Foreign investment rules – what are they and do they apply to me?

The level of foreign investment in the Australian property market is often talked about as having a negative affect on housing affordability.

In fact, it’s such a hot topic that the Foreign Investment Review Board (FIRB) has been under attack in the media for failing to police or enforce compliance with foreign investment rules.10916423_s

But what actually is a ‘foreign person’ and what are the current rules for foreign buyers looking to purchase Australian residential property?

Here’s a snapshot for you…

Who do the foreign investment rules apply to?

Generally speaking foreign investment rules apply to ‘foreign persons’ which broadly means:

  •   any natural person who is not an Australian citizen or not ordinarily resident in Australia; or
  •   any company or trust structure where either (a) 15% or more is ultimately owned or controlled by any one foreign person or corporation, or (b) 40% or more is ultimately owned or controlled by one or more foreign persons or corporations.

There are also additional rules and further subcategories relating to other categories of foreign persons (including foreign governments), and there are exemptions relating to New Zealand citizens acquiring residential property and US citizens acquiring commercial property.

What are some of the most pertinent rules for foreign buyers looking to purchase Australian residential property?

Below is a list of the 6 most pertinent rules relating to foreign buyers of Australian foreign

  • For each specific property that a foreign buyer seeks to purchase, that foreign buyer must apply to FIRB to purchase that property. General applications to purchase property are not accepted although separate and simultaneous applications are able to be made for multiple properties.
  •  If FIRB approves the purchase, the approval letter is valid for 12 months but the approval attaches to the applicant, not the property (ie it is not transferable to another party).
  •  Foreign persons can only purchase vacant land or new property if approved by FIRB.  Established dwellings cannot be purchased, however established properties for redevelopment may in some instances be approved for purchase.
  • Temporary residents, if living in Australia, may purchase one established dwelling but they must sell the established property if Australia ceases to be their principal place of residence.  They only have three months to sell the property from the date on which they left Australia.
  •  If a temporary resident becomes a permanent resident then all conditions cease to apply.
  • If a developer has been granted pre-approval by FIRB to sell new dwellings to foreign persons then each foreign person is not required to submit an application to FIRB to purchase the property.

What is FIRB and how do they make decisions?

The Foreign Investment Review Board (FIRB) examines proposals by foreign persons to invest in Australia and makes recommendations to the Treasurer on those subject to the Foreign Acquisitions and Takeovers Act 1975 and Australia’s foreign investment policy.

Here we’ll examine the types of dwellings foreign persons may wish to acquire and how the FIRB rules apply to each type of dwelling.

Residential land

Generally any acquisition of residential land by foreign persons must be approved by FIRB regardless of its value.

FIRB treats different types of residential dwellings quite differently however, so it is important to consider the type of property sought to be purchased.

1. New dwellings

A new dwelling is considered to be a dwelling that has not previously been sold by a developer and has not been occupied for more than 12 months.

new vs old

Whilst a foreign person is required to obtain FIRB approval prior to purchasing a new dwelling, it is FIRB policy to approve applications without conditions.

FIRB considers the acquisition of new dwellings by foreign persons not to have a negative impact on housing stock in Australia.

As mentioned in our previous article, certain developers can apply to FIRB for an upfront approval to sell to foreign persons.

This approval therefore removes the need for the foreign person to make an individual application to FIRB.

Developer approvals are usually granted if the developer sells off-the-plan lots of 100 or more and intends to have much of the marketing campaign delivered within Australia (ie not solely overseas).

If upfront approval is granted then the developer will be required to meet ongoing reporting requirements.

2. Established dwellings

Basically, if it’s not a new dwelling, it’s considered to be an established dwelling and will most likely not be approved by FIRB for acquisition by a foreign person.

However, some exceptions apply.  These are:

  •  A foreign person operating a substantial Australian business may purchase an established dwelling if the purpose of the purchase is to house Australian staff.
  •  A foreign person may in some instances be approved to purchase an existing dwelling where it is being acquired for redevelopment.  Generally this approval will be granted on the basis that the established dwelling cannot be rented prior to demolition and the redevelopment (ie continuous construction) must commence within two years of approval being granted.

3. Vacant land

Generally FIRB approval will be granted to a foreign person wishing to purchase vacant land for residential development on the proviso that continuous construction commences within two years of approval being granted.

Commercial land

landCommercial land is defined to be any land that is not residential or rural land.

Generally, FIRB approval is not required to be obtained for developed commercial land valued at $54 million.

However, if the property is heritage listed then the threshold is reduced to $5 million.  A higher threshold ($1,078 million) applies to United States and New Zealand investors.

Applications to acquire vacant land for commercial development are normally approved subject to the condition that continuous construction commences within five years.

Rural land

Rural land is defined as land used wholly or exclusively for the purpose of carrying on a business of primary production.

FIRB approval will be required to buy an interest in a primary production business where the total assets of the business exceed $248 million (or $1,078 million for New Zealand and United States investors).

Legally Yours comment

Failure to comply with foreign investment laws can lead to penalties and/or an unwinding of the transaction.


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Mira Stammers


Mira is a solicitor and CEO of Legally Yours, has been working as a lawyer since 2007 in both Melbourne and London, and founded Legally Yours with the aim of make the law more accessible and affordable for all Australians. Visit Legally Yours.

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