The Foreign Investment and Review Board have released a new policy dealing with the acquisitions of residential real estate and acquisitions of commercial real estate. This article discusses the changes to the policy surrounding the acquisition of residential real estate that may affect the manner in which you conduct your business or the considerations given when purchasing residential or investment property. Please consult www.belllegal.com.au for information relating to the acquisition of commercial real estate.
According to the policy of the Foreign Investment Review Board, “residential real estate” means all Australian residential land and housing other than commercial properties (i.e. offices, factories, warehouses, hotels, restaurants and shops) and rural properties (i.e. land that is used wholly and exclusively for carrying on a substantial business of primary production). Acquisitions of ‘hobby farms’ and ‘rural residential’ blocks are considered to be residential real estate.
Notification not needed
No notification is needed from the Foreign Investment Review Board if:
- An Australian citizen living abroad purchases either in their own name or through an Australian corporation or a trust;
- A Foreign national who is a holder of a permanent resident visa or is a holder, or is entitled to hold, a ‘special category visa’ (i.e. New Zealand citizens) purchasing either in their own name or through an Australian corporation or a trust;
- Foreign nationals purchasing as joint tenants with their Australian citizen spouse; and
- Temporary residents
The definition of ‘temporary resident’ includes all foreign persons living in Australia who:
- hold a valid temporary visa which permits them to stay in Australia for a continuous period of more than 12 months (irrespective of how much time is remaining until that visa expires); or
- have submitted an application for permanent residency (PR), and hold a bridging visa which permits them to stay in Australia until their PR application has been finalised
No notification is needed if temporary residents acquire:
- single blocks of vacant land;
- new dwellings; or
- an established (second hand) dwelling to be used as the principal place of residence (including if dwelling is to be demolished first then redeveloped)
Short-term visitors such as tourists, business people and those here for a medical procedure are not temporary residents.
Acquisitions of certain types of property do not require notification regardless of the citizenship or residency status of the purchaser.
These acquisitions include:
- New dwellings purchased from the developer, where the developer has pre-approval to sell those dwellings to foreign persons;
- An interest in a time share scheme which does not permit more than four weeks entitlement per year;
- Certain residential real estate in Integrated Tourism Resorts (ITR);
- An interest acquired by will or devolution by operation of law; or
- An interest acquired from the Government (Commonwealth, State or Territory, or local).
If the acquisition is not listed above, then a foreign purchaser must notify the Government and adhere to certain eligibility criteria to allow for a purchase.
Notification needed by Foreign Investment Review Board
Vacant residential land
Acquisitions by foreign-owned companies, trust estates and non-resident foreign persons of single blocks of vacant land (i.e. land which is zoned to permit the construction of no more than one residential dwelling per block of land) for the purpose of building a single residential dwelling on each block are normally approved provided construction commences within 24 months (previously within 12 months and development expenditure of at least 50 per cent of land cost). There is no longer the development expenditure requirement of at least 50 per cent of land cost.
For other vacant land (not single blocks) such as multiple residential dwellings are normally approved provided:
- Continuous substantial construction must commence within 24 months; and
- At least 50 per cent of the acquisition cost or the current market value of the land (whichever is higher) must be spent on development.
New dwellings acquired ‘off the plan’ (before construction commences or during the construction phase) or after construction is complete are normally approved where the dwellings:
- have not previously been sold (i.e. they are purchased from the developer); and
- have not been occupied for more than 12 months
The previous requirement that only 50 per cent of new dwellings can be sold to foreign persons on an ‘off the plan’ basis is removed provided developers market locally and overseas.
This category includes dwellings that are part of extensively refurbished buildings where the building’s use has undergone a change from non-residential (for example, office or warehouse) to residential. It does not include established residential real estate that has been refurbished or renovated.
Established (Second Hand) Dwellings
Foreign persons are prohibited from acquiring established dwellings (i.e. not new dwellings but dwellings that have been previously owned and/or they have been occupied for more than 12 months) for investment purposes. The dwelling cannot be purchased to be used as a rental or holiday property, irrespective of whether they are temporary residents in Australia or not. Foreign residents purchasing second hand dwellings for principal place of residence are exempt as discussed previously.
Foreign companies purchasing second hand dwellings
Foreign-owned companies can now purchase established dwellings for the use of their Australian based staff provided that they sell or rent the dwelling if it is expected to remain vacant for more than 6 months. There is no limit to the number of established dwellings which can be purchased, where required for employee accommodation.
Redevelopment of second hand dwellings
A proposed redevelopment (not refurbishments) must increase the number of dwellings and no rental income can be obtained from the existing dwelling prior to demolition. Such redevelopments are required to demolish the existing dwelling and commence construction of the new dwellings within 24 months in line with vacant land (previously 12 months).
A redevelopment proposal which does not increase the number of dwellings may be approved where it can be shown that the existing dwelling is at the end of its economic life (i.e. property is derelict or uninhabitable), since constructing a new dwelling would effectively increase the housing stock. To demonstrate that the property is uninhabitable and must be demolished, a valuation of the existing structures by a licensed valuer and/or a builder’s report is generally required. Photographs and other forms of evidence may also be required. Approval of such proposals would be subject to the same conditions outlined above.
Time Share Schemes
The acquisition of an interest in a time share scheme where the entitlement of the foreign person (and any of that person’s associates) is greater than 4 weeks in any year must be notified and will normally be approved according to the eligibility requirements for the relevant category of property outlined above.
For more information regarding the new policy of the Foreign Investment Review Board and how the new policy may affect you, please contact Bell Legal Group.
The contents of this article are for general information only. It is not intended to be a comprehensive statement of the law, and should not be relied upon as such. If advice on the law is required, it should be sought on a formal professional basis. Bell Legal Group excludes liability for loss suffered by any person resulting in any way from the use of, or reliance on information presented in this article.