Tony Baldwin, Partner
Tracey Rundle, Partner
Janelle Kenzler, Solicitor
The final stage of changes to the Government's foreign
investment screening arrangements for acquisitions of real estate
by foreign persons was fully implemented on 31 March 2009
– over a month after initial expectations.
The Assistant Treasurer announced the changes on 18 December
2008, with policy changes being implemented immediately. The
balance of the changes, to be incorporated into the
Regulations1, were due to be implemented in February
Changes made to the regulations
New and updated forms have been issued for foreign persons to
complete and submit to the Foreign Investment Review Board (FIRB)
in relation to the acquisition of residential real estate:
Form 3 – to be completed by companies and trustees
(this Form has not yet been updated); and
Form 4 – to be completed by individuals.
The new Forms are written in plain English and are intended to
be more user-friendly.
Individuals are no longer required to submit supporting
documentation for the acquisition of residential real estate.
Resort and hotels
Resorts, hotels, hostels and guesthouses (or individual
dwellings within them) which are of a commercial nature, are now
considered commercial real estate which do not require FIRB
approval for acquisitions below the commercial thresholds of:
$953 million for the 2009 calendar year for US investors;
$5 million for heritage listed property; and
$50 million for all other acquisitions.
In order for individual dwellings within resorts, hotels and the
like to be considered of a commercial nature, they must be used as
part of the hotel (eg managed by the hotel operator), and not just
physically located in it.
The FIRB will still consider individual dwellings which are
owner occupied or rented privately (ie not through the hotel) as
residential premises, and the acquisition of such properties will
still require the ordinary approval required for residential real
Foreign investors will need to fully investigate this issue
prior to signing contracts. If there is any doubt as to whether or
not a dwelling is operated as part of the resort or hotel,
enquiries should be made with hotel management, and warranties
given by the seller included in the contract.
There is no longer provision for pre-approval to be obtained for
the sale of an interest in a building (either existing or
off-the-plan) in which hotel services are or would be provided.
Temporary residents acquiring an interest in the following will
not be required to notify the FIRB of proposed acquisitions of:
vacant land which is zoned to permit construction of a single
residential dwelling, and there is no interest in any adjoining
established residential dwellings which are to be used as their
principal place of residence; and
new residential dwellings.
Temporary residents will still need to apply for approval for
all other acquisitions.
A new definition of "temporary resident" has been
inserted to include foreign persons living in Australia who:
hold a valid temporary visa permitting them to stay in
Australia for a continuous period of more than 12 months (without
regard to the time remaining on the visa); or
have submitted an application for permanent residency, and hold
a bridging visa permitting them to remain in Australia until their
application is finalised.
Amendment to monetary threshold – 2006
The monetary threshold for US investors acquiring an interest in
a foreign company with Australian assets and subsidiaries (known as
offshore takeovers) has increased to $200 million. This amendment
is taken to have commenced on 2 December 2006.
This retrospective amendment rectifies an error made in a
previous amendment of the Regulations in 2006, when it was intended
to increase the threshold to $200 million.
What is the purpose of the changes?
The changes are intended to:
streamline the notification and administrative processes for
certain acquisitions of real estate (which are not considered
contrary to the national interest and are currently routinely
correct an amendment made to a monetary threshold in December
1 Foreign Acquisitions and Takeovers Regulations 1989 and
Foreign Acquisitions and Takeovers (Notices)
The article discusses the legislative requirements and then provides some comments on common mistakes made by caveators.
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