Foreign Buyers

Under Australia’s foreign investment framework, foreign residents generally need to apply for and receive foreign investment approval before purchasing any residential real estate in Australia.

The Government’s policy is to channel foreign investment into new dwellings as this creates additional jobs in the construction industry and helps support economic growth.

Foreign investment applications are generally considered in light of the overarching principle that the proposed investment should increase Australia’s housing stock. Consistent with this aim, different factors apply depending on whether the type of property being acquired will increase the housing stock or whether it is an established dwelling.

It is important that foreign investors understand and comply with Australia’s foreign investment framework as strict criminal and civil penalties may apply for breaches of the law, including disposal orders.

Established dwellings

Foreign residents are generally prohibited from purchasing established dwellings in Australia, with the exception that temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia.

A temporary resident is an individual who:

holds a temporary visa that permits them to remain in Australia for a continuous period of more than 12 months (regardless of how long remains on the visa); or
is residing in Australia, has submitted an application for a permanent visa and holds a bridging visa which permits them to stay in Australia until that application has been finalised.

The purchase of an established dwelling in these circumstances is normally conditional on the person selling the property when they leave Australia, or cease being a temporary resident, permanent resident or an Australian citizen.

Temporary residents cannot acquire established dwellings to rent out or for use as a holiday home.

New dwellings and vacant land

Foreign residents generally need to apply and receive foreign investment approval before purchasing new dwellings and vacant residential land for development. Applications to purchase new dwellings are usually approved without conditions.

Applications to purchase vacant land are normally approved subject to construction being completed within four years (to prevent land banking). Once new dwellings are built or purchased, they may be rented out, sold, or retained for the foreign investor’s own use.

Redevelopments

Foreign residents will normally be allowed to purchase an established dwelling for redevelopment in Australia, provided the redevelopment genuinely increases the housing stock. An increase in Australia’s housing stock is generally taken to mean that at least one additional dwelling will be created.

What is the approval process?

Foreign residents should apply and wait for approval before taking an interest in residential real estate. To take any action before approval is received is a breach of the law.

Foreign residents who want to minimise the risk of a property they are interested in purchasing being sold to someone else before they receive foreign investment approval can enter into a contract as long as the contract is conditional on receiving foreign investment approval.

Fees

The fees that are payable for residential FIRB applications vary based on the price for the acquisition of the interest and are payable when the application is lodged. Fees start at $5,600 for acquisitions up to $1 million.

Fees can be estimated at. http://firb.gov.au/applications/estimator/

Stamp Duty & Land Tax

Most Australian states now impose stamp duty and land tax surcharges for non-residents.

In addition to normal stamp duty – stamp duty surcharges apply in New South Wales (+ 8%); Victoria (+ 7%) and Queensland (+ 7%).

Similarly, in addition to normal land tax, land tax surcharges apply in New South Wales (+ 0.75%) and Victoria (+ 1.5%).

Special land tax rates apply in Queensland for Absentee owners who have been away from Australia for more than 6-months in total during the financial year ending 30 June. Anyone, including Australian citizens and permanent residents can potentially qualify as ‘absentee’.