FIRB Rules for Foreign Investors
If you are not an Australian citizen or permanent resident, you must get approval from the Foreign Investment Review Board (FIRB) before purchasing property. Temporary visa holders can buy one established dwelling to live in (not rent out) and must sell when they leave. All foreign buyers can purchase new dwellings without restrictions. FIRB application fees range from $14,100 for properties under $1M to much higher for expensive properties.
Permanent residents and citizens can buy any property without FIRB approval. If you recently became a PR, you are treated the same as an Australian citizen for property purchase purposes.
Negative Gearing
Negative gearing is when the costs of owning an investment property (mortgage interest, maintenance, insurance, council rates) exceed the rental income. The loss can be deducted from your taxable income, reducing your tax bill. For example, if your property costs you $50,000/year but earns $40,000 in rent, the $10,000 loss can offset your salary income, potentially saving you $3,700 in tax if you are in the 37% bracket.
Capital Gains Tax (CGT)
When you sell an investment property, you pay CGT on the profit. If you hold the property for more than 12 months, you get a 50% discount on the capital gain. The remaining gain is added to your taxable income for that year. Your primary residence (the home you live in) is exempt from CGT. Foreign residents lost the 50% CGT discount in 2012, making investment less attractive for non-residents.
Financing
Australian banks typically lend up to 80% of the property value (80% LVR) to investors. If you borrow more than 80%, you will need to pay Lenders Mortgage Insurance (LMI) which can add $10,000-30,000 to your costs. Chinese buyers may also consider loans from Chinese banks with Australian operations (Bank of China, ICBC, China Construction Bank) which sometimes offer competitive rates for Chinese nationals.
Popular Investment Areas
For Chinese investors in Sydney, popular areas include Chatswood, Eastwood, Hurstville, and Burwood due to strong Chinese community infrastructure. In Melbourne, Box Hill, Glen Waverley, and Doncaster are popular. Consider proximity to train stations, schools (especially selective schools), and Asian amenities when choosing — these factors significantly affect both rental demand and capital growth in areas popular with Chinese tenants.