The Australian property market has drawn increasing numbers of overseas buyers in recent years, with many of them enjoying record capital growth and strong rental returns.
However, with recent moves from government bodies and regulatory agencies to slow down the housing boom and restore affordability for young Aussie buyers, the landscape has changed a little.
Here’s everything you need to know if you’re a property investor from overseas, who is planning on buying a property in Australia…
According to the Australian Government’s Foreign Investment Review Board website, foreign investment approval is generally required before an overseas resident can purchase residential property in Australia.
The government has also taken the stance that overseas investment should add to the existing housing stock, as this creates jobs in the building industry and supports Australia’s economic growth.
As such, your proposal to invest in Australia is more likely to be approved if it involves creating at least one new dwelling, than if you plan to buy an established house.
For example, if you hope to buy an older home and knock it down, you’ll need to redevelop the site to include at least two dwellings so you don’t fall foul of the legislation.
Foreign non-residents will need to get foreign investment approval – this includes corporations, trustees and governments from outside Australia.
It can get complicated when you are investing with others as a company, as the residency and citizenship of each individual involved in the company will be taken into account, such as if you go into business with a relative who lives in Australia, while you reside elsewhere.
Foreign non-residents can purchase new properties that have not been previously occupied.
You can also purchase vacant land and develop it, or an established dwelling that you intend to demolish and redevelop the site.
You won’t be able to purchase an established home and use it to live in, for holidays or rent it out.
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Temporary residents on bridging or temporary visas, who currently reside in Australia, may purchase one established dwelling to live in, but are usually unable to rent it out.
If you’re a temporary resident, you’ll need to seek approval if you plan to redevelop the site of an established dwelling.
New dwellings can be purchased by foreign investors without any conditions, and vacant land can be purchased if you plan to develop it within four years.
You’ll need to pay fees for any residential real estate application you make as a foreign investor in Australia, and the amount will vary depending on the value of the land or dwelling purchased.
The first step is to head to the new FIRB application portal and apply using the Australian Taxation Office’s foreign investment application form.
Your application will need to include a cover letter identifying how your transaction will fit into current legislation, and confirm whether it meets the financial thresholds set out in the Foreign Acquisitions and Takeovers Act 1975 (Cth).
It will also need to include your personal and/or company or trustee details, such as major activities and locations, existing investments and assets and any details of existing relationships, including economic interests, between you and the seller.
You’ll further need to demonstrate that the transaction is not contrary to Australia’s national interest, and that it has a sound commercial rationale.
The application process can be very time consuming, detailed and confusing, so engaging an Australian property lawyer or buyer’s agent with specific experience in foreign ownership is a good idea.
Breaches of the Australian foreign investment framework can lead to civil penalties including fines and disposal orders, as well as possible criminal convictions.
So, you’re planning on investing in the Australian property market, the ideal path forward is to seek qualified legal advice.