In brief - Foreign persons need government approval to purchase real estate in Australia
If you are a foreign person intending to buy real estate in Australia, you should make your purchase contracts conditional on foreign investment approval, unless you already have approval or you are exempt. Significant penalties may apply to ineligible owners of real estate.
When do foreign persons need to notify the government?
Generally, foreign persons need to notify the government to take an interest in residential real estate, vacant land or to buy shares or units in Australian urban land corporations or trusts.
Foreign persons need to notify if they want to take an interest in developed commercial real estate that is valued at $53 million or more ($1062 million for US investors). However, if the real estate is heritage listed, a $5 million threshold applies.
You should notify if you have any doubt as to whether or not an investment is notifiable.
Who is a foreign person?
According to Section 5 of the Foreign Acquisitions and Takeovers Act 1975, a foreign person is:
- a natural person not ordinarily resident in Australia
- a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a "controlling interest"
- a corporation in which two or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 per cent or more)
- the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest
- the trustee of a trust estate in which two or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an "aggregate substantial interest"
A "substantial foreign interest" occurs when a single foreigner (and any associates) have 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.
When and how to apply to invest in Australian real estate or business
You should apply in advance or make your purchase contract conditional on approval.
There is no required form, but your application should include information about the parties, the proposed investment (including its nature, methods of acquisition, the value of the investment, timetables and whether the investment is public), a statement of the investor's intentions (immediate and ongoing), how the proposed investment may impact on the national interest and any applicable statutory notices.
More information can be found at the website of the Foreign Investment Review Board.
How long does the approval process take?
A decision normally takes up to 30 days. If it is very complicated or you do not provide sufficient information, the period may be extended a further 90 days. Once the decision has been made, allow 10 days to be notified.
A decision might raise no objections, which means it will be approved. Alternatively, conditions could be imposed or the proposal could be prohibited.
When do you not require approval to buy real estate in Australia?
An application for approval to acquire real estate is not required if:
- you are an Australian citizen living abroad
- your spouse is an Australian citizen (not a permanent resident) and you are purchasing residential real estate in both names as joint tenants (not tenants in common)
- you are a New Zealand citizen and you are purchasing residential property
- you hold a permanent resident visa and you are purchasing residential property
- you are purchasing new dwelling(s) from the developer, where the developer has pre-approval to sell those dwellings to foreign persons
- you are acquiring an interest in a time share scheme which does not permit you (or any of your associates) more than 4 weeks' entitlement per year
- you are purchasing certain residential real estate in an Integrated Tourism Resort (ITR)
- you are acquiring an interest in developed commercial property valued below the relevant monetary thresholds
- you are acquiring an interest in developed commercial property where the property is to be used immediately and in its present state for industrial or non residential commercial purposes; the acquisition must be wholly incidental to the purchaser's proposed or existing business activities
- you are acquiring an interest by will or by operation of law (such as a court order regarding the division of property in a divorce settlement, but not if both parties simply agree to transfer property without a court's intervention)
- you are purchasing property from the government, whether Commonwealth, state, territory or local
|Claire Day||Brendan Maier|
|Property acquisition, development and sale|
|Colin Biggers & Paisley|
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.