Our Managing Director, Simon Harvey, was recently asked to contribute to a Daily Telegraph article exploring a question many Australian expats face: does buying property back home still make sense when you’re building a life in the UK?
The case study focused on an Australian living in Britain who already owns a property in Australia that is used by family members. She’s now considering buying a second property, partly as an investment and partly as a base she can use for several months of the year when visiting family.
It’s a situation that will resonate with many Australians abroad. While owning a home in Australia can offer flexibility and peace of mind, it can also raise important questions about affordability, tax, financing and whether the property genuinely supports your wider lifestyle goals.
In this article, we expand on Simon’s advice and explore some of the key financial considerations before taking the plunge.
For Australian expats living in the UK, owning a home in Australia can be very appealing.
Perhaps you want somewhere to stay when visiting family, rather than relying on them to accommodate you or paying for a hotel.
Or, with remote working making international lifestyles more achievable, you may be thinking of splitting your time between the UK and Australia.
Owning property in both countries might seem like the obvious way to make those options possible.
However, buying an Australian property while living in the UK can be more complicated than it first appears. Tax considerations, financing costs, currency risk, and questions about how much you’ll actually use the property come into play.
Read on to find out how tying up a substantial amount of your wealth in another property could affect your wider financial plans.
The upfront cost of buying an Australian property can be substantial
Buying property in Australia while living in the UK can require significant capital.
For example, an apartment costing around AUD $750,000 (£395,000) could require at least £100,000 from your UK finances to cover the deposit, Stamp Duty, and other costs depending on your circumstances and available financing options.
That’s a substantial amount of capital to commit to an asset that you may only occupy for part of the year.
And if you already have a mortgage or other major financial commitments in the UK, you will need to consider the combined cost rather than the Australian property in isolation.
A property may be affordable on paper but still make it harder to achieve other goals, such as reducing your working hours, building investment wealth, or retiring earlier.
Renting the property could provide financial benefits
Renting the property out while you are in the UK could help offset the mortgage and other costs, making it more financially sustainable.
But if you want somewhere you can stay whenever you return to Australia to see your family, having a tenant may mean you cannot use it when you need it.
Short-term letting can seem like a compromise, letting you generate income while keeping some flexibility.
However, this isn’t always straightforward. Some apartment buildings restrict or prohibit short-term rentals, while local rules and charges can also make this approach less attractive.
Before assuming Airbnb-style short-term letting will help you manage financial issues, you need to confirm whether it’s permitted and financially viable for the property you are considering
Don’t underestimate the cross-border tax implications
Generating rental income may help cover some of the costs of ownership, but it can also introduce additional tax complexity. Australia will generally have taxing rights over your Australian rental income. You will also need to consider the UK tax treatment because you remain a UK resident.
The UK and Australia have a double taxation agreement designed to prevent the same income from being taxed twice. Tax paid in Australia can generally be taken into account when calculating your UK liability.
However, this does not necessarily mean the tax positions cancel each other out.
Differences in how the two countries calculate taxable rental profits can mean the Australian tax credit does not eliminate UK tax liability.
You need to be careful about how much time you spend in Australia
If you buy a property and start spending several months a year in Australia, you need to understand whether your changing circumstances could affect your Australian tax position.
Australia’s tax residency rules aren’t based solely on a simple day count, and the 183-day rule is only one factor in the broader residency framework.
This is especially important if you work while spending extended periods in Australia.
A lifestyle that involves living and working between the two countries can therefore create tax considerations that go well beyond the property itself, and we would strongly recommend you get expert advice.
Don’t let the property crowd out your other goals
Perhaps the biggest question is whether buying the property actually helps you achieve the lifestyle you want.
If your ultimate objective is to spend more time in Australia, reduce your working hours, and eventually split your retirement between the two countries, a substantial outlay of money now is likely to make that harder to achieve.
While property can play an important role in your plans, it’s not the only way to achieve the lifestyle you want. Instead, you could build more financial flexibility through pensions, ISAs, and other investments while exploring different ways to spend more time in Australia.
For example, renting a property when you visit may initially seem less attractive than owning one, but it avoids the costs of owning a property and keeps your capital available for other investments.
Build the lifestyle before buying the property
The desire to live between both countries is understandable, but property ownership is only one way of achieving it.
Before buying, you need to ask yourself several questions, including:
- How often will you realistically use the property?
- Do you genuinely need a permanent base in Australia at this stage?
- Can you afford the financial commitment?
- What happens if your circumstances change?
Most importantly, you need to consider the purchase alongside your entire financial plan rather than making a decision in isolation.
At bdhSterling, we help clients look at the bigger picture. As a dual-authorised company with offices in both Australia and the UK, we are uniquely placed to provide expert cross-border financial advice.
Whether you’re planning a future move, considering buying property in Australia, or looking to divide your time between the UK and Australia, we can help you create a financial plan that supports your ambitions on both sides of the world.
Get in touch
If you have any queries regarding your financial planning, please get in touch with us.
Please note
The value of your investment can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only; it does not take into account your personal objectives, financial situation, or needs.
Please do not solely rely on anything you have read in this article and ensure that you conduct your own research and get expert advice to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.