Renting and Managing your Australian Property
If you own your own home or an investment property in Australia, then an expatriate assignment can pose a few management issues. If you have decided to keep the property, and we still believe that all Australian expatriates should retain an investment in Australian real estate if they intend to return, despite the Government's best endeavours to make it financially less attractive, then the chief issue is whether you intend to rent the property out?
In the vast majority of cases the answer to this question is "yes", unless there are particular reasons for retaining access to the property – a common one being the presence of older children in Australia.
Even if there is no financial pressure to rent out the property, it is very often the case that expatriates will prefer to have the property occupied rather than deal with the security and maintenance issues associated with an unoccupied house. In any event, you may be advised to rent out your house to further reinforce a non-resident tax position.
In any event, the purpose of this article is to provide some indication of the particular issues faced by expatriates who let out their property in Australia.
The Letting Agent
If you lived in Australia you would have the choice of managing the property yourself or employing an agent. For all practical purposes that choice is not available to you as an expatriate and you need to be particularly careful about your choice of the managing/letting agent.
Your absence overseas means:
- That you will probably need to provide them with more latitude than usual when it comes to meeting repair and maintenance costs, and vetting tenants
- You will not have the ability to monitor their performance (on the ground) as easily
- It will not be as easy to replace an agent who is not performing effectively, and
- The area of tenancy law is also now highly regulated and you will need to rely on the agent to meet a raft of statutory requirements.
As an aside, the fees paid to agents for letting and managing a property are not regulated and you need to discuss these individually - plus any of the incidental charges that may be levied. However, you may expect to pay a fee equivalent to one weeks rent to the agent for renting the property (and re-renting), and between 5-10% of gross rental, plus GST, for management. We have a partner, experienced in providing services to expatriates, who can provide letting management services in Melbourne, Sydney, Brisbane, Adelaide and Perth. Their management fees vary across the different states, currently between 7.7% and 8.8% of gross rental, with some variability depending on the property value and location; Contact us if you would like an introduction.
These are almost always underestimated by a new landlord and, apart from the agent fees above, include:
- Incidental repairs to the property - perhaps low with an apartment, but consider what generally "goes wrong", on a regular basis, with a large period house and factor in the hourly cost of tradesmen. You may also need to factor in a thorough "refreshing" of the house every five years.
- Council rates plus all water and sewerage charges
- Cleaning costs - carpets and curtains may need professional cleaning to establish a"base line" for the first property inspection and between tenancies, if not paid for by the previous tenant
- Insurance - current building insurance should be checked to ensure that you are protected from a landlord's perspective. Standard building insurance will offer some protection for landlords, but it often contains clauses excluding malicious damage by a tenant, accidental damage, legal liability and cover for the loss of income.
- Preparation of condition reports, insurance claims and inventory lists by the agent.
- Land tax, if applicable, and
- The preparation of annual tax returns by your tax advisor or accountant - two per annum if the property is held in joint names - although this is a deductible expense in itself.
Even if you are non-resident for tax purposes you are required to submit an Australian tax return in any year in which you earn rental income in Australia. This will be actually be to your benefit if the property is negatively geared, as tax losses from the property can accrue indefinitely and be used to offset later capital gains and income tax on return to Australia. Separate tax advice is also very much recommended if your property is likely to produce a net taxable income (be "positively geared") and you are non-resident.
Please use our Inquiry form if you would like to be contacted about managing your rental property; no cost or commitment attaches to any initial discussion.