FISCUS MORTGAGES - INFORMATION AND ADVICE

Australian Mortgages

Australia is a popular location for property and has been for many years. Its climate boasts a huge variety of weather conditions such as the tropics of Northern Australia and Cairns, the English countryside feel of Victoria, sunny Queensland with the endless beaches of the Sunshine Coast and the major cities of Sydney, Melbourne, Perth and Brisbane.

When you combine this with a laid-back attitude and the fact that everyone speaks English, it is easy to see why UK residents are interested in purchasing property in Australia, not only as a holiday home but often for emigration.

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Australian Property Regulation

The first step to purchasing property in Australia is to decide upon the property you would be interested in, then gain approval from the Foreign Investment Review Board (FIRB).

Before entering into any contract, all foreign individuals that wish to purchase Australian property must gain prior approval from the Australian Government’s FIRB, unless they meet one of the exemptions laid out in the Foreign Acquisitions and Takeovers Regulations.

These exemptions are:

- Australian citizens that are resident abroad.
- Foreign nationals with permanent resident visa.
- Foreign nationals with (or eligible for) a ‘special category visa’ (such as New Zealanders).
- Foreign purchasers entering into joint tenancy with an Australian spouse.

According to the act, the definition of a foreign person is:

- Not ordinarily resident in Australia.
- A corporation where an individual not ordinarily resident holds a controlling interest in the enterprise (15% or more)
- As above, but where 2 or more persons hold an aggregate controlling interest (40% or more).
- The trustee of an estate where 2 or more individuals that are not ordinarily resident in Australia or a foreign corporation hold an ‘aggregate substantial interest’, which again implies 40% or more.

To seek approval of your plans from the Aussie Government, you need to go to the FIRB website and download the relevant application forms. In the case of residential property, this will be the R2 Form and a Section 26A Notice.

What does this regulation mean to foreign investors?

Basically the Australian Government, like all governments, are happy enough with foreign investment. However, if lots of foreigners bought property in Australia, this reduces the supply of houses available for Australian citizens, pushing up the prices that residents would then have to pay to get their own home.

The Australian Government therefore want foreign investment in residential property to add to the overall housing stock in Australia. Their laws are thus aimed at channelling foreign investment into increasing the supply of houses, not just demand. This means new constructions are the best way to obtain Australian property – new homes, townhouses and property developments. This not only increases the total number of homes, but sustains jobs in Australia’s construction industry and is therefore welcomed by the Australian Government.

AUSTRALIAN MORTGAGES

While you wait to hear back from the Foreign Investment Review Board, you can begin to prepare your financial arrangements for the property. To this end, you should be able to arrange an ‘agreement in principle’ with a mortgage provider. This means that once you receive FIRB approval, you will be able to confirm the mortgage from the lender and purchase the property in question.

As with all foreign purchases, we recommend you arrange legal representation that is conversant in the local law. This should be much simpler with Australian property as it is an English-speaking country. Your legal representation will be able to go over any contracts that are to be signed, carry out background checks on the financial status of the property and arrange the deposit that is to be paid prior to completion.

An Australian bank account will be required, but this should be relatively straightforward to arrange. Mortgage funds are in Australian Dollar denomination, so having an Australian bank account will simplify the process and save you money by removing foreign exchange fees. You will also need to get hold of a Tax File Number (TFN), which can be provided by the Australian Taxation Office.

It is not possible to get a self-certification mortgage in Australia. If you are employed you will have to provide three months’ payslips and bank statements supporting your salary claims. For the self-employed, you will have to provide audited business accounts for the 12 month period prior to your application and personal bank statements.

Australian lenders will take into account rental income if you plan to buy-to-let the property. However they will only factor in around 70% of any potential rental income that could be earned on the property.

TAX IMPLICATIONS OF PURCHASING PROPERTY IN AUSTRALIA

As with the USA, the states of Australia are all independent and thus have their own taxation criteria and rates. As this means that Stamp Duty and taxes all vary widely (take a look at the extreme case of the Northern Territories which has neither property tax nor stamp duty!), we have decided that the best way to provide tax information for each state is to provide links to the tax pages (and in most cases, tax calculators) of each State Government’s website:

New South Wales – State Capital: Sydney

Victoria – State Capital: Melbourne

Queensland – State Capital: Brisbane

Western Australia – State Capital: Perth

South Australia – State Capital: Adelaide

Northern Territories – State Capital: Darwin

Tasmania – State Capital: Hobart

Australian Capital Territory (ACT) – National and State Capital: Canberra

If you are interested in purchasing property in Australia and are unsure of your financing options, please complete our mortgage enquiry form and we shall have an IFA contact you by phone within 24 hours.