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Immigration and Property Buying – The New Property Acquisition Rules

Since 1st July 2016 last year, the federal government, with the New South Wales and Victoria state governments, have cracked down on foreign non-residents buying Australian property, who are not Australian citizens, permanent residents living in Australia or eligible New Zealand Citizens living in Australia. New tightened up Foreign Investment Review Board (FIRB) approval applications, processes and fee structures for foreign non-residents wishing to buy real estate in Australia are now in place. Foreign non-residents not complying with the new regime structure, are now served with mandatory forced sale notices, with also tax implications.

From an immigration agent’s prospective, a client could be coming to them, to obtain permanent residence in Australia, to avoid the hurdles and tax burdens of deemed as a foreign non-resident. The new foreign non-resident regime do not apply to Eligible New Zealand Citizens (ENZCs), who are deemed as permanent residents in Australia, for tax purposes and to avoid the foreign non-resident land taxes, who have been residing in Australia, for more than 200 days.

From an immigration agent’s prospective, a foreign non-resident wish to buy property in Australia, now can only buy from a developer (off the plan / new property) who has pre Foreign Investment Review Board (FIRB) approval to sell to foreign non-residents, or the foreign non-resident themselves must obtained Foreign Investment Review Board (FIRB) approval.  

Foreign non-residents to purchase residential property must apply on-line via the FIRB website –

Apply on line - https://firb.gov.au/applications/apply-now/

Fees, on a progressive scale - https://firb.gov.au/applications/estimator/

General the fees are on a progressive scale, starting $5,000.00 if the property sale price is less than $1 million, $10,100.00 for less than $2 million, $20,300.00 for less than $3 million and so forth (note, fees as at 2016/2017 subject to change with government budget changes).

For commercial real estate / vacant commercial land, foreign persons must notify the FIRB and receive a no objections notification from the FIRB before acquiring an interest in commercial land in Australia. Different rules apply depending on whether the land is vacant or not, whether the proposed acquisition falls into the category of sensitive commercial land that is not vacant, and the value of the proposed acquisition. This also depend, where the foreign non-resident is coming from, as the thresholds are different for Chinese, American, Japanese and South Korean, who have different thresholds, under the Free Trade Agreements. Free Trade Agreement are still being negotiated with United Kingdom and India, which might include real estate acquisition and threshold considerations.

Non-resident foreign persons are generally prohibited from purchasing established or second-hand residential dwellings in Australia. However if temporary resident to Australia -

Temporary residents will normally be allowed to purchase only one established dwelling to live in as their residence (home) in Australia, subject to the conditions that they:

  • Use the property as their principal place of residence in Australia;
  • Do not rent any part of the property, included ensuring that the property is vacant at settlement; and
  • Sell the property within three months from when it ceases to be their principal place of residence.

Temporary residents are not permitted to purchase established or second-hand dwellings as investment properties, or rent out, or as holiday homes.

From an immigration agent’s prospective, they are not deemed to be taxation experts, in which taxation lawyers and accountants have the skills and expertise in the taxation field. However, a general idea of the taxation regime for the foreign non-resident by the immigration agent is helpful, before the client seeks further adequate advice from their lawyer or accountant. For foreign non-residents since 1st July 2016, who own property in Australia, then decide to sell it, with a sale price of $2 million or more. The Australian Taxation Office (ATO) now catches them out on their seller vendor clearance certificate, who are now to pay 10% of the sale prices at settlement, as a foreign non-resident or foreign-based corporation exist withholding tax.

New South Wales and Victoria are the two dominated states, when it comes to foreign investment of real estate in Australia, accounts for 70% of foreign property investment. Both New South Wales and Victorian State Governments have also entered into the foreign non-residents crackdown, with purchaser declarations required when stamping, with stamp duty surcharges and land tax for foreign non-residents.

In New South Wales, on top of normal stamp duty, foreign non-residents now also pay 4% of the purchase price, as a foreign non-resident stamp duty surcharge. There is also now a 0.75% land tax foreign non-residents holding property in New South Wales and this also includes foreign permanent residents in Australia, who being living in Australia for less than 200 days.

In Victoria who has such arrangements in place longer than New South Wales. On top of normal stamp duty, foreign non-residents now also pay 7% of the purchase price, as a foreign non-resident stamp duty surcharge. There is also now a 1.5% land tax foreign non-residents holding property in Victoria.

The recent 2017 Federal Budget, brought down by Federal Treasurer Scott Morrison MP, states “even tougher rules on foreign investment in residential real estate will be introduced, removing the main residence capital gains tax exemption, and tightening compliance.”

The new 2017 budget measures will also apply an annual foreign investment levy of at least $5,000 on all future foreign investors who fail to either occupy or lease their property for at least six months each year.

The new 2017 budget measures we also will restore the requirement that prevents developers from selling more than 50 per cent of new developments to foreign investors.

 

Written by Paul McKenzie AAPI - CEO of ABS Conveyancing, in Sydney.

Email for questions: This email address is being protected from spambots. You need JavaScript enabled to view it.

Copyright 2017 Migration Alliance Website – all rights reserved.

 

References -

Foreign Investment Review Board (FIRB) Website May 2017.

Australian Taxation Office (ATO) Website May 2017.

New South Wales Office of State Revenue Website May 2017.

Victorian Office of State Revenue Website May 2017.

Australian Government, Federal Budget Speech and Papers, 9th May 2017.

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  • Guest
    Adrian Monday, 30 October 2017

    So if I buy a new dwelling off the plan from a developer... I am able to live in it for a couple years and then rent it out as an investment in the future?

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Guest Wednesday, 13 December 2017
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