On 18 December 2008, Chris Bowen MP, the Assistant Treasurer, announced changes to the Government's foreign investment screening arrangements for acquisitions of residential real estate by foreign persons. The purpose of the changes is described as streamlining the current notification and administrative arrangements.

A number of the changes related to foreign investment policy and became effective on 18 December 2008. These include:

  • removing the $300,000 limit on acquisitions of property being acquired by student visa holders as their principal place of residence.
  • the removal of the requirement that no more than 50% of new dwellings can be sold to foreign persons on an "off the plan" basis (provided that the developer has marketed both locally as well as overseas).
  • extending the definition of "new dwelling", which previously had a requirement that the dwelling had never been occupied or sold, to include dwellings that have not been sold but that have been rented out for no more than 12 months.
  • permitting foreign-owned companies to purchase established dwellings for use by their Australian based staff provided that they sell or rent the dwelling if it is expected to remain vacant for more than 6 months.

A number of other changes have been announced but will be subject to amendment of the current Foreign Acquisitions and Takeovers Regulations 1989 and include:

  • accommodation facilities such as resorts, hotels and serviced apartments will be treated as commercial real estate rather than residential real estate and therefore notification and approval will only be required where the value of the property exceeds the commercial property thresholds (currently $5 million for heritage listed properties, $953 million for US investors or otherwise $50 million for non heritage listed properties).
  • exempting temporary residents from notification of proposed acquisitions of established residential real estate for their own residence, new dwellings and single blocks of vacant residential land.

The Regulations were expected to be amended before the end of February 2009, but this is now not expected until March 2009.

Of particular note to developers is the abolition of the current procedure of issuing advance approval for sales of new dwellings to foreign persons (the previous "off-the-plan" approval). It will now be necessary for all non-resident foreign purchasers to submit individual applications for approval. A developer may submit an application on behalf of a foreign purchaser. Therefore either a developer will not be able to enter a contract with a foreign person until approval is received or any contract will need to be conditional on approval. While the abolition of the 50% limit of sales to foreign persons is a welcomed change, the requirement for individual applications will place an administrative burden and uncertainty on sales.

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