Here's how it normally begins. A lucrative overseas contract proves too tempting to resist. The family home is rented out because of course, Australia will once again be home at the end of the contract. For all intents and purposes, the expatriate has now become an investor in Australian property.
From here there's a number of different possible outcomes. Some will complete the contract and return home, moving back into the property that's been occupied by tenants. A surprising number of people will extend their original contract, or take another. These will often not end up returning to Australia at all, at some point choosing to sell their Australian property and permanently settle overseas.
Some will buy property in their adopted homeland, which opens up a whole spectrum of other considerations. Still others will buy more Australian properties, using their higher earning capacity to build a profitable portfolio in a market they know and trust. In recent times, a falling Australian dollar has made this last option even more attractive for expats, who get far more "bang for their buck" by buying properties back home.
Wherever the expat's path leads, there's one issue that must remain front and centre of any property decisions. Local tax obligations do not automatically cease just because the expat is living and working overseas. There is a self-reporting obligation on all property owners which can create a false sense of security, but it's inevitable that any tax liability will eventually come to light and become payable, even if the relevant owner notifications are not made.
Case in hand - I was recently contacted by a Sydney-born woman who'd been referred by one of my long-term expat clients. She'd been living and working overseas for five years, but had failed to notify the Land Tax office of her property investments when she left Australia in 2009, nor had she reported any of the income derived from the properties over that time. She told me she simply had no idea she was obliged to do so. When we roughly calculated out her likely tax bill, it came to more than a hundred thousand dollars.
There's another significant problem that regularly arises for expats and that relates to the value of their property. The sheer volume of information available on-line can create the illusion of knowledge, but there's just no substitute for formal valuations. In this particular lady's case, needing to sell her property to pay the looming tax bill, she had formulated its worth at around twice the true market value. Although she was basing her expectations on sales of similar properties that were in the same suburb, these other properties were in far better locations with superior outlooks. Of course the opposite extreme is the expats who don't realise their property's value has risen and make decisions without fully understanding their options.
There's really only one way for any expat to avoid the risks presented by long distance property investment and that's to build a network of trustworthy professionals they can trust. A successful outcome first depends on finding an experienced real estate agent who can effectively advise on buying or selling, as well as manage any tenancies.
I strongly recommend to all my expat clients to have a formal valuation undertaken on any property they own at the time they're leaving the country, as well as at regular intervals thereafter.
Secondly, the tax rules that apply to Australian expatriates are highly complex, so finding an experienced tax accountant to advise on the particular options available to suit the individual is also critical
With clients all over the world, I regularly travel overseas and make a point of visiting my clients as often as possible. With many expats not able to physically visit Australia regularly themselves, me going to them is the next best thing. After all, in a world that's rapidly becoming smaller, it's relationships that really count.