Purchase of Australian Property : FIRB Approval & Process
The rules surrounding the purchase of Australian real estate - by anyone other than Australian citizens and Permanent Residents - are reasonably complex and will become more so from December 1, 2015 with the introduction of new Foreign Investment Review Board (FIRB) application fees and a new compliance/penalty regime. These changes reinforce our stated view that no foreign investor should purchase Australian real estate without legal advice to ensure that they remain compliant with regulatory requirements.
At this point in time a greater emphahsis on compliance is appropriate; with inadequate enforcement leading to a lack of confidence in the community that investors and marketers are meeting FIRB requirements.
We have tried to simplify the often complex FIRB rules in the documents below. The first is a Guide focussed on explaining the purchase process for foreign citizens who are not resident in Australia wishing to invest in Australian property. The second document contains Flow Charts which attempt to summarise the FIRB rules as they apply both to Temporary Residents in Australia and Foreign Non-Residents (FNR) outside of Australia. These flow charts constitute our interpretation of the rules and are NOT intended to be relied upon - you are encouraged to contact the FIRB (www.firb.gov.au) directly or we can arrange professional advice, if requested.
Note that foreign investors intending to buy real estate in Australia have relatively open access to the Australian market and mortgage finance, with mortgages up to 70% of the property value typically available, but they must seek prior approval from the Government through the Foreign Investment Review Board (FIRB) unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations.
Purchase of Australian Urban Property
The following individuals are not required to seek approval for the purchase of Australian residential real estate:
- Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust;
- Foreign nationals who are the holders of permanent resident visas or are holders, or are entitled to hold, a ‘special category visa’ purchasing either in their own name or through an Australian corporation or a trust; and
- foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.
Foreign persons are normally given approval to buy:
- Vacant land for development, including house and land packages where construction has not commenced, subject to a condition imposed under the FATA that construction is completed within 4 years of their application being approved for residential developments, or continuous construction is commenced within 5 years for commercial developments; and
- New dwellings such as house and land packages, home units and townhouses purchased ‘off‑the‑plan’ that is under construction or newly constructed, but never occupied or previously sold. ‘Off‑the‑plan’ sales to foreigners are only permitted for new development projects or extensively refurbished commercial structures, which have been converted to residential, on condition that no more than half the dwellings in a development are sold to foreign persons.
- Certain categories of foreign nationals, who hold a visa that permits them to reside in Australia continuously for at least the next 12 months, may be given approval to purchase established residential real estate (that is, second hand dwellings) for use as their principal place of residence (that is, not for rental purposes) while in Australia. A condition of such purchases is that the dwelling must be sold when the foreign nationals’ temporary resident visas expire, they leave Australia, or the property is no longer used as their principal place of residence.
- Foreign companies, with an established substantial business in Australia, buying for named senior executives resident in Australia for periods longer than 12 months, may be eligible for approval provided the accommodation is sold when no longer required for this purpose. Whether a company is eligible, and the number of properties that may be acquired, will depend upon the extent of the foreign company’s operations and assets in Australia. Unless there are special circumstances, foreign companies normally will not be permitted to buy more than two houses under this category. Foreign companies would not be eligible under this category where the property would represent a significant proportion of its assets in Australia.
Proposals by foreign persons to acquire developed residential real estate that do not fall within the above categories are subject to the FATA, but are not normally approved.
All contracts by foreign persons to acquire interests in Australian urban land should be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract. Contracts should allow a minimum of 40 days from date of lodgement for such a decision. Foreign investors are in breach of the FATA if they enter an unconditional contract to acquire property before approval is granted and may be subject to significant penalties.