Buying Property Overseas From Australia

Buying property overseas can be exciting.

Whether you’re looking for that sweet rental yields, or setting up a retirement base, or buying a holiday home, the opportunities outside Australia can be eye-watering.

But with the potential rewards come extra risks. Fortunately, this guide will walk you through how to buy property overseas from Australia, step by step.

How Does Buying Property Process Work?

Australian banks won’t accept foreign property as loan security. But if you own property here with enough equity, you can use it to fund overseas purchases.

If you’ve researched your target market and need finance, speak with an Australian bank that has international branches or your broker can connect you with them. Non-Australian international banks may also help.

Always contact the local branch in your chosen country to confirm mortgage terms, interest rates, and eligibility.

Guide To Buying Property Overseas

Start With A Clear Plan

Before you start looking for listings, make sure you have a clear idea of what you want. The first thing you need to define is your goal and then pick your market.

After that, set your budget. Don’t forget to factor in miscellaneous costs such as stamp duty, legal fees, translation, insurance, and more.

Know the Risks

Foreign property deals can break down quickly if you are not familiar with the risks. The Property Investment Professionals of Australia (PIPA) highlights a few of these issues:

• Financing is tough. As we mentioned earlier, there are only a handful of banks providing financing for foreign properties in Australia.

• Countries have unique laws. And in some countries, consumer protection is weaker. So, it’s good to take legal advice.

• One of the biggest hurdles while buying a property overseas is that foreign currency is never stable. Exchange rates can swing like a pendulum and inflate your costs.

• There is also the factor of distance. While it is a problem you can solve, the distance can make you vulnerable to fraud and mismanagement.

Finance Your Purchase

There are a few ways to go about financing your purchase. You can:

• Opt for local banks to get a mortgage.
• Get an overseas mortgage with an international bank.

• Use your existing property’s equity to finance a loan for an overseas property.

Ready Your Deposit

Non-residents often face higher deposit requirements. For example, if you want to buy a property in Spain as an Australian, you might need a 30-40% deposit. It varies with the country so, you should do the research and ready your deposit.

How Much Can You Borrow?

The important thing to note is that most countries limit your borrowing power to 80% of the property value or Loan to Value Ratio (LVR).

Australian banks are one of the only few institutions in the world to offer 105% investment loans with a guarantor arrangement with your parents.

Tax Implications For Buying A Property Overseas

You should definitely consider talking to a qualified accountant if you’ve decided on buying a property overseas. It’s because there are a number of tax implications that you need to know. There are also advantages that you can take and build a strong investment portfolio.

You don’t need to inform the Australian Taxation Office (ATO) you’re buying property overseas but you need to disclose this while you file your next tax return.

In the disclosure, you cover aspects such as rental income (if any) and your expenses including any capital gains or even losses.

What Are Double Tax Agreements?

When you buy property overseas, both Australia and the foreign country may tax your rental income. A Double Tax Agreement (DTA) avoids double taxation.

Australia’s Foreign Income Tax Offset (FITO) lets you reduce your tax if you’ve already paid overseas. Sometimes, the DTA gives full taxing rights to the foreign country, exempting you in Australia.

But when selling, Australia’s Capital Gains Tax (CGT) rules still apply. An accountant can help you decide where you’re better off paying tax and ensure you meet reporting obligations.

Deductions And Negative Gearing

Many overseas property expenses such as repairs, maintenance, and depreciation are deductible in Australia. Improvements, like extensions or new kitchens, are capital costs and not immediately deductible.

Since July 2008, net foreign losses can be offset against both Australian and overseas income, allowing negative gearing benefits across borders. Keeping detailed records and consulting a cross-border accountant ensures you maximise deductions while staying compliant.

Final Words

While a property overseas could open doors to strong returns and benefits, it does come with extra hurdles such as higher deposits, tax obligations, and financing limits.

The key to navigate these hurdles is preparation. With the right strategy you can minimise risks and make your investment worthwhile.

If you have an existing mortgage in Australia and want to know if you can cash out to invest in real estate offshore, call us on 1300 889 743 or fill in our online assessment form to find out how our mortgage brokers can help.