Buying in Australia from NZ - Foreign Acquirer Duty

I have had several enquiries from NZ based Kiwis looking to purchase a property in Australia.

They may be wanting to secure a home before they make the move across the ditch.

They could be NZ based parents helping their Aussie based kids to secure accommodation, or looking to buy a holiday pad so they can scoot back and forth (and jump on the boom train).

It all sounds like it should be a fairly straightforward exercise. After all, Aussies are buying up NZ properties without too much fuss or expense.

However, the shoe doesn't fit the other foot quite so well.

First up, Foreign Acquirer Duty (FAD) ... what is it?

FAD is a tax levied on non-residents buying property in Australia. If you are a NZ citizen living in NZ, then you will be charged FAD when buying a property in Australia. The tax is charged as a % of the purchase price.

Queensland 8%

NSW 9%

WA 7%

Tassie 8%

SA 7%

NT 0% - apparently no-one wants to buy a home in NT!

You will also pay Stamp Duty. For example, if you buying a property in QLD for $1m you will pay $115,000 in stamp duty and FAD. If it's a investment property, then the total cost is $122,000. That's tax - straight to the Government. You won't see it again. Gone.

These taxes are enough to put off most Kiwis. Fair enough, it's an extortionate amount of money to pay as an entry fee. Remember, Aussies pay nothing when they buy in NZ ... hardly fair.

Another consideration is getting a loan to pay for the property (and all the tax). As a Kiwi living in NZ you are regarded as an expat. There are very few Aussie lenders that will entertain an expat loan and the process is complex and onerous. Be prepared to provide a mountain of paperwork and lose a lot of hair.

Also, bear in mind that if you borrow more than 80% of the purchase price you will need to pay Lenders Mortgage Insurance as well. This can add 10's of $1,000's to the cost of the loan.

So, as you can tell, you've got to be very bullish if you want to buy a property in Oz from NZ. The costs and processes are, for the majority of Kiwis, very prohibitive.

How do you get around these major hurdles? Easy, reside in Australia. As soon as you step off the plane you are issued a subclass 444 visa. This means you are now "resident". However, you must then continue to prove that you are living in Oz and not just popping over to beat the system. If you buy a home and bugger off back to NZ you can rest assured that the State Revenue Office will be on your tail. Give them a sniff of an opportunity to tax you and they'll grab it with both hands.

Of course, should you want to discuss this further, then reach out to me. I'll be very happy to assist you! paul.davey@uno.com.au 0423688811