Under Australia’s foreign investment framework, foreign persons need to apply for foreign investment approval before purchasing 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 considered in light of this principle.
It is important that foreign investors understand and comply with Australia’s foreign investment framework as strict penalties may apply for breaches of this law, including orders requiring you to dispose of property purchased by you without approval.
New Dwellings and Vacant Land
Foreign persons generally need to apply and/ or 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. Once new dwellings are built or purchased, they may be rented out by the foreign investor, sold, or retained for their own use.
Land that has previously had an established dwelling on it would generally not be treated as vacant land for the purposes of Australia’s foreign investment framework. Further, a single dwelling that has been built to replace one or more demolished established dwellings would generally not be considered a new dwelling for the purposes of Australia’s foreign investment framework.
Non-resident foreign persons are generally prohibited from purchasing established dwellings in Australia. However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia.
The purchase of an established dwelling in these circumstances would normally be conditional on the foreign person selling the property when they leave Australia or cease being a temporary resident and do not become a permanent resident or an Australian citizen.
In addition to his, temporary residents cannot acquire established dwellings to rent out or for use as a holiday home.
The Application Process
Foreign persons should apply for approval before taking an interest in residential real estate. However, foreign persons 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.
Foreign persons are required to pay a fee for each application made or notice given, under the Act and the Regulation (limited exceptions apply).
The fees that are payable for residential land applications depend on the price for the acquisition of the interest and can end up being quite costly, another reason why foreign persons may wish to enter into a conditional contract.
The board has a statutory period of 30 days to make a decision from the date of full payment of the relevant fee on the application, and a further 10 days to notify the applicant of the outcome.
Article from: NL & Associates
Written by: Nicole Leggat
The 2016 NSW Budget introduced a four per cent surcharge purchaser duty (surcharge) on the purchase of residential real estate by foreign persons from 21 June 2016. Further to this, the 2017 NSW Budget, increased the surcharge rate from four per cent to eight per cent for agreements entered into on or after 1 July 2017.
The surcharge is in addition to the duty payable on the purchase of residential property. The surcharge does not apply to Permanent visa holders, New Zealand citizens who hold a special category visa (subclass 444) or Partner (provisional) visa holders (subclass 309 or 820).
However, it does apply to persons who are, the three types of individuals listed above, who do not meet the 200 day rule (200 days or more in Australia immediately prior to the contract date) or temporary visa holders, who are persons who hold Australian temporary visas which are subject to limitation, such as an end date, and are considered to be foreign persons, regardless of whether they meet the 200 day rule. Unfortunately, this cannot be overcome by the incorporation of a company or establishment of a trust.
A corporation and a trustee of a trust can be a foreign person in the following circumstances:
- a corporation in which is an individual not ordinarily resident in Australia; or
- a foreign corporation or a foreign government holds a substantial interest; or
- a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
- the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or the trustee of a trust in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
- a foreign government; or
- a general partner of a limited partnership where:
- an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds at least 20 per cent in the limited partnership, or
- two or more persons each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate interest of at least 40 per cent in the limited partnership.
Should you be considering purchasing property in NSW and are unsure if the Surcharge Purchaser Duty applies to you, feel free to call Nicole on 9328 6917 for a consultation.
Article by: Nicole Leggat