TAXATION IN AUSTRALIA: Rental income is a taxable income and once your property is producing an income you will need to submit an Australian tax return.  Whilst rent is a taxable income many of the costs relating to holding an investment property are tax deductible, these include cash costs (such as body corporate costs, council rates, management fees etc) interest, if you are funding the property and non cash items such as depreciation.  Depending on the property, the rental income and costs that you have, many investors will not pay tax for many years. To assist you with your Australian tax return Home Port Property can arrange for a local taxation accountant to prepare the required returns that can then be forwarded to your local accountant.

Australia also has stamp duty, land tax and capital gains tax.  Investors can find further details at the web site of the Australian Taxation Office www.ato.gov.au 

BUYING OFF PLAN: Many investors are choosing to purchase their investments “off the plan”. In Australia buying “off plan” usually requires 10% of the purchase price as a cash deposit, this should sit in a solicitors trust account and not be accessible by the developer until project completion.  Purchasers need to check their contracts prior to signing to ensure this is the case.  There is then no more to pay until the project is fully complete and ready to occupy.

This practice allows investors to get involved in a project early on and lock in the current price.  In the hope that by the time the project completes it will have already had some capital growth.

AUSTRALIAN MORTGAGES: Some international investors are able to use their local lenders and those lenders will use the Australian property as security.  However, many investors require a loan from an Australian lender.  Australia has many bank and non bank lenders and many will lend to international investors.

Lenders will generally take rental income (or projected rental income for new projects) in to account.  However most will also require evidence of other income that the purchaser has.

Most lenders will lend to a maximum 80% of the value of the property.  Generally lenders prefer property that is above 50sqm internally and if below will generally still provide funds but often not up to 80%.  Some lenders will lend up to 60% without any proof of other income.

Loan products and rates are generally the same as those available for local investors.  Loans are generally available for up to 30 years and are available on a principle and interest or interest only basis.  Variable interest rates are currently around 7% and 3 year fixed rates are currently around 6.7%.

THE GENERAL PURCHASING PROCESS: Most projects require an initial holding deposit once you have selected the particular property that you intend to purchase.  This holding deposit is usually between AUD$1,000 & $5,000, is usually fully refundable should you have a change of mind prior to signing contracts, and is usually held in a trust account.

Once a holding deposit is received the vendor’s solicitor will prepare a contract of sale. This is usually a few days after the holding deposit has been sent. 

We strongly suggest to all of our clients that they use the services of a local Australian solicitor who is independent of the developer and the developer’s solicitor and who solely represents the purchaser.  It is important to have legal representation in the geographic area in which you are purchasing to ensure that the particular legal requirements for that locality are being met.

The contract, once prepared is sent to the purchaser’s solicitor.  They in turn review the contract, suggest and negotiate any changes that they feel are in your best interests and forward the contract to you, with their covering notes.

The general time frame that most of our developers agree to (for off the plan projects) for our international purchasers is to allow 21 days from contract issue to have contracts signed and returned and up to a further 21 days to transfer a 10% deposit.

Once the contract has been signed by the purchaser and the vendor (with no outstanding conditions) and the 10% deposit has been paid it is considered to be “unconditional”.  This 10% is generally held in a trust account by the developer’s solicitor.  It is important to ensure that the 10% is held in trust and is not available to the vendor until the project is complete.  This will be specified in the contract.

Several months prior to settlement your solicitor will contact you to prepare for settlement.  It is important at this time to:
• Organise a pre settlement inspection.  You can do this yourself, though we suggest that in addition you use the services of an independent builder to inspect your property on your behalf.  This service is readily available and at a cost of under AUD$400 to inspect, report and then re inspect after any defects have been fixed it offers excellent value to protect your new asset.
• Organise an Australian bank account.  If you are borrowing funds in Australia you can organize this with the same lender.  In any case you will require a local account to have the rent paid in to.
• Organise a local property management agency to manage your investment.  Some investments already have this facility in place, such as serviced apartments. 
• Organise finance.  You should have already spoken with a finance company or a local Australian mortgage broker to ensure that you can obtain finance.  Now is the time to actually organize it to ensure that funds will be available as soon as your property is complete.

All of these things can be done without you needing to personally visit Australia.

As a general guide you should allow for the following costs at settlement:

Legal fees: AUD$1,00 to $1,400
Stamp Duty: This is a state based tax and varies depending on property price. - An AUD$400,000 property, purchased in Darwin would have stamp duty of around AUD$19,000.
Loan application (if borrowing funds): AUD$600
Pre settlement inspection: AUD$400

EXCHANGE RATE: Obviously investors need to be aware that exchange rate variations can lead to potential gain or loss.  In general, compared to other similar developed countries the AUD$ is weaker, this plus the fact that Australian prices are still relatively low compared to other developed countries mean that you can purchase far more for your money in Darwin than say in Sydney, New York or London.

On October 2005, AUD$1 was worth around US$0.763, EURO$0.641, GBP$0.434

HOME PORTS LATEST DARWIN INVESTMENT OPPORTUNITY: Home Port have recently listed a project that has been specifically chosen for its growth potential combined with its excellent projected rent returns and hassle free management option.  It meets all the criteria listed above to provide all the benefits of a serviced apartment now and all the potential benefits of a standard residential property as far as growth opportunity and flexibility down the track.

These apartments are ideally located in the middle of the city, close to everything.  They will offer a level of finish, quality and facilities that is currently unmatched in Darwin, with most apartments offering spectacular water views.

These apartments can be secured now, at today’s prices on just 10%, with the remainder not due until completion, which is expected to be in late 2007.

Facilities will include a pool, with a waterfall feature, tropical planting and pool deck, a gym, restaurant and conference facilities.  All apartments will be air conditioned and are well sized.  Located within walking distance of the Darwin CBD and major facilities, entertainment and restaurants.

All this, plus the benefits of an initial 3 year rental guarantee (at 6% net rent return (less rates), with the investor keeping any upside) and a long lease term of 25 years.  But if your situation changes and you wish to owner occupy, you can opt out of the lease at any time provided you give 90 days notice.

Available apartments include:

One bedroom apartments average 55sqm internally plus 10sqm balcony.
Two bedroom apartments average 90sqm internally plus 10sqm balcony.

Prices: Prices are in Australia dollars and range from AUD$286,950 to AUD$543,950

Email us today to register your interest and we will send you a full information pack.

These apartments are located in a growth area; they offer a healthy rent return and are being managed by one of the best known serviced apartment managers in the Pacific, who have a proven track record for offering quality accommodation with an average occupancy rate across their Australian properties of over 80%, meaning a very secure investment.

Written by John Faulkner, General Manager of Home Port Property.  A real estate agency specialising in servicing the needs of international investors looking to invest in Australia & New Zealand.  You can find further investment related information and specific investment opportunities at Home Ports web site at: www.homeportproperty.com.au  or if you would like any information relating to this article or Home Ports investments you can email John at johnf@homeportproperty.com.au