Buying and Owning Property in Australia as a Foreign Person
Australia actively restricts and surcharges foreign property ownership, a policy response to housing affordability pressure, and most Americans on temporary visas count as "foreign persons" under that framework even while living and working in the country. Add in the IRS's separate reporting requirements for foreign rental income and property, and a straightforward home purchase turns into a two-country compliance exercise.
FIRB Approval: Who Needs It
Foreign persons, generally anyone who isn't an Australian citizen or permanent resident, including most temporary visa holders on a 482, must apply for Foreign Investment Review Board (FIRB) approval before buying residential property. Approval is typically granted for a single established dwelling to live in while the visa is current, or for new/off-the-plan property as an investment, but not for established dwellings purely as an investment. Permanent residents (subclass 189, 190, and similar) are generally treated the same as citizens and don't need FIRB approval.
Foreign Buyer Surcharges
On top of standard stamp duty, most states levy an additional foreign buyer surcharge, commonly in the range of 7-8% of the purchase price in New South Wales, Victoria, and Queensland, applied specifically to foreign persons. There's typically also an annual foreign owner land tax surcharge on top of ordinary land tax. These surcharges apply regardless of how long you've lived in Australia if you remain classified as a foreign person under the relevant visa category.
US Reporting on Australian Rental Income
Rental income from an Australian property is reportable on Schedule E of your US return regardless of FIRB status, with depreciation and expenses handled under US rules that don't always mirror Australian depreciation schedules. The Foreign Tax Credit generally offsets Australian tax paid on the same rental income, but the timing mismatch between the two countries' tax years again requires careful reconciliation.
Capital Gains on Sale
Foreign residents for Australian tax purposes generally do not qualify for the Australian main residence capital gains tax exemption in the same way citizens and permanent residents do, and a foreign resident capital gains withholding tax (currently 15% of the sale price) is withheld at settlement on Australian property sales, refundable via your Australian tax return if your actual liability is lower. The same gain is also reportable on your US return, with the Foreign Tax Credit available for actual Australian tax paid.
Worked Example: A 482 Visa Holder Buying a Home
An American on a 482 visa in Brisbane buys an established AUD 750,000 home to live in while sponsored. She obtains FIRB approval (a formality for an established dwelling as her principal residence) and pays Queensland's foreign buyer land transfer surcharge on top of standard duty, adding roughly AUD 52,500 (7%) to her settlement costs. If she later becomes a permanent resident and sells the property years afterward, she may then qualify for standard resident CGT treatment on future gains, but any gain accrued during her period as a foreign resident is generally apportioned and taxed accordingly.
