Since the forced sale in early 2015 of the $39 million
Point Piper Mansion, Villa de Mare, which was bought in breach of
Australian foreign investment laws, the Government has foreshadowed
the introduction of a tougher and more robust foreign investment
regime. And From 1st December 2015, a number of changes to
Australia's foreign investment rules commenced.
These changes impact on builders and developers who sell and
market to foreign buyers. Previously there was no fee payable by
most purchasers of newly constructed residential dwellings.
Fees for Foreign Buyers
As of 1st December 2015, all applicants must pay a fee to the
Foreign Investment Review Board (FIRB) before the foreign
investment application is processed. The fee payable would depend
on the type of application and the value of the property intended
to be purchased. Key changes of the fees payable are set out in the
The Australian Tax Office
The Australian Tax Office (ATO) is now charged with the
responsibility to regulate foreign investment in residential real
estate and strengthen the enforcement of the FIRB rules. The ATO
plans to establish a register relating to foreign ownership of
residential real estate from the 1st July 2016.
Advance Off The Plan (Blanket) Approval
A blanket approval may be given to vendor/developers for advance
off the plan developments. The development must consist of fifty or
more dwellings and have received Council approval.
An application fee of $25,000 advance payable off the plan
approval applications applies. This approval allows the
vendor/developer to sell 100% of dwellings in their development to
foreign persons, without the need for individual foreign buyers to
apply to FRIB for separate approval.
However the application fee is not credited towards any fees
payable for individual sales to foreign buyers. The
vendor/developer must report to FIRB every six months, detailing
then sales to foreign buyers in the preceding six months. They must
then pay FIRB further fees for each dwelling sold to foreign
For example, if during a six month period a developer sells
twenty off the plan apartments to foreign buyers (and these sales
are all valued under $1 Million) the developer will be liable for
approximately $100,000 (i.e. Twenty sales at $5,000 each) together
with the applicable fee of $25,000 for obtaining the blanket off
the plan approval.
Although these new costs may be absorbed into the development
costs, it is recommended that vendors or developers, who wish to
recoup these costs directly from foreign clients, include a clause
in their sale contracts entitling them to do so.
Advance off the plan approval will only be granted on the
dwellings for sale in the development are also marketed in
Australia. Harsh penalties may apply for any breach of the
marketing or reporting conditions.
The current rules, restricting non-resident foreign persons from
purchasing established dwellings remain in place.
The Government has announced a range of tougher penalties to
make it easier to pursue foreign investors who breach the
For criminal penalties, the maximum penalties for most offences
Individuals – 750 penalty units ($127,500) or three years
Company – 3750 penalty units ($637,500).
Civil penalties will also be introduced, with maximum penalties
Individuals – 250 penalty units ($42,500); and
Company – 1250 penalty units ($212,500) for business and
In the residential real estate space, the civil penalties are
more severe and extend to capital gains made on divestment, or
percentages of the purchase price or market value of the property.
In addition, infringement notices will also be introduced for
certain residential property breaches.
The Government will also introduce increased criminal penalties
and new civil penalties for third parties who knowingly assist
foreign investors to breach the rules.
Any foreign individuals or companies involved in investment in
Australia must familiarise themselves with the regime and ensure
that they are aware of all their rights and responsibilities.
Indeed, it is very important that foreign investors and advisors
need to be aware of their obligations and to abide by these new
FIRB rules to avoid the significant civil penalties which can now
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.
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