Can foreigners buy property in australia?

Beyond the beautiful setting and thriving economy in Australia, the property market has significant potential for capital growth. So, it makes sense that foreign investors are showing widespread interest in purchasing property in Australia.

However, the Foreign Investment Review Board (FIRB) proposes several rules that foreign investors need to know before they decide to invest in Australia’s property market.

So, to help you navigate foreign investment in Australia here’s what you need to know.

Can foreigners purchase property in Australia?

While it is entirely possible for foreigners to purchase property in Australia, they have to be granted permission to do so by the Foreign Investment Review Board (FIRB).

What is the Foreign Investment Review Board (FIRB)?

The FIRB is a government body established to manage inbound foreign investment in Australia. The purpose of establishing the governing body was to ensure that Australia was reaping the economic benefits of foreign investment without taking ownership opportunities away from Australian citizens.

The FIRB has implemented a set of rules that essentially only allows foreign investors to purchase new dwellings instead of established dwellings.

The idea is that if non-residents invest in building new properties, there will be more job creation opportunities in the construction industry, and the economy will grow. The government can also gain revenue through stamp duty 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.

So 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. So, 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 the developer sold the investment property, 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 two dwellings need to be constructed. In other words, the foreign investor can redevelop the original dwelling, but they must also build a second dwelling. This way, the job creation aspect is still applicable.

So, redevelopment is subject to the condition that more than one property has to be built.

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 to temporary Australian residents only. 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 become a 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 residential dwelling or vacant land:
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Source: FIRB. The fees continue to increase up to a maximum of $1,045,000 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 $222 per penalty unit.

Depending on the type of breach and infringement notice tier, a penalty can range anywhere from 12 penalty units ($2,644) to 300 penalty units ($66,600). However, you can incur a maximum criminal penalty of 10 years or 15,000 penalty units ($3,330,000) units.

For more on specific breaches, see FIRB’s Guidance Note 11.

Cover image source: ChameleonsEye/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.