However, the Foreign Investment Review Board (FIRB) imposes several rules that foreign investors need to know before they decide to invest in Australia’s property market.
To help you navigate foreign investment in Australian property, here’s an overview of what these rules are and how they work.
Can foreigners purchase property in Australia?
While it is entirely possible for foreigners (i.e. non-residents of Australia) to purchase property in Australia, the purchase process is different for them than for Australian residents, and they have to be granted permission by the FIRB. This means that there are some rules they need to follow in order to purchase property.
What is the Foreign Investment Review Board (FIRB)?
The FIRB is a federal government body established to advise the Treasurer on managing inbound foreign investment in Australia. The purpose of establishing the governing body was to ensure that Australia could reap the economic benefits of foreign investment without taking ownership opportunities away from Australian citizens. The Board acts as an advisor, with the responsibility for making decisions on the policy resting with the Treasurer.
The FIRB has created a set of rules that essentially only allows foreign investors to purchase new dwellings, not established dwellings. These investors must also apply to the FIRB for permission to buy an investment property in Australia.
The idea is that if non-residents invest in building new properties, there will be more job creation opportunities in the Australian construction industry, and the economy will grow. The federal, state and territory governments can also gain revenue through stamp duty and other taxes, while ensuring that Australian residents aren’t deprived of opportunities to buy residential property.
Who doesn’t have to apply to the FIRB to purchase property?
Only foreigners and temporary Australian residents are mandated to apply to the FIRB to purchase property in Australia under the FIRB’s rules.
This means the following groups of people are exempt from applying for approval with the FIRB:
- Australian citizens (regardless of whether they live in Australia or not)
- New Zealand citizens
- Australian permanent visa holders
- Foreigners buying property as joint tenants with someone they are married to who belongs to one of the above groups.
What property can foreign investors purchase?
Foreign investors are generally prohibited from purchasing established dwellings in Australia. However, they can apply to the FIRB to invest in:
- New buildings: property that has not been previously sold as a dwelling and has not been previously occupied. If a developer is selling the investment property to the foreign investor, it must not have been occupied for more than 12 months.
- Vacant land: property must be constructed within four years of the FIRB approval date. Once construction has been completed, proof must be sent to the FIRB within 30 days.
There are, however, a few exceptions to the established dwelling rule.
Firstly, the FIRB is likely to approve an application where the foreign investor plans on redeveloping a property. But, the approval is subject to the fact that it needs to “genuinely increase Australia’s housing stock”. For example, a foreign investor may be able to redevelop an existing house if they knock it down and replace it with two townhouses. This way, the job creation aspect is still applicable.
As with construction on vacant land, the demolition, redevelopment and construction of the new property must be completed within four years of FIRB approval, and proof must be sent to them within 30 days of the construction being completed.
The second exception applies only to temporary Australian residents. A temporary resident is permitted to purchase an established dwelling, provided that they sell it when they eventually leave the country. If they don’t leave the country and instead become an Australian citizen or permanent resident, then they can maintain ownership of the property.
How much does it cost for foreigners to apply to purchase Australian property?
As part of the FIRB application process, the foreign investor will have to pay an application fee.
The application fee is dependent on the value of the new dwelling or vacant land:
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|Less than $75,000||$2,000|
|$1 million or less||$6,350|
|>$1 million to $2 million||$12,700|
|>$2 million to $3 million||$25,400|
|>$3 million to $4 million||$38,100|
|>$4 million to $5 million||$50,800|
|>$5 million to $6 million||$63,500|
|>$6 million to $7 million||$76,200|
|>$7 million but less than $8 million||$88,900|
|>$8 million but less than $9 million||$101,600|
|>$9 million but less than $10 million||$114,300|
The fees continue to increase up to a maximum of $503,000 at the time of writing, for residential property valued at over $40 million.
What happens if foreigners purchase property in breach of FIRB rules?
Should foreign investors not adhere to the FIRB rules, they could face serious penalties. For example, suppose the foreign investor purchased property without FIRB approval. If that is the case, they’ll be liable to pay fines of up to $3.3 million or face up to 10 years’ imprisonment.
The Australian Government has strict rules in place about foreign property investment, in an effort to ensure that Australian citizens are not missing out on ownership opportunities.
Provided that foreign investors are contributing to economic growth and have the necessary approval from the Foreign Investment Review Board’s approval, they are permitted to purchase new dwellings and vacant land. It may also be possible for them to purchase existing dwellings in some cases, if they satisfy some additional criteria.
While the application process is generally fairly straightforward, foreign investors will want to consider consulting a property investment expert in Australia to help navigate the compliance regulations around owning property in Australia, including tax considerations.
Cover image source: Olga Kashubin/Shutterstock.com
About Amir Ishak
Amir is the Principal Advisor and Client Director at Property Tax Specialists. A Chartered Accountant (CA), Amir has over 20 years of experience in business advisory, accounting and tax, and was named Accountants Daily’s 2021 Property Specialist Accountant of the Year. Amir has formally held senior advisory roles with Big 4 accounting firms and financial institutions.