after 9 May 2017, the "second-hand plant and the equipment" in the existing rental properties cannot be claimed (the "plant and equipment limitation"); the capital gains tax on the property (the "CGT on the property") — the capital gain on the sale of the investment property is subject to the CGT; the 50% CGT discount applies to the individuals who hold the property for at least 12 months; the main residence exemption applies to the family home (the "principal place of residence"); the 6-year absence rule applies when the owner moves out and rents the property; the foreign resident CGT withholding applies to the sale of the Australian property by the foreign residents (the purchaser withholds 12.5% or 15% of the sale price and remits it to the ATO); the stamp duty (the "transfer duty" or the "conveyancing duty") — the stamp duty is the state-based tax on the transfer of the property; the stamp duty rates vary by the state and the territory; the typical rates: (a) the New South Wales: the stamp duty is calculated on the sliding scale (up to 7%) for the residential properties; the first home buyers can claim the exemption or the concession for the properties valued up to $1,000,000 (the "first home buyer stamp duty exemption"); (b) the Victoria: the stamp duty is calculated on the sliding scale (up to 5.5%) for the residential properties; the first home buyers can claim the exemption for the properties valued up to $600,000 and the concession for the properties up to $750,000; (c) the Queensland: the stamp duty is calculated on the sliding scale (up to 5.75%); the first home buyers can claim the exemption for the properties valued up to $500,000; the foreign resident stamp duty surcharge — the foreign residents pay the additional stamp duty surcharge: (a) the NSW: 8% surcharge (increased from 4% in 2024), (b) the VIC: 8% surcharge, (c) the QLD: 7% surcharge, (d) the WA: 7% surcharge; the land tax (the "land tax") — the land tax is the state-based annual tax on the ownership of the land (NOT the buildings); the land tax is calculated on the "unimproved value" of the land (the "site value"); the land tax rates vary by the state; the general threshold for the land tax in NSW is $1,075,000 (the "land tax threshold" for the 2025-26 year); the foreign residents pay the additional land tax surcharge: (a) the NSW: 4% surcharge on the land value above the threshold, (b) the VIC: 4% surcharge; the GST on the property (the "GST on the new residential premises") — the GST is payable on the sale of the "new residential premises" (the "new residential premises" — the premises that have NOT been previously sold as the residential premises or that have been substantially renovated); the GST on the new residential premises is 10% of the sale price; the developer can use the "margin scheme" (the "margin scheme" — the GST is calculated on the margin between the sale price and the acquisition cost) to reduce the GST liability; the foreign resident additional taxes — the foreign residents: (a) pay the additional stamp duty surcharge (8% in NSW and VIC, 7% in QLD and WA), (b) pay the additional land tax surcharge (4% in NSW and VIC), (c) are subject to the CGT withholding (15% of the sale price for the properties valued at $750,000 or more), (d) cannot claim the main residence exemption for the dwellings acquired after 1 July 2020, (e) must obtain the "foreign investment approval" (the "FIRB approval" — the "Foreign Investment Review Board" approval) for the acquisition of the residential property (the "residential land" — the established dwellings and the vacant land). All amounts in Australian Dollars (AUD). For related reading, see our Capital Gains Tax Guide → and Personal Tax Guide →.
Negative Gearing
- Net rental loss deduction: The rental property expenses (the interest, the rates, the management fees, the repairs, the depreciation) exceed the rental income. The net loss is offset against the other income (the salary, the business income, the capital gains). The negative gearing is available for the residential properties, the commercial properties, and the shares (the "margin lending"). The capital works deduction (2.5%) and the plant and equipment depreciation (Division 40) are available from the 2025-26 year.
- Plant and equipment limitation: For the properties acquired after 9 May 2017, the "second-hand plant and the equipment" (the carpets, the blinds, the air conditioners) in the existing rental properties cannot be claimed. The new properties (the "new residential premises") and the properties where the owner has installed the new plant and equipment can still claim the depreciation.
For the capital gains on the sale of the investment property and the 50% CGT discount, see our Capital Gains Tax Guide →.
Foreign Resident Property Rules
- FIRB approval: The foreign persons (the "foreign persons" — the non-residents, the temporary residents, the foreign-owned companies) must obtain the FIRB approval before acquiring the Australian residential property. The application fee ranges from $14,100 to $1,058,100 (depending on the value of the property). The exemption applies to the new dwellings (the "new dwelling exemption" — the foreign person can acquire the new dwelling without the FIRB approval in certain circumstances).
- CGT withholding: The purchaser of the Australian property from the foreign resident (or from the seller who does not provide the "Clearance Certificate") must withhold the CGT at 15% of the sale price (for the properties valued at $750,000 or more) or 12.5% (for the properties below $750,000). The vendor must apply for the "Clearance Certificate" from the ATO (the "Clearance Certificate" — the "CGT withholding clearance certificate"). The certificate is valid for 12 months.
For the stamp duty surcharges and the land tax surcharges for the foreign residents, see our Starting a Business Guide →.