Australian Expat Property Owners To Feel The Pinch on Empty Dwellings

Australian Expat Property Owners To Feel The Pinch on Empty Dwellings

Australian Expat Property Owners To Feel The Pinch on Empty Dwellings


The vacancy house rates are increasing in major cities across Australia, with the census revealing that just over 11.2% of housing was recorded to be unoccupied. With the affordability of housing putting stress on the local economy, empty property taxes have arrived which means that Australian expat property owners may feel the pinch if they leave their property empty. Presently Melbourne and Sydney seem to be the front-runners, with Melbourne having over 19% and Sydney having over 15% of empty properties.


Legislation Is Changing That Will Affect Australian Expat Property Owners

With the numbers stacked the Victorian State Government has felt the need to legislate an empty home tax. The Federal opposition’s treasury spokesman Chris Bowen has also backed a standard vacant dwelling tax across all the nation’s major cities and stated ‘it is only a matter of time’. Similar types of measures have come into force in Vancouver and Paris, showing it is a developing trend to combat housing affordability. The Victorian State Government has introduced a 1% tax on the capital value on the vacant home if it has been vacant for at least six months in a year. The tax is expected to commence from 1st January 2018, and will apply for the period of 1st May 2017 to 31st December 2017.

This has also highlighted a broader ‘practicality challenge’ for empty property taxes. For example, how do you define acceptable reasons for a property being empty? One of our previous articles touched on the land tax implications for holding property and being deemed a non-resident. An absentee surcharge levy is applied for non-residents in some states and the introduction of the vacant land tax will add another layer of tax to be paid each year.

The legislation hasn’t been passed yet in all states, however, there is push to have the vacant land tax only subject to foreign residents and non-residents (Australian expats).  The vacancy charge, will be in line with other fees foreign residents must pay when purchasing property in Australia. As an indication of this, foreign purchasers in South Australia must pay a 7% tax levy in addition to the regular stamp/transfer duty.

The empty home tax is designed to increase the number of homes on the rental market. At present, the Victorian vacancy tax will apply to 16 inner-city areas including Yarra, Darebin, Melbourne, and Bayside municipalities which are some of the favourite “hunting grounds” for Australian expat property owners. It is projected that an estimated $80m will be raked in over a 4-year period. If it is evident that the legislative change is successful other states won’t be far behind to implement such a tax in their metropolitan areas.


Why It Is Important That Australian Expat Property Owners Review Their Situation

As an example if you are an absentee owner with a dwelling in Melbourne valued at $1m that has been vacant for a period of 6 months between 1st May 2017 to 31st December 2017  then as at 1st January 2018, you’ll be required to pay $17,975 in ordinary land tax and additional vacant land tax of $10,000. As you can see your holding tax costs are a ridiculous 2.80% of the value of the property and this isn’t factoring in any other holding costs like body corporate fees, council rates and insurance.

If you think these changes are going to impact you, it might be worth reviewing your long term strategy for holding property in Australia. Is it worth holding or selling and what are the pros and cons for doing so?


Disclaimer – The above commentary is general in nature and should not be construed as tax or financial advice. Please consult a licensed tax accountant and financial adviser to determine whether the above information is suitable for you.

Brett Evans is the Managing Director and a Financial Planner with Atlas Wealth Management which is the first financial services firm in Australia to specialise in providing financial advice to Australian expatriates. With over 20 years of experience in the finance and investments industry, Brett has worked for blue chip companies which include the Australian Stock Exchange (ASX), HSBC, Suncorp and Citi Smith Barney.