Many Hong Kong residents who have been approved for Australian permanent residency visas choose to stay in Hong Kong and consider purchasing Australian property for long-term investment or personal use. However, a review of the property tax systems in various Australian states revealed that even if you hold permanent residency, if you are overseas when purchasing a property, you may still be considered a "foreigner" in some states and be subject to additional stamp duty. New South Wales (NSW) has specific residency requirements, while Queensland (QLD) is more relaxed. Prospective buyers should understand the policies beforehand to avoid being caught in these traps.
New South Wales has strict regulations, but overseas PRs may not be exempted
The New South Wales government introduced the Additional Foreign Acquirer Duty (AFAD) in 2016, currently at 9% of the property purchase price. Under section 104JA of the Stamp Duty Act, buyers deemed "foreign persons" are required to pay the AFAD regardless of the property purchase price.
It's worth noting that even permanent residents aren't automatically exempt. According to state regulations, if a buyer has lived in Australia for fewer than 200 days in the 12 months prior to signing the purchase agreement, they will not be considered "ordinarily resident in Australia" and will still be required to pay AFAD.
For example, if a PR living overseas purchases a residential property worth A$1 million in Sydney but has not met the 200-day residency threshold in the past year, he or she will be required to pay an additional A$90,000 in stamp duty, equivalent to approximately HK$470,000, which may put a budget pressure on some buyers.
Although New South Wales has an "exemption commitment" mechanism that allows buyers to apply for a refund of taxes paid if they promise and actually live in Australia for 200 days within 12 months after the new house is completed or sold, if they fail to fulfill the residence commitment, the tax office may recover the relevant taxes and additional interest.
Queensland's standard relaxed PR generally does not need to pay
In contrast, Queensland has more relaxed permanent residency requirements. The state introduced AFAD in 2016, and the tax rate will increase from 7% to 8% starting in July 2024, applying to buyers with "foreign" status.
According to the Queensland Revenue Office, only those who are not Australian citizens or permanent residents, or who purchase residential property through a foreign entity such as a company or trust, are considered "foreign persons" and subject to AFAD. Once permanent residency is confirmed, individuals generally do not pay additional tax on private property purchases. Even if the buyer is overseas at the time, their residency does not affect their eligibility for the exemption.
However, it is worth noting that if the buyer purchases a property jointly with a non-Australian resident or foreign spouse, the non-PR joint owner is required to pay AFAD on his or her share.
Differences in tax systems reflect local policy approaches; buyers should plan early.
Looking at the two jurisdictions, New South Wales has a strict definition of "ordinary residence," while Queensland primarily relies on status, without requiring a specific number of days of residence. While both are popular destinations on Australia's east coast, their tax arrangements differ significantly, reflecting the differing attitudes of local governments towards foreign investment and non-residents purchasing property.
Permanent residents interested in purchasing property in Australia, especially those who have lived overseas for a long time, should be cautious. Because the definition of "foreigner" and tax arrangements vary from state to state, it is crucial to carefully select a state and understand your tax responsibilities in advance. Identity verification and residency requirements can impact your tax burden and can easily result in tens of thousands of dollars in additional expenses. Consult a registered local lawyer or advisor if necessary to ensure compliance with regulations and avoid incurring additional tax costs due to identity verification errors.
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