1. Is stamp duty, transfer tax or a similar tax payable on the direct sale, purchase or leasing of real estate? If so, what are the rates and who is required to pay the duty or tax?

All Australian states and territories impose a form of stamp duty or transfer duty on the direct sale or purchase of land situated in that jurisdiction.

In New South Wales (NSW), Victoria (Vic), Queensland (Qld), Western Australia (WA), Tasmania (Tas) and the Australian Capital Territory (ACT), the duties legislation has been rewritten with a focus on transactions, rather than a stamp duty imposed on instruments. However, the legislation differs significantly among each of those jurisdictions. The Northern Territory (NT) and South Australia (SA) have both retained stamp duty legislation that focus on dutiable instruments (although the NT legislation includes references to “dutiable transactions”).

All of the transfer duty jurisdictions (NSW, Vic, Qld, WA, Tas and ACT) treat real estate as dutiable property, although some jurisdictions impose different rules for certain types of property (such as residential land) and the timing of liability rules vary from one jurisdiction to another, with some jurisdictions imposing a liability upon agreements for sale whereas other jurisdictions impose duty on a “transfer”.

The stamp duty jurisdictions (SA and NT) charge stamp duty on conveyances of real estate, although SA allows exemption for commercial land (excluding residential and primary production land).

The rate of tax on land sales or transfers differs in each State and Territory, with each jurisdiction imposing tax at rates that increase depending on the value or consideration. The maximum general rate in each jurisdiction is as follows:

Some jurisdictions (e.g., SA) may also charge an ad valorem transfer registration fee.

Transfer duty or stamp duty may be payable on the grant of a lease of real property if there is consideration for the grant of the lease. However, that consideration must generally be additional to, or instead of, the rent payable for the lease (e.g., a lease premium). Transfer duty or stamp duty is then calculated on the amount or value of the consideration at the normal land transfer rates for that State or Territory. There is generally no duty payable on a lease of real property if the only consideration is the obligation to pay market rent during the term of the lease.

The transfer or surrender of an existing lease of real estate may be subject to duty.

If goods and services tax (GST) is payable on the acquisition of the property or lease, duty is calculated on the GST inclusive price.

2. Is stamp duty, transfer tax or a similar tax payable on the indirect sale or purchase of real estate, e.g. by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and who is required to pay the duty or tax?

Landholder duty is generally payable on acquisitions of shares or units in a land holding company or unit trust. Qld has separate rules for trust acquisitions (which WA has adopted for discretionary trusts only) and acquisitions of certain trustee companies. Some jurisdictions also have special rules or concessions for acquisitions or takeovers of listed entities.

The landholder duty rates (and foreign purchaser surcharge) generally correspond to the duty payable on a direct transfer of real estate. The land holder threshold in each jurisdiction is as follows:

3. Is value added tax, goods and services tax or a similar tax payable on the sale or purchase of real estate, and the letting of real estate? If so, what are the rates and who is required to pay the tax?

Australia imposes a broad-based GST on supplies made by registered entities. GST is imposed at a flat rate of 10%.

A business entity must register if it has a GST turnover of A$75,000 or more. A not-for-profit organisation is required to register if it has a GST turnover of A$150,000 or more.

The sale of real estate may be subject to GST if the supply is made by an entity that makes the supply in the course or furtherance of an enterprise, unless a specific exemption applies. There are exemptions for (among other things):

• sales of residential premises that have previously been transacted and are no longer “new residential premises”;
• the supply of a going concern; and
• the supply of farm land used to carry on a farming business.

Residential rents are generally input taxed, which means the landlord is not liable for GST (or required to charge GST to the tenant) but the landlord is unable to recoup GST from its inputs (such as acquisitions relating to its purchase and continued ownership of the land). Accommodation provided by hotels and boarding houses are generally subject to GST, although concessions may be available for accommodation supplied to long-term guests.

GST is generally payable on the supply by way of lease of commercial premises, provided the landlord is registered (or required to be registered). Lessees who rent commercial premises for their businesses may be able to claim GST input credits for the GST included in the rent.

4. Are there any annual taxes that may be payable on the ownership of real estate e.g., annual land tax, municipal taxes, surtaxes, etc.?

Land tax is an annual tax levied on the ownership of real property, payable by owners. "Land" generally includes vacant land, land that is built on, and lots in building unit plans.

Land tax is levied by state and territory governments and is generally assessed on the taxable value of an owner’s total land holdings, based on the unimproved land values (i.e., ignoring any buildings or other improvements on the land). The taxable value is the aggregate of the relevant values of all land owned by that person (excluding any exempt land). The tax is generally imposed on the component of taxable value above a tax-free threshold.

Since land tax is levied by state and territory governments, the rates of land tax vary. The maximum rate in each jurisdiction is as follows:

In addition to the above state and territory taxes, the Australian federal government has introduced a vacancy fee for residential land that is left vacant for at least six months during a year.

Local government or council rates also apply to real estate across all jurisdictions.

5. What is the tax rate imposed on rental income?

Australian residents are subject to income tax on “taxable income” of their worldwide real estate rental businesses. Taxable income is an entity’s total assessable income less allowable deductions.

Entities receiving rental income are required to declare the monetary value of all income received on rental properties in Australia and overseas, and their legal ownership of the property.

The corporate tax rate for companies is 30%, although a lower rate of 25% may apply to eligible businesses that:

• has an aggregated turnover for that income year of less than A$50 million; and
• 80% or less of the assessable income is base rate entity passive income.

Individuals are subject to income tax on rental profits charged on a progressive scale as set out in the tables below for the 2024-2025 tax year.

Resident tax rates 2024/25 (not including Medicare levy of 2%)

Foreign residents tax rates 2023-24

Non-residents who are subject to tax on Australian rental income in their country of residence may be able to claim tax credit relief under the terms of any applicable double taxation treaty (DTT) with Australia (if applicable).

6. Is interest on borrowings used to acquire real estate deductible for tax purposes against rental income? If so (i) are there any restrictions, such as thin capitalisation, transfer pricing or interest limitation rules; and (ii) is there any withholding tax on interest?

Interest on borrowings used to acquire an investment property is generally an allowable deduction on the basis that the interest is incurred in gaining or producing assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income (i.e., rental income). However, there has been parliamentary discussion from time to time about whether interest should continue to be deductible where the taxpayer is negatively geared.

Australian companies and non-resident corporate entities are subject to restrictions including hybrid mismatch rules, transfer pricing rules and Australia’s thin capitalisation rules.

The hybrid mismatch rules are intended to implement the OECD's final recommendations on BEPS Action 2. The rules apply to payments that give rise to hybrid mismatch outcomes where:

• a payment is deductible in one jurisdiction and non-assessable in the other jurisdiction; and
• the one payment qualifies for a tax deduction in two jurisdictions; and
• receipts are sheltered from tax directly or indirectly by hybrid outcomes in a group of entities or a chain of transactions.

Transfer pricing

Australia’s transfer pricing rules can limit the deductibility of interest on a loan, particularly where interest rate margin is excessive or the related party transaction is not on arm’s length terms.

Thin capitalisation rules

Australia’s thin capitalisation rules apply to:

• Australian entities investing overseas and their associate entities; and
• foreign entities investing in Australia.

Broadly, where the thin capitalisation rules apply for non-financial entities (including where entities have at least A$2 million in debt deductions on an associate inclusive basis), interest deductions are based on one of the three tests:

• A default fixed ratio test based on 30% of "tax EBITDA";
• A group ratio test (rather than the worldwide gearing test), by election;
• A third-party debt test for general class investors and also financial entities that are not ADIs, by election

The fixed ratio test is the default if no choice is made.

A key feature of the fixed ratio test is the carry-forward of denied deductions for up to 15 years, where a modified continuity of ownership test or business continuity test is met for companies or modified trust loss rules for trusts.

Different rules apply for financial entities and authorized deposit-taking institutions.

Subject to any applicable DTT, Australia imposes interest withholding tax of 10% on interest paid by Australian resident borrowers not acting at or through a permanent establishment outside Australia; or non-resident borrowers carrying on business in Australia at or through a permanent establishment in Australia.

A non-resident who is carrying on a business of leasing real estate in Australia through a permanent establishment in Australia may be liable for interest withholding tax on interest paid to a non-resident lender if money is borrowed to purchase the real property in Australia.

7. Are deductions for capital expenditure available against rental income for tax purposes, for example, capital allowances or deductions for depreciation? If so, are deductions available for expenditure on both land and buildings, or on buildings only?

General depreciation rules allow a deduction for the decline in value of depreciating assets (such as an oven or dishwasher) based on the asset's effective life.

Special depreciation rules apply to capital works such as buildings and structural improvements, which may be claimed at a statutory rate of either 2.5% or 4% (i.e., spread over 25 years or 40 years), whichever is applicable. Capital allowances may be claimed on qualifying capital expenditure incurred on assets to be used wholly or partly for the purposes of a taxable business. Capital works deductions must be taken into account when working out any capital gain or loss on a future sale of the property.

Deductions may be available for capital works used to produce income, including:

• buildings or extensions, alterations, or improvements to a building;
• alterations and improvements to a leased building, including shop fitouts and leasehold improvements;
• structural improvements such as sealed driveways, fences and retaining walls; and
• earthworks for environmental protection, such as embankments.

Deductions for leasehold improvements

Deductions on leasehold improvements (including shop fitouts) can generally only be claimed at the statutory rate of either 2.5% or 4%, whichever is applicable.

The availability of capital allowances on fixed plant and machinery may be restricted by reference to the allowances claimed and disposal values brought into account by previous owners of the real estate.

8. Are there any other material restrictions on the costs and expenses which may be deducted in calculating a person’s taxable rental income, e.g. transfer pricing or anti-hybrid rules?

Expenses incurred in establishing a loan, such as loan application fees and lender’s mortgage insurance are not immediately deductible but may be claimed as a deduction over five years or the term of the loan, whichever is shorter.

Repairs made to an investment property during the period it is leased are generally deductible, but repairs carried out within the initial 12 months of acquiring the property may not be deductible. Where a deduction is not allowed, these expenses may be used to reduce a capital gain on a future sale.

Tax deductions may be denied for expenses related to the holding of vacant land (i.e., without any substantial and permanent structures) unless the land is used in carrying on a business for the purpose of producing assessable income (such as a property development business). Companies and managed investment trusts are not affected.

9. Are there any restrictions on the use, and/or the carry forward, of losses?

Tax losses and capital losses can generally be carried forward indefinitely, but companies may be unable to recoup losses if they have not maintained the same majority ownership and control. Trusts are also subject to complex loss recoupment rules.

10. Are capital gains arising on the direct sale of real estate taxable? If so, what are the rates and are there any exemptions?

Entities may be subject to capital gains tax (CGT) imposed on the sale of real estate if the property is held on capital account.

Property developers or speculators may be taxed under the trading stock rules or their sale proceeds may be taxed as ordinary income. However, the mere realisation of a capital asset will generally be taxed under the CGT rules (even if the taxpayer goes about the realisation in an enterprising way).

CGT is generally payable by the taxpayer who sells the asset.

Australian resident individuals and trusts may be able to reduce the amount of capital gain by 50% (or 33.33% for complying superannuation funds) when selling real estate that has been owned for at least 12 months before it is sold. Where the discount capital gain is made by a trust, the gain is grossed up and flows through to Australian resident beneficiaries who may then be able to utilise their own capital losses and apply the discount percentage (50% or 33.33%), if eligible.

If the beneficiary of a trust is a non-resident, the trustee may be required to pay tax on the beneficiary's share of the trust’s net income (including capital gains), although that is generally not a final tax and the foreign resident beneficiary may be able to claim a credit for tax paid by the trustee. However, this does not apply to certain types of trusts such as managed investment trusts, which are subject to final withholding rules.

Exemptions or concessions may be available in certain circumstances (such as the CGT main residence exemption or small business CGT concessions).

11. Are capital gains arising on the indirect sale of real estate taxable, e.g. by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and are there any exemptions?

Capital gains arising from the indirect sale of Australian real estate may be taxable in Australia.

Foreign and temporary Australian residents are subject to CGT on any indirect interest in Australian real property. A foreign or temporary resident will be taken to have an indirect interest in Australian real property if the taxpayer and associates own 10% of more of another entity, whether Australian or foreign, and the market value of the assets of that entity is mainly attributable to taxable Australian property (i.e., more than 50% of the value of its total assets are taxable Australian property).

Taxable Australian property includes:

• Australian real property (e.g., a house, apartment, commercial building or land;
• an indirect interest in Australian real property;
• a mining, quarrying or prospecting right in Australia;
• a CGT asset that you have used to carry on a business through a permanent establishment in Australia; or
• an option or right over one of the above.

12. Is there a withholding tax on rental income?

Rents are not specifically subject to withholding tax but the repatriation of rental income to a foreign resident shareholder may be subject to dividend withholding tax.

Fund payments made from a managed investment trust (MIT) or corporate collective investment vehicle (CCIV) may also be subject to withholding tax if the payment is authorised to be made to a place outside Australia or the recipient has an address outside Australia.

If the beneficiary of a trust (other than a MIT) is a non-resident, the trustee may be required to pay tax on the beneficiary's share of the trust’s net income, but that is generally not a final tax and the foreign resident beneficiary may be able to claim a credit for tax paid by the trustee.

13. Is there a withholding tax on capital gains derived from real estate? If so, does the withholding tax apply to both direct and indirect sales, or to direct sales only?

Foreign residents selling Australian real estate are subject to foreign resident capital gains withholding (FRCGW), which is payable by the purchaser to the Australian Taxation Office (ATO) at settlement of the sale contract.

FRCGW applies to the direct sale of property, where the sale of real property with the market value of A$750,000 or more will be subject to withholding, or indirectly, where a membership interest of 10% or more in an entity whose underlying value is principally derived from Australian real property.

FRCGW requires the purchaser to withhold 12.5% of the purchase price. The foreign resident must lodge a tax return at the end of the financial year and can claim a credit for the amount withheld.

14. Does the jurisdiction have a REIT regime? If so, please outline the tax treatment of the REIT and the main conditions that must be satisfied to enter and remain within the regime.

There are no specific REIT rules in Australia. From an Australian income tax perspective, most REITs are classified as Managed Investment Trusts (MITs). The MIT regime governs investment vehicles, such as REITs.

REITs do not generally pay corporate income tax on passive rental income but distribute this to investors who pay tax at their own individual tax rate. The beneficiaries of the trust, or the trustee on their behalf, are subject to taxes on the share of the net income generated by the MIT.

A MIT is a publicly-held and commercially-operated collective investment trust that invests in primarily passive income activities. A trust qualifies as a MIT by meeting the following criteria for the income year in which it operates:

• the trustee is an Australian resident, or the central management and control of the trust is in Australia;
• the trust does not carry on or control an active trading business;
• the trust is a managed investment scheme;
• the trust meets the widely held requirement;
• the trust meets the closely held restriction; and
• the trust is operated or managed by an appropriately regulated entity.

The "widely held" requirement is based on the type of management investment scheme, and whether it is registered or unregistered, and retail or wholesale.

The "closely held" restriction differs depending on whether the MIT is a registered management investment scheme that is a retail trust, or a wholesale trust.

Under the MIT regime, fund payments (i.e., distributions of the MIT’s net income excluding dividends, interest, royalties and certain capital gains or losses) made to foreign residents are generally subject to a special withholding tax rules. Under those rules, the rate of withholding is 30% if foreign investor is a tax resident of a jurisdiction without an information exchange agreement with Australia. However, the rate of withholding is generally 15% where Australia has an information exchange agreement with the foreign investor’s jurisdiction, unless:

• the fund payments are attributable to a "clean building MIT", in which case a 10% withholding rate applies;
• the fund payments are attributable to "non-concessional MIT income", in which case a 30% rate applies.

After July 1, 2024, the withholding tax rate for MITs was reduced from 30% to 15% in respect of certain “new” build-to-rent investments. It is also proposed that from July 1, 2025 the clean building MIT withholding tax concession will extend to data centres and warehouses that meet a relevant energy efficiency standard, where construction commences after May 9, 2023.

An eligible MIT may elect into a new attribution regime for the taxation of MITs – such entities are referred to as attribution MITs (AMITs) – which (among other things):

• allows AMITs to use an attribution method of tax (investors are taxed on the parts of the AMIT's trust components that are attributed to them as if they derived those amounts in their own right and in the same circumstances as the AMIT);
• allows AMITs to carry forward under- and over-estimates of tax amounts into the discovery income year (generally without adverse tax consequences); and
• allows investors to make, in certain circumstances, both upward and downward adjustments to the cost base of their unit holdings to eliminate double taxation that might otherwise arise.

15. Apart from REITs, are there any other tax-efficient real estate investment vehicles or structures which are commonly used to acquire, hold and exploit real estate in the jurisdiction?

Australia offers tax-efficient real estate investment schemes including companies, unit trusts and cross-stapled structure involving a MIT. On July 1, 2022, Australia also introduced the framework for a new type of corporate entity called a corporate collective investment vehicle (CCIV), which is subject to tax treatment that aligns with the taxation of AMITs.

Unit Trusts are often used to hold Australian real estate and can also be a tax-efficient investment vehicle for unit holders as they benefit from tax rates and thresholds on their share of the capital gain. If the unit holder is an Australian resident individual, they may benefit from the capital gains discount of 50% on assets held in the trust for 12 months or longer.

Discretionary trusts and self-managed superannuation funds are frequently used to acquire and hold real estate for a single Australian resident investor or family group, but these structures are not usually suitable where multiple investors are involved.

16. Are there any structures commonly used to mitigate real estate tax liabilities on acquiring and/or disposing of real estate?

It is common in Australia to purchase and hold real estate through a trust structure due to the ability to pass through capital gains to Australian resident beneficiaries who may then be able to utilise their own capital losses and apply the CGT discount percentage (50% or 33.33%) if eligible.

17. Are there any material differences in the way individuals and companies are taxed on acquiring, letting and/or disposing of real estate?

Companies are taxed at the corporate tax rate or 30%, or at a lower rate of 25% for base rate entities (mentioned at question 5 above) whereas individuals are taxed at the individual tax rate which is charged on a progressive scale and can range from A$0 if taxable income is between A$0 and A$18,200 to A$51,667 plus 45c for each A$1 over A$180,000, if the individual's taxable income is A$180,0001 and over. Companies are also subject to loss recoupment rules.

This guide does not constitute tax advice and readers should note that the laws of each jurisdiction are regularly refined and/or revised, so the statements made in this report are not definitive. However, this guide does provide a summary overview of the state of the law as at 31 January 2025 and will hopefully serve as a useful tool for investors to ensure they understand the unique provisions and distinctions in the various jurisdictions.