Under Australia’s foreign investment framework, foreign persons generally need to apply for foreign investment approval before purchasing residential real estate in Australia.
It is imperative that if you are a foreign individual you seek legal advice as to whether the rules administered by the Foreign Investment Review Board (FIRB) apply to you as strict criminal and civil penalties may apply for breaches of the law, including disposal orders.
New dwellings and vacant land
Foreign persons generally need to apply and receive foreign investment approval before purchasing new dwellings and vacant residential land for development.
Applications to purchase new dwellings are usually approved without conditions. Applications to purchase vacant land are normally approved subject to construction being completed within four years.
Once new dwellings are built or purchased, they may be rented out, sold, or retained for the foreign investor’s own use.
Land that has previously had an established dwelling on it would generally not be treated as vacant land for the purposes of Australia’s foreign investment framework.
Non-resident foreign persons are generally prohibited from purchasing established dwellings in Australia. However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia.
The purchase of an established dwelling in these circumstances would normally be conditional on the foreign person selling the property when they leave Australia, or cease being a temporary resident and do not become a permanent resident or an Australian citizen.
Foreign controlled companies are generally prohibited from purchasing established dwellings, although foreign companies with a substantial Australian business may be permitted to acquire established dwellings for the purpose of providing housing for their Australian based staff.
Consistent with the aim of increasing the housing stock, foreign persons (both temporary residents and non‑residents) can apply for approval to purchase an established dwelling for redevelopment (that is demolishing the dwelling and constructing new residential dwellings in its place). These applications are normally approved on the condition that at least two dwellings are built for the one demolished.
When does a foreign person need to seek approval for a proposed purchase?
Foreign persons must have received foreign investment approval before they acquire an interest in residential real estate.
An interest in residential real estate can include:
- signing an unconditional contract agreeing to purchase a dwelling;
- signing an unconditional contract agreeing to purchase a share of a dwelling (such as joint tenants or tenants in common with any number of other people);
- a security interest under a real property mortgage, even if the person that possesses the property is an Australian citizen or permanent resident;
- an option that provides the right to purchase a property at an agreed price at some time in the future (such as a put and call option);
- a leasehold agreement that is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years;
- increasing the share of ownership of a dwelling that the foreign person already has an interest in;
- acquiring shares in a corporation or units in a unit trust where interests in residential real estate exceeds 50 per cent of the entity’s assets; or
- any other acquisition that meets the definition of an interest in Australian land under the Foreign Acquisitions and Takeovers Act 1975.
What is the approval process?
Foreign persons should apply for approval before taking an interest in residential real estate. Applicants must wait to receive that approval before taking an interest in residential real estate. To take any action before approval is received is a breach of the law. FIRB has a strict 30 days to make a decision from the date of full payment of the relevant fee on application, and a further 10 days to notify the applicant of the outcome. FIRB charges substantial application fees and an application for approval to purchase residential real estate will not be considered until these fees have been paid in full to the FIRB.
Foreign persons who want to minimise the risk of a property they are interested in purchasing being sold to someone else before they receive foreign investment approval can enter into a contract as long as the contract is conditional on receiving foreign investment approval.
Contact Calvados + Woolf Lawyers
If you would like to apply for foreign investment approval for:
- A new dwelling
- Vacant residential land
- A second hand or established dwelling
- An exemption certificate for established dwellings
Contact our offices in Fortitude Valley or Upper Mount Gravatt for further information. We have a team of property lawyers that can advise you on FIRB approval and assist with your property purchase