The Australian Government has announced changes to the law
applicable for acquisitions of residential real estate by foreign
persons. Those changes which are changes to policy are now in place
whereas those that require an amendment to the Foreign
Acquisitions and Takeovers Regulations 1989 will come into
effect shortly when amended Regulations are promulgated.
Off-the-plan sales to foreigners
The previous arrangement which enabled developers to obtain
approval to sell up to one half of apartments in a new residential
development has been changed. From now up to 100% of such
apartments may be sold to foreign persons. The previous restriction
that the apartment must be brand new when sold has been varied to
permit a developer to rent the apartment for no more than 12 months
before it is sold by the developer to a foreign person.
Up till now developers made an application to FIRB for a consent
applicable to a particular development for sales to foreign
purchasers. Foreign purchasers in those circumstances did not make
a separate application. The developer was required to submit an
annual report giving details of all sales in the development
including details of foreign purchasers. That process has now been
discontinued. Purchasers will be required to make their own
application. The form to be used has yet to be released.
These arrangements will be reviewed after 2 years. They are
obviously intended to assist residential developers offload stock
in the current financial climate.
Vacant residential land
The previous restriction which required a foreign purchaser to
build a dwelling within 12 months of the acquisition of a vacant
residential lot has now been extended to 24 months.
Foreign companies purchasing second hand dwellings
There is to be no limit to the number of established dwellings
which can be purchased for employee accommodation by foreign owned
companies. Where it is expected that the dwelling will remain
vacant for more than 6 months the foreign owned company will be
required to sell or rent the dwelling.
Redevelopment of second hand dwellings
Any development must increase the number of dwellings. The
requirement that no rental income can be received prior to
demolition has not been changed. A foreign purchaser will now have
24 months to commence construction of new dwellings where dwellings
have been purchased prior to demolition for a particular
residential project. Development expenditure must be at least 50%
of the purchase price of the property.
Temporary residents purchasing second hand dwellings
A "temporary resident" now includes all foreign
persons living in Australia on a valid visa but does not include
short term visitors such as tourists. Individual situations would
need to be checked but there is greater scope for a temporary
resident to purchase second hand real estate.
Foreign students who are resident in Australia are no longer
subject to a $300,000.00 limit on the value of an established
dwelling purchased as their principal place of residence.
Resorts and hotels – accommodation facilities
Where resorts and/or hotels are to be purchased they will be
treated as commercial real estate rather than residential real
estate. This includes individual units within any such development.
Of consequence, provided the purchase price is less than the exempt
developed commercial property price fixed from time to time, a
purchaser will not be required to notify and therefore obtain
approval for that purchase.
For developed commercial property the current price limit under
which no approval is required (as distinct from notification) is $5
million for a heritage listed property, $50 million for a
non-heritage listed property or (subject to some exceptions) $953
million for investors from the United States of America. The need
to notify needs to be checked with each transaction.
Development of vacant commercial land (non residential
In this category the policy has been changed to permit a foreign
purchaser 60 months from the date of acquisition rather than 12
months to commence continuos substantial construction on the land.
The restriction that the development cost must be not less than 50%
of the acquisition cost or value of the land purchased has been
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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