The Commonwealth Government has issued an Options Paper “Strengthening Australia’s Foreign Investment Framework” seeking comment on reforms to the foreign investment framework relating to residential real estate and Australian agricultural land and agribusinesses.
The Government is considering the following proposed reforms:
- increasing compliance and enforcement activities around foreign investment in residential real estate through the creation of a specialised investigative and enforcement area within the Australian Taxation Office; and
- amending the Foreign Acquisitions and Takeovers Act 1975 (the Act) to provide for increased criminal penalties and new civil pecuniary penalties and infringement notices.
The Government is also considering the introduction of application fees for all foreign investment proposals:
- For residential real estate proposals and rural land acquisitions, a fee of up to $5,000 would apply to properties valued under $1 million. Applications to purchase a property equal to or greater than $1 million would be subject to a fee of up to $10,000. This would then increase in increments of up to $10,000 for each additional $1 million in property value.
- Property developers seeking an advanced off-the-plan certificate would be levied an application fee based on the number of dwellings sold to foreign investors.
- Business, commercial real estate and agribusiness investments would be subject to application fees between $10,000 up to $100,000 depending on the size and sector.
Residential real estate
Otherwise the current framework for foreign investment in residential real estate will be retained.
Currently different rules apply depending on whether the property is a new dwelling or whether it is an established dwelling:
- All foreign persons (temporary residents and non-residents) can apply to purchase vacant residential land for development and newly constructed dwellings in Australia.
- Non-resident foreign persons are generally prohibited from purchasing established dwellings in Australia. However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia. The purchase of an established dwelling is conditional on the foreign person selling the property when they leave Australia. Temporary residents cannot acquire established dwellings for investment (rental) or holiday purposes.
Under the Foreign Acquisitions and Takeovers Act 1975, it is a requirement that each proposed acquisition of real estate be individually notified and reviewed, unless specifically exempt. However, property developers (Australian or foreign) can apply for an advanced off the plan certificate to sell all new dwellings in a development of 100 or more dwellings to foreign persons, provided the development is marketed locally as well as overseas. Foreign persons purchasing dwellings in a certified development do not require separate approval.
Rural land
From 1 March 2015, foreign investors must obtain prior approval for a proposed acquisition of an interest in rural land where the cumulative value of the rural land owned by the foreign investor, including the proposed purchase, is $15 million or more.
The Government also intends to introduce a new $55 million screening threshold for foreign investment in Australian agribusinesses.
