Purchase of Australian Property : FIRB Approval and Process
The rules surrounding the purchase of Australian real estate - by anyone other than Australian citizens and Permanent Residents - are reasonably complex and have become more so since December 1, 2015 with the introduction of 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 emphasis 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 may have access to the Australian mortgage market and mortgage finance, 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
FIRB provisions exempt the following individuals and entities from needing to seek approval before purchasing Australian residential real estate:
- an Australian citizen;
- a New Zealand citizen;
- the holder of an Australian permanent resident visa;
- an individual purchasing property as joint tenants with their Australian citizen spouse, New Zealand citizen spouse, or Australian permanent resident spouse;
- This exemption does not include purchasing property as tenants in common.
- an Australian corporation that would not be a foreign person if interests directly held in it by Australian citizens living abroad, Australian permanent visa holders or New Zealand citizens were disregarded;
- the trustee of a resident trust, if at the time of the acquisition, the trustee would not be a foreign person if interests directly held in it by Australian citizens living abroad, Australian permanent visa holders or New Zealand citizens were disregarded; or
- a charity operating in Australia primarily for the benefit of persons ordinarily resident in Australia.
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 visa expires, 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 on 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.