Residential real estate
Australia’s foreign investment policy encourages foreigners to purchase newly constructed houses typically referred to as ‘off-the-plan’ properties. These are more often than not apartments, which are generally approved without conditions.
Foreign persons are prohibited from purchasing established houses, regardless of whether it is to be used as an investment property or as their residence. However, those classified as ‘temporary residents’ for income tax purposes are permitted to purchase one established dwelling only. This is on the condition that it is used solely as their residence while they are in Australia, and it must generally be sold once it ceases to be their residence.
Applications to purchase vacant land for development are normally approved subject to certain conditions; for example, construction must begin within 24 months.
All foreign persons must notify the FIRB of any proposed acquisition of residential real estate, which includes new houses, off-the-plan properties, or vacant land for development.
In February 2015, the Federal Treasurer ordered the sale of a $A39 million Sydney harbourside mansion, which had been purchased by a Chinese national who failed to seek prior approval from the FIRB. The foreign investor was given 90 days to sell the property, which had been purchased through various shelf companies in Australia and Hong Kong.
Commercial real estate
Investment proposals for existing developed commercial real estate, including offices, factories, retail outlets, and hotels, do not require approval where the value of the real estate is less than $A330 million for developed commercial properties. If the real estate is heritage listed, a lower threshold of $5 million applies. Any proposed acquisitions above this threshold must be approved by the FIRB prior to purchase.
All foreign persons must notify the FIRB of a proposed acquisition of vacant land for commercial development, regardless of the value of the land. Such applications are normally approved subject to development conditions.
Agricultural land
All foreign persons must apply for FIRB approval for a proposed acquisition of an interest in agricultural land where the cumulative value of the land owned by the foreign investor, including the proposed purchased, exceeds $A15 million. Agricultural land, is land used wholly and exclusively for the carrying on of a primary production business, as defined in the Act.
FIRB fees and penalties
There are fees to apply for FIRB approval. Business, commercial real estate, and agribusiness investments are subject to application fees ranging from $1,000 to $1.1m, depending on the size of the investment and the sector it operates in.
In addition to the current criminal penalties, the Government has also introduced civil pecuniary penalties and infringement notices for breaches of the foreign property ownership rules. These changes could see infringement notices ranging from $2,040 to $51,000 depending on the investor and whether they voluntarily came forward. Civil penalties could range from 10 per cent to 25 per cent of the purchase price or market value of the property, whichever is higher.
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