It has been recently reported that the Australian Tax Office
(ATO) has adopted the position that if a binding
Contract for an 'off-the-plan' dwelling is not able to be
settled, that dwelling will be considered
According to news.com.au, a spokeswoman for the ATO cited
subsections 15(4) and (5) of the Foreign Acquisitions and
Takeovers Act 1975 (Cth) (FATA) in explaining
that "a dwelling is considered to be sold when an
agreement becomes binding." She went on to state that
"if a property is on-sold after the date on which the
Contract becomes binding and prior to settlement, then this is
considered to be an established dwelling."
This view was not the 'common sense' approach that many
had thought prevailed, i.e. if a property has just been built and
the title has never changed hands then its status as a
'new' dwelling would not be affected by a failed
At present, the ability of foreigners to invest in Australian
real estate extends to 'new' properties only. If the
ATO's position was maintained, then foreign buyers would be
excluded from purchasing a property when it is on-sold after a
failed settlement. According to news reports, this was thought to
have the potential to lead to a weakening of prices, particularly
in areas such as Brisbane in which development is active.
Last week however, the Treasurer of the Commonwealth of
Australia Hon. Scott Morrison M.P released a statement announcing
policy changes (full copy available here) to the effect that
dwellings will still be considered 'new' in the event of a
failed settlement, in order to avoid property developers being
"left in the lurch when a foreign buyer pulls out of an
The changes are designed to avoid relevant markets being
negatively impacted by an expected increase in off-the-plan sales
not being completed. We will see instant implementation for
individual applications, closely followed by an allowance for
'New Dwelling Exemption Certificates' to capture
acquisitions of property which are preceded by a failed
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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If an owner wants to remove a caveat, issuing a lapsing notice is a quick and easy way to shift the problem to the caveator.
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