According to international practice, a vacancy rate for commercial housing of between 5 and 10% is a reasonable area, and a vacancy rate of between 10 and 20% is a vacancy danger area. In Australia, the vacancy rate has been below 5% for many years, indicating that housing is in short supply. So that's why more and more people are investing in Australian property.
In 2023, Australia's housing vacancy rate has dropped to less than 1%, and the continuous influx of immigrants and international students has made rent in major Australian cities unattainable. Overseas people who invest in real estate in Australia have therefore gained huge benefits.
1. What is the Australian Vacancy Tax?
The Vacancy Fee is an annual fee paid by overseas owners who own an Australian residential property that is unoccupied for more than half of the year (183days). This is to reduce the vacancy rate and thus provide more housing opportunities for Australian residents. The fee is levied by the Australian Taxation Office(ATO) to assess whether and how much needs to be levied based on the "vacancy tax return" filed by all overseas owners.
2. Who needs to pay Australian Vacancy Tax?
People who meet the following conditions will need to pay vacancy tax in Australia:
1. Overseas owners, i.e. persons who are not Australian citizens or who do not ordinarily reside in Australia (who have not lived in Australia for at least 200 days in the past 12 months);
2. Persons who own a residential property and fail to live in it within one year or fail to rent or sell it to the market for more than 183 days; and
3. The property is a property approved for purchase by the Foreign Investment Review Board (FIRB).
3. How much is the Australian Vacancy Tax?
According to information provided on the Australian Tax Office's website, the vacancy tax is usually the same as the FIRB application fee paid by investors when submitting a foreign investment application.
The ATO calculates the specific cost based on the vacancy tax return filed by the owner, so you don’t have to calculate it yourself.
4. How do I file Australian Vacancy Tax?
Overseas buyers should be reminded that if you buy a property that has been rented out for more than 183 days in this financial year, you do not need to pay a vacancy fee to the Australian Tax Office, but you still need to declare the vacancy tax exemption to the ATO every year.
All overseas buyers applying for FIRB Australia approval to purchase residential properties are required to file an annual vacancy tax return. The Australian Vacancy Tax Return will record the details of the property and will help the ATO decide whether to impose a vacancy fee on it or not.
Buyers will generally receive an annual email from the ATO as a reminder to Lodge Vacancy Fee. Even if they do not receive a reminder, owners must remember to file their own taxes.
The vacancy tax return can be downloaded here: https://www.ato.gov.au/FIRBvacancyfee/, or you can contact a lawyer to help with the application.
The deadline for filing Vacancy Tax is every 12 months plus 30 days after the owner's purchase. The time is usually calculated from the date on which the owner has the right to take possession of the property, which is the date of closing. If the property is sold on January 1, for example, you will need to file a Vacancy Tax Return by January 30 of each year. Late payments may incur penalties or interest.
Once your return is submitted, you'll be taken to a confirmation page with information about the amount of vacancy tax and payment methods. The payment amount and payment due date will also be mentioned in the email sent to the owner.
5. How do I get an exemption for Vacancy Tax in Australia?
For those who do not want to pay a vacancy fee, the simplest way is to not leave the house empty (at least, don’t leave it vacant for more than half of a financial year). So whether you rent it out or live there with relatives and/or friends, you can avoid paying vacancy tax. If during a vacancy period you can prove that the house has not intentionally been left vacant, such as traveling abroad, then you can also avoid paying.
Specifically, you may be exempt from Vacancy Tax in Australia if the following conditions are met, but a return and related supporting documents will still need to be filed.
Exemptions include:
1. The house has been rented for more than 6 months, or self-occupied for more than 6 months, or relatives, friends or other people have lived for more than 6 months (no need to sign a lease);
2. The house is damaged, unsafe or unfit as a residential dwelling;
3. Occupancy in the property is prohibited or restricted pursuant to a court or arbitral tribunal order, or under federal, state or territorial law;
4. The permanent resident of the house (who may not be a foreigner) is unable to continue living there due to long-term hospitalization or nursing care;
5. The registered owner has passed away and the administration of the estate is still incomplete - death certificate of the registered owner of the property;
6. The owner is no longer an overseas tax resident - visa certificate; or
7. The legal ownership of the property has changed within the year.
For more information, please visit the ATO website:
In particular, homes used for short-term rentals (i.e. rentals for less than 30 days) - including AirBnBs - are not considered to have been genuinely used for residential purposes even if they are actually rented for more than 183 days in a year, and are therefore subject to Vacancy Tax in Australia.
Alison’s Story
Born in Hong Kong an moved to Australia, I have been associated with real estate all my life. As the plane slowly landed on the runway of Melbourne Airport, my life and career also changed to another runway. I changed from a Hong Kong real estate agent to an Australian real estate agent, and successfully obtained the Australian lawyer qualification.
When I was working in a law firm, I was surrounded by highly educated professionals. Even though their wages are very well, and they are absolutely the elites in society, but their lives are full of hard labor, and it’s hard for them to get rich through buying properties.
So I spend all my time and effort on learning financial and real estate investment knowledge, hoping to achieve financial freedom as soon as possible, and let my parents who have worked hard for many years live a good life.
Now I will share with you the knowledge and experience of investing in Australian real estate, and embark on the road to financial freedom together.
Alison Australian real estate information platform
The original intention of Miss Alison to establish investwithalison.com is to provide neutral Australian real estate information through this platform and help investors establish the most suitable investment strategy.
👉Website: investwithalison.com
👉Email: hello@investwithalison.com
👉Linkedin: linkedin.com/in/alisonwongaustralia/
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