Here’s our guide to FIRB and restrictions on property ownership in Australia.
Many countries around the world have restrictions on property ownership for foreign nationals, if you’re thinking about investing in Australian property, it’s important you understand how the property ownership rules work before you spend time or money on your investment.
In Australia, as a foreign purchasers you are restricted from purchasing existing or ‘second hand’ properties. However, you can purchase new build property, subject to Foreigner Investment Review Board (FIRB) approval.
Some non-resident buyers are exempt, such as:
- an Australian citizen (regardless of whether they are ordinarily resident in Australia or not)
- New Zealand citizens
- the holder of an Australian permanent visa; or
- foreign persons purchasing property as joint tenants with their Australian citizen spouse, New Zealand citizen spouse, or Australian permanent resident spouse.
The FIRB assess applications from foreigners who wish to purchase property in Australia. With particular regard to new dwellings, foreigner buyers generally need to apply to receive approval before purchasing their property, but the FIRB website states “Applications to purchase new dwellings are usually approved without conditions”.
What is a classed as a new dwelling?
A new dwelling is described as:
“A dwelling that will be, is being or has been built on residential land, has not been previously sold as a dwelling and has either: not been previously occupied or if the dwelling is part of a development, was sold by the developer of that development and has not been occupied for more than 12 months in total”.
The fees for applying for FIRB approval vary depending on the property price and range from AUD 5,700 to over AUD100,000.
New Dwelling Exemption Certificate
However, in circumstances where a property developer holds a new or near-new dwelling exemption certificate, this allows the developer to sell dwellings in a specified development to a foreign person, and the foreign buyers do not require individual foreign investment approval to purchase.
Developers may apply for the New Dwelling Exemption Certificate if the development meets the following criteria:
- it consists of 50 or more dwellings
- has development approval from the relevant government authority
- if applicable, that foreign investment approval was sought to purchase the land and that any conditions are being met
Where a developer holds a New Dwelling Exemption certificate, it limits the number apartments which foreign buyers can purchase to 50% of the total apartments. If the 50% quota is reached, any additional foreign buyers will require approval from FIRB on an individual basis.
Sales contracts differ between those with pre-approved New Dwelling Exemption Certificates and for those buyers obtaining their own FIRB approval. For those seeking their own FIRB approval, sales contracts should be ‘Subject to FIRB approval’.
Are there penalties?
Strong penalties exist for breaches of the FIRB rules and requirements can result in criminal prosecution.
We strongly recommend that if you are investing in Australia, then you only purchase a property where the developer holds a New Dwelling Exemption Certificate. These rules apply countrywide in Australia.
Don’t forget, when you’re investing in overseas properties you must consider the factors that will impact the performance of your investment.
With so many factors that can influence the performance of your overseas investment, we recommend why not request a copy of our Investor’s Guide to Australia – just email [email protected] for your copy.
Whilst the rules for FIRB apply nationally in Australia, the different States in Australia have different taxes and foreign investors are charged at different rates depending on the State.
Property investment is complex and multiple factors dictate whether a property is a good is investment – it’s not simply about the purchase costs. Before making a commitment to purchase any property, be sure to run financial models so you have a really clear understanding of the likely performance of your property.
We hope you found this article useful, read in conjunction with our other articles on investing in Australia and this should give you an understanding of the market. We’ve produced articles not just for Australia, but also the UK and New Zealand, so make sure you take the time to consider all your options and make sure your investment is right for you.
Important notice: Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect. You use the information at your own risk and accept no liability if you rely on this information. Proptech Pioneer is not a tax advisor, conveyance, lawyer, financial advisor or mortgage advisor. You should seek independent advice from independent professionals before making any investment decision