Buying property overseas from Australia: How it works, tax implications

If you’re thinking about buying property overseas from Australia, as a holiday home or investment, you’ll need to navigate a foreign real estate market and get to grips with possible tax implications at home and abroad.

This guide gives some pointers on the most important things to consider, to find and finance your overseas property, including a look at Wise’s large amount transfers as an ideal way to pay for your new home.

Buying property overseas from Australia

Buying property overseas from Australia is possible, but it can be more complicated than buying a new home locally. Australian residents may struggle to secure overseas mortgages for buying property abroad, making financing more complex. Plus, once you find a new home, you’ll need to navigate an unfamiliar real estate market and purchase process.

Getting a dedicated local team on hand to help you find and negotiate a price on your new property is essential. You’ll also usually need professional tax advice to keep you on the right side of the law.

When buying property overseas, the tax implications can depend on the countries involved as well as the property's primary usage. As well as needing to declare and pay tax on any income sourced from your property, capital gains tax is likely to apply when you sell it at a later stage.

Get professional support from real estate specialists, legal advisors, and tax accountants, so you’ll have reassurance that your overseas property purchase can proceed hassle-free.

How to finance your property abroad

The first thing most potential property buyers need to figure out is the financing of an overseas property purchase. This can be a different experience compared to buying a property in Australia, where you’re more likely to have an established credit history and assets, which make securing a loan more straightforward.

If you’re a cash buyer and able to finance the property purchase out of pocket, securing finance may not be on your mind. However, if you need to take a mortgage to cover some or all of your costs, you may have a few different options:

Mortgages from Australian banks

While all major Australian banks offer mortgage and home loan products, the availability of products aimed at people buying properties overseas is pretty low. Generally, Australian banks will only offer a standard mortgage for a property in Australia. The alternative may be to look at specific investment mortgages, which sometimes have options for overseas property purchase - but which usually also come with higher fees and interest rates.

Using a specialist mortgage broker who is familiar with Australians buying property abroad may make the process easier.

Mortgages from foreign banks

You might also consider applying for a mortgage from a bank in the country where you plan to buy property. Many major banks will offer mortgages to foreign applicants - but the options available to you, as well as the terms you’re offered, can vary depending on things like your tax residency and financial situation.

Shop around with some different banks in the country you’re considering buying in, to see whether any can support your application. Remember to get qualified legal advice and use a translator if needed, to make sure you’re clear on the conditions of any loan you may take on.

Mortgages from international banks

A final option is to look to a large global bank like HSBC¹, which can offer mortgages for a range of different countries. International banks may be able to take into account your credit history and assets in Australia to make an assessment of your suitability for a mortgage issued through their division in a foreign country.

Overseas mortgages from international banks may be aimed at high-wealth individuals looking to invest, so do weigh up the costs and options available carefully before you choose.

Make low-cost large international payments with Wise

Buying an overseas property is exciting - but sending high-value payments overseas can be daunting and expensive. Keep down your costs with secure transfers through the Wise large value payments service.

Wise offers automatic fee discounts when you send 40,000 AUD or more over the course of a month, and currency conversion uses the mid-market rate with no surprise or hidden costs to worry about. There’s a dedicated high-value transfer team to talk you through your payment, including advising on the documents and information you may need to provide, to securely process your transfer as quickly as possible.

Set up your Wise high-value payment online or in the Wise app, and get all the support you need to move your money from Australia to 140+ supported countries, with low fees and mid-market exchange rate. Whether it's one large transfer or multiple smaller ones in any of the global currencies we support, you can save more with Wise.

Tax implications for Australian residents buying property overseas

Before you buy a property overseas, you’ll need to understand any possible implications for taxes in Australia and in the country where the property is located in.

One important consideration if you’re an Australian tax resident is the ATO’s Section 20 reporting requirements². This requires you to report foreign earned income, including rent, and also to report if you own overseas assets worth 50,000 AUD or more. Tax treatment of the property and any income may vary depending on the way you use it. Australian tax laws differentiate between holiday homes offered for rent and for private use, for example³.

Tax relating to property ownership can vary a lot depending on the property location, type, and usage - so getting professional advice may be necessary to make sure you’re clear on all your obligations in Australia and abroad.

Foreign income tax offset & double taxation

While you will usually need to report foreign income to the ATO - including rent you earn from your overseas property - you may already have paid tax on this income in the country the property is located in. If this is the case, you might be able to offset the tax already paid overseas against any Australian tax that would be due on that income.

Check if there is a double taxation agreement between Australia and the country your overseas property is located in. If there is, you may find that this provides the option to offset tax so you do not have to pay twice on the same income. Get professional advice to see if this could apply to your situation.

Deductions for overseas property expenses

When reporting your overseas property income to the ATO, you might be able to access deductions for certain expenses that are associated with owning the property. This depends on various factors, including whether or not you rent out the property on a long-term basis or as a short-term holiday let, for example.

Some deductions are available for things like real estate commissions and the costs of advertising a property and making good after a tenant departs. As these rules require you to meet certain eligibility criteria, you’ll need to check the details carefully to make sure you account for any allowable deductions properly.

Capital gains tax (CGT) on overseas property

If you sell an overseas property and make a gain, the sale value may be subject to capital gains tax⁴. Assuming you’re an Australian tax resident, and the property you have abroad is not a main residence, you will usually have to report the sale and pay CGT on the increase in value of the asset, minus some allowable expenses.

Again, you are likely to require professional advice to navigate this step when selling your overseas property, as CGT may also be due in the country your property is located in, depending on local law there. Getting tax advice from an accountant who is familiar with both jurisdictions can help ensure you remain legal and don’t pay more tax than required.

Summary

While buying an overseas property is a dream for many people, it does require a lot of planning to make sure the process goes smoothly. This guide can start off your research - and while you’re thinking about how best to manage your international property purchase, check out Wise to help you transfer money with low fees and manage your money internationally.

👉🏻 Learn more about large amount transfers with Wise

1. HSBC - how to buy property overseas
2. ATO - Section 20
3. ATO - holiday home tax considerations
4. ATO - property and capital gains tax