Property Investors – Tax Implications When Investing in Australian Property

Taxation often takes a backseat in the minds of property investors when considering purchasing an investment property. However, it should be given due consideration, as smart portfolio structuring can significantly impact net profit beyond mere capital gains.

Many Australian property investors opt to utilize their Self-Managed Super Fund (SMSF) for property purchases. This is because capital gains tax stands at a favourable 10% if the property is held for at least 12 months, and it can even be exempt from capital gains tax if sold during the pension phase.

SMSF’s are also allowed to borrow funds to purchase property through a Limited Recourse Borrowing Arrangement. Historically, loan interest rates for SMSF’s were very high, making borrowing not cost effective so SMSF’s often opted for outright property purchases. However, lenders have since lowered their rates, which are now only slightly higher than standard personal interest rates. However, the paperwork is complex and requires the set-up of the correct legal structures.  

Another form of tax, stamp duty, vary across different states in Australia, and these differences can greatly affect your net profit. It’s important to note that each state has its own set of stamp duty rates.

For instance, on a $1,500,000 property purchase, the stamp duty and associated government taxes will vary depending on the state. Did you know that in NSW the duty is ~$21,000 less than in Victoria?

Here’s how the States rank on a $1,500,000 property purchase (as of April 2024):

TAS$63,070(includes $385 extra government taxes)
NSW$65,555(no extra government taxes applicable)
ACT$68,712(includes $612 extra government taxes)
WA$69,062 (includes $696 extra government taxes)
QLD$72,785(includes $6,010 extra government taxes)
NT$74,580(includes $330 extra government taxes)
VIC$86,525(includes $3,725 extra government taxes)
SA$90,760(includes $14,430 extra government taxes)

See detailed stamp duty breakdown below:

NSW$8,990 + $4.50 for every $100 over $300,000. Premium properties priced $3,000,000+ attract stamp duty of $150,490 plus $7 for every $100 over $3,000,000.
SA$6,830 + $4 for every $100 for properties between $200,001 – $250,000
QLD$8,955 + $4.75 for every $100 over $150,000, $11,330 plus $5 for every $100 over $300,000 and $21,330 + $5.50 for every $100 over $500,000.
ACT$1.48 per $100 up to $200,000 up to a flat rate of $5.09 per $100 for properties priced $1,455,000 and above.
VIC$2,870 + 6% of value between $130,000 – $960,000, 5.5% of value between $960,000 – $2,000,000 and $110,000 plus 6.5% in value in excess of $2,000,000
WA$28,435 + 5.15% value over $725,000. 
TAS$5,935 + $4 every $100 for properties over $200,000 and below $375,000. 
NTFor properties priced $525,000 and below the formula is: (0.06571441 x V2) = 15V, where V is the dutiable value of the property divided by 100.

In NSW and VIC, there is an 8% surcharge on stamp duty for foreign buyers, while in WA, SA, and QLD, it is 7%. There is no surcharge in the ACT and NT. Whether you’re a foreign buyer or even a permanent resident – who must meet the 200 day rule – it’s crucial to consult your lawyer to verify your status and ascertain if you’re subject to the stamp duty surcharge.

If you’re looking for help to purchase a Sydney investment property, contact the trusted Premier Home Finders Team. Our expert team specialise in specific Sydney regions including the Lower North Shore, the Upper North Shore, the Eastern Suburbs and Inner City.  

Disclaimer: Please be aware that this information is of a general nature, and it is advisable to seek independent financial advice before making any financial or investment decisions, ensuring you make well-informed choices.