It is important to obtain expert advice about your particular tax liabilities for your investment property in Australia. Below you can obtain a brief guideline to Australia’s property tax system which will assist you in your investment decision.
Any income that you receive from renting out property in Australia will generally be liable for income tax and will need to be included in your tax return. This income could come from renting out land or buildings, or it could even be income you earn by having private lodgers or flat mates living with you.
Capital gains tax (CGT) forms part of the income tax system in Australia and is payable upon realized capital gains. However, for home owners this tax is not charged as the sale of personal residential property is normally exempt from capital gains tax. Gains realized during any period in which the property was not used for personal use (eg. rental) are, however taxable.
The good news is that recent reforms to the CGT system in December 2006 have limited the range of capital gains taxable on assets for foreign investors. This is an attempt by the Australian government to further enhance Australia’s appeal as an attractive business environment for overseas investors.
Goods and Services Tax (GST) is charged at a flat rate of 10% and is charged on the supply of goods and services, including real estate. It is essentially a value added tax (VAT) as it is the consumer or end user who ultimately bears the tax.
Australia does not charge inheritance taxes, although some inherited assets may have Capital Gains Tax implications for the beneficiaries.
Investors will be liable for stamp duty which is levied on a wide range of transactions, such as agreements for acquisitions of real estate, business and some marketable securities, as well as leases and financing transactions. Stamp duty is a state tax and is charged either at a fixed rate or on an increasing scale depending upon the value of your investment.
Council rates or property taxes typically fund the local governments in all States. Taxes are charged on residential, industrial and commercial properties. In addition, some States levy tax on land values.
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