Understanding the New Policies for Overseas Investors Buying Australian Property
The Australian government has a robust regulatory framework for the property market, and this mature management helps ensure the healthy and stable development of the Australian property market. At the same time, it serves as a reminder to all those wealthy individuals looking to buy or invest in Australia: it pays to buy sooner rather than later (clients who purchased property in Australia in earlier years are no doubt delighted).
Some common questions on the policies governing overseas investment in Australian property:
1. What is the FIRB?
FIRB stands for the Foreign Investment Review Board. This body is primarily responsible for reviewing and approving foreign investors' investment projects in Australia.
2. Who needs to apply to the FIRB?
All foreign nationals other than Australian permanent residents and Australian citizens need to apply to the FIRB.
3. Which foreign nationals can buy an established property?
Foreign nationals holding a valid Australian visa for more than 12 months may buy one established property to live in, but they must sell that established property within 3 months of moving out, otherwise the government will force the sale of the property.
4. Which foreign nationals may only buy new properties?
Foreign nationals who do not hold any valid Australian visa for more than 12 months (including overseas individuals with short-term visas, such as tourist visas). Definition of a new property: a brand-new dwelling purchased directly from a developer that has never been lived in; or vacant land suitable for residential development, with construction of a new home commenced within 24 months. (This includes off-the-plan apartments or townhouses, as well as buying land to build a home.)
5. How long does FIRB approval take?
Under the legislation, the Treasurer has 30 to 90 days to consider an application and make a decision. For purchase applications relating to ordinary residential property, approval is usually granted within 30 days of submitting the application.
6. Have there been any changes to the department administering the new FIRB policy?
The new FIRB policy came into effect on 1 December 2015. The FIRB no longer administers this alone; it now manages residential property jointly with the Australian Taxation Office (ATO).
7. Have there been any changes to the application fees?
Purchases before 1 December 2015 had no application fee.
After 1 December 2015:
1 Overseas investors purchasing a property valued under A$1,000,000 in Australia must pay an application fee of A$5,000 (though from 1 July 2017 the application fee rose to A$5,500).
2 Overseas investors purchasing a property valued between A$1,000,000 and A$2,000,000 must pay an application fee of A$10,000.
3 For overseas investors purchasing a property valued above A$2,000,000, an additional A$10,000 application fee applies for every extra A$1,000,000 in the property price.
8. Application process
After the contract is signed, a solicitor applies to the FIRB.
9. Have there been any changes to taxes and fees?
At present, each state has introduced different policies. Please consult a licensed real estate agent or solicitor in the relevant state for details.
From 1 October 2016, Queensland will charge overseas buyers an additional 3% surcharge when purchasing property in Australia.
This is calculated based on the contract date.
10. What has changed in relation to penalties?
Previously, breaches were never penalised. Now, overseas buyers, real estate agents and associated solicitors who breach the rules face varying fines depending on the circumstances of the property purchased, and even imprisonment.
Although the added taxes and fees are not especially high (they are negligible compared with rental returns and property price growth), every little saving still counts—and good properties really do become scarcer with every sale.