Investment property laws & tax obligations in Australia
There’s more to property investment than simply buying a house and renting it out. As a property investor, you must follow certain rules and obey tax regulations that vary depending on the state or territory you’re investing in.
For a smooth and successful property investment journey, make sure you’re aware of the investment property laws in Australia. In this article, we provide a quick breakdown of the requirements, regulations, and obligations all potential investors need to know.
Requirements for buying investment properties
Compliance with Australian real estate laws is a must for any successful property investment. When buying properties in Australia, keep these rules and regulations in mind:
Title search
Doing your due diligence is crucial when it comes to buying investment property. As an investor, you need to know who the property you want to acquire legally belongs to and find out if there are any encumbrances or easements on the property. This also ensures that there are no issues with ownership that could negatively affect you.
Work with a conveyancer and solicitor to help you work through the due diligence process. Following professional and expert advice, especially in legal matters such as these is essential.
Tenancy and landlord laws
The laws around tenancy, tenant rights, tenant agreements, and rental properties vary between states and territories. When investing in rental properties, you must understand all the responsibilities of being a landlord. Even if you live in another state or territory, you’re bound by the laws of where your rental property is located.
Complying with tenancy laws is paramount if you want to operate a rental property. As a landlord, you must always consider the rights and well-being of your tenants. Failure to do so could cost you and may result in legal consequences.&
Foreign or overseas investment
If you’re a non-resident or have a temporary visa, you must have the approval of the Foreign Investment Review Board (FIRB) before you buy your investment property. However, if you’re an Australian citizen who would like to invest in real estate, you can still purchase properties while abroad. You could get an expat home loan to take advantage of investment opportunities even if you reside outside the country.
Building codes, safety regulations, zoning laws
If you’re building or renovating an investment property, you must comply with the building and safety regulations. Speak with your contractor and research the local regulations to ensure you’re meeting the requirements.
Your construction project must abide by the the safety standards and environmental requirements within the council guidelines. This includes obtaining permits, getting inspection certificates, and making sure that your build or renovation follows local zoning laws.
Strata laws
When investing in a townhouse or apartment that’s part of a strata complex, you’ll be dealing with strata title regulations. Keep abreast of the strata laws that cover the rights and obligations of property owners. This will inform you on how to properly proceed when it comes to disputes and details on managing common areas.
Land tax obligations for investment properties
The amount of land tax an investor must pay depends on the unimproved value of the land. The land obligations vary per state and territory as well so some exceptions and thresholds may apply to certain areas.
To give you an idea of what land tax may cost per state, we’ve compiled data from PwC Australia that details the highest effective land tax rates and taxing dates. Take note that lower value properties will garner lower rates.
Maximum land tax and stamp duty rate per state
| General land tax rate | Surcharge land tax rate | |
|---|---|---|
| Northern Territory | Land tax is not levied in the Northern Territory | |
| Western Australia | 2.67% maximum rate | Not imposed in Western Australia |
| South Australia | 2.4% maximum rate | See: Trust Surcharge Land Tax Rate |
| Victoria | 2.65% maximum rate | See: Absentee Owner (Surcharge) Rate |
| Tasmania | 1.5% maximum rate | Additional 2% on residential land owned by foreign persons excluding the principal place of residence |
| Queensland | 2.75% maximum rate | Additional 3% on taxable land owned by absentee individuals, foreign corporations, and trustees of foreign trusts |
| New South Wales | 1.6% maximum rate over the general threshold of $1,075,000 and up to the premium threshold of $6,571,000 2% maximum rate for high value properties over the premium threshold of $6,571,000 | Additional 4% for residential landowners owned by foreign persons Starting from the 2025 land tax year, this rate will increase to 5% |
| Australian Capital Territory | Fixed charge of $1,612 and additional valuation charge of up to 1.26% on the five-year average unimproved value | Additional 0.75% on residential land owned by foreign persons excluding the principal place of residence |
Additional tax rates per state
In Western Australia, properties located in the metropolitan area are also subjected to an additional Metropolitan Region Improvement Tax rate which is 0.14%. South Australia has an additional Trust Surcharge Land Tax Rate which applies to land owned in trusts.
In Victoria, there is an Absentee Owner (Surcharge) Rate which applies an added 4% to all land owned by absentee owners from 1 January 2024. The state also has a Vacant Residential Land Tax Rate adding 1% to the land tax rate for all residential land in Melbourne’s middle and inner suburbs that have been vacant for more than six months in a calendar year. This is a separate rate from the Residential Vacancy Fee.
The state also has a COVID-19 Debt Levy that lasts for ten years starting on 1 January 2024. Buyers will have to pay $500 for landholdings with a value between $50,000 to $100,000 and $975 with a value between $100,000 to $300,000. For landholdings over $300,000 in value, you’re expected to pay $975 plus an increased land tax rate of 0.1%. The additional 0.1% has been included in the max rate in the table above.
Stamp duty for investment properties
Stamp duty is a tax imposed by state and territory governments for certain transactions including property purchases. Different states and territories have varying rules and regulations surrounding stamp duty costs.
Below are the Australian stamp duty rates and thresholds from PwC Australia which provide the highest effective rates. Lower rates may apply for properties of lower value. The rates are current as of 1 August 2024.
Maximum stamp duty and land holder threshold per state
| Asset transactions | Land holder threshold | |
|---|---|---|
| Northern Territory | Max duty rate is 5.95% | Land value threshold is $500,000 |
| Western Australia | Max duty rate is 5.15% | Land value threshold is $2,000,000 |
| South Australia | Max duty rate is 5.5% | Land value threshold Nil |
| Victoria | Max duty rate is 6.5% | Land value threshold is $1,000,000 |
| Tasmania | Max duty rate is 4.5% | Land value threshold is $500,000 |
| Queensland | Max duty rate is 5.75% | Land value threshold is $2,000,000 |
| New South Wales | Max duty rate is 5.5% | Land value threshold is $2,000,000 |
| Australian Capital Territory | Max duty rate is 5% for commercial properties where the land value is over $1,900,000 or Nil if the land value is under $1,900,000 but lodgement is still required | Land value threshold is Nil |
If you’re a foreign investor purchasing residential property, you’ll have to pay an additional 7% surcharge in Western Australia and South Australia. The additional surcharge is 8% for foreign purchases of residential property in Victoria, Tasmania, Queensland, and New South Wales. The surcharge rate for New South Wales will increase to 9% by 1 January 2025.
In Tasmania, there’s also a 1.5% surcharge for foreign purchases of primary production. For New South Wales, there’s a 7% premium rate when transferring residential properties with a value exceeding $3,636,000.
Tips on buying an investment property
Knowing investment property laws in Australia, as well as your tax obligations, can make your real estate purchase run smoother. Here are a few more tips to help you when buying an investment property:
- Understand local investment rules and regulations. Not only do some regulations change per state but they can also change depending on the city you’re in. Always check the council guidelines when building or renovating an investment property.
- Review your finances carefully. Always include the stamp duty and land tax costs when figuring out the budget for your investment property purchase. These costs stack up quickly and could overwhelm your finances if not taken into consideration early on.
- Find a loan that fits your investment needs. The loan you choose could make or break your investment property venture. Figure out what kind of loan would help you achieve your investment goals.
Ready to buy an investment property?
Get the ideal investment property loan with low interest rates, useful loan features, and flexible terms. Get in touch with us today at loans.com.au by calling 13 10 90 or apply online!
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
