The Overlooked Rules Overseas Buyers Often Miss When Buying Property in Australia
1. When an overseas investor buys land, can the land be resold before construction begins?
Yes, but approval must be obtained first. When an overseas investor buys vacant land, FIRB approval usually comes with a condition that "the land interest must not be sold, transferred or otherwise disposed of before completion". If a resale is genuinely required, you should first apply to the Australian Taxation Office (ATO) for a variation and obtain approval; selling without approval breaches the conditions of the approval.
In addition, under FIRB policy, overseas investors cannot buy established dwellings. However, in practice there are "only established dwellings, not established land" — meaning that before any building stands on the land, the land is not defined as an existing dwelling, and so it is not subject to the "established dwelling" restriction and can be purchased by a new overseas investor. Put simply, if an overseas investor buys an apartment building in Australia, once it is handed over it cannot be sold to another overseas person and can only be sold to a local with residency status. But if the purchase is Australian land, then after the land is handed over and before building work begins, once a variation is applied for and approved by the ATO, it can be sold to a local or an overseas investor — the range of buyers who can receive the land transfer is fairly broad.
2. Vacancy fee return for overseas persons
Some clients receive a penalty notice from the Australian Taxation Office (ATO) about a vacant property, when in fact the property was not vacant at all — it was simply because they forgot one step, namely lodging the annual vacancy fee return. If there is a dwelling on your land, you must lodge an annual vacancy fee return within 30 days of the end of each 12-month period within your ownership period, known as the vacancy year. If your dwelling is not occupied or made available for rent for more than 183 days during the vacancy year, you may need to pay a vacancy fee.
The ATO will usually send you a reminder letter to the email address you provided on the Land and Water Register, prompting you to lodge the vacancy fee return. That email contains the information you need to lodge the vacancy fee return. Note that regardless of whether the property was occupied for 183 days within the year, overseas owners must still lodge the return. If, based on the information lodged, no vacancy fee is payable according to the ATO, no fee will be incurred.
Even if you do not receive a reminder letter, you still need to lodge the vacancy fee return. If you have not yet registered your property on the Land and Water Register and have not received a vacancy fee reminder letter, please first register on the Land and Water Register. There is no charge for registration.
If your property is vacant land, the vacancy fee return only needs to be lodged once a dwelling has been built on the land.