Buying residential land: approval required!

The approval process is designed to ensure proposed investments actually increase Australia’s housing stock. An application must be submitted electronically to the Australian Taxation Office and a fee is payable (the amount will depend on the sale price and type of property).

Non-residents are typically prohibited from purchasing established dwellings. There are exceptions, including residences for temporary residents, for redevelopment, and for Australian-based employees. Typically non-residents acquire interests in residential land such as vacant land and new (and near-new) residential dwellings.

There can be significant penalties (including infringement notices, civil and criminal penalties) when non-residents do not adhere to the foreign investment laws of Australia. A failure to notify could attract a maximum penalty of AUD 3.3 million (for individuals) or 10 years in prison. Importantly, non-residents must receive approval from FIRB before acquiring the interest in land. It is not enough to make the application. Acquiring an interest without approval could attract the same maximum penalty and imprisonment.

Australian residential property can also attract vacancy fees. These may apply if a residential property is not occupied or available on the rental market for at least six months in a 12-month period. Whether a vacancy fee applies will depend on when the property was acquired. It typically applies to acquisitions made on or after 09 May 2017. However it can also apply if a foreign person fails to submit a foreign investment application.

As each state and territory has its own requirements for non-residents and these rules are regularly reviewed, non-residents should get advice on acquisitions of property in Australia to avoid any pitfalls.

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