45 Cameron Street, Launceston Tasmania

Phone: (03) 6332 9353

/uploads/blogging/featured/keys-1317389_1920.jpg

Conveyancing in Tasmania - Foreign Purchasers of Residential Property

Foreign investment in Australia is heavily regulated with significant penalties for non-compliance. Accordingly, if you are not an Australian citizen or permanent Australian resident it is important to understand the approval requirements before purchasing land in Australia.

What is a 'foreign person'?

The Foreign Acquisitions and Takeovers Regulation 2015 (Act) defines a “foreign person” as:

  • any person not ordinarily resident in Australia; or
  • any corporation or trustee in which a person who is not ordinarily resident in Australia holds a substantial interest, any foreign government; and
  • and any other person that meets certain conditions set out in the Act.

A person is “ordinarily resident” in Australia if they have been in Australia for at least 200 days in the past 12 months and there is either no time limit on their stay in Australia or, if the person is not in Australia at the time of making the purchase, during their most recent stay in Australia, there was no limit as to time on that stay.

Rules for Established Houses

Non-resident foreign persons are generally not allowed to purchase established Australian houses. However, temporary residents can apply to purchase an established dwelling to use as a residence while they live in Australia. The purchase of an established dwelling in these circumstances would normally be approved on the condition that the property is sold when they leave Australia. Temporary residents cannot acquire established dwellings to rent out or for use as a holiday home.

Foreign controlled companies are generally not allowed to purchase established houses, although foreign companies with a substantial Australian business may be permitted to acquire established houses for the purpose of providing accommodation for their Australian based staff.

Rules for New Houses and Vacant Land

A foreign person will generally need to apply and receive approval from the Foreign Investment Review Board (‘FIRB’) before purchasing new houses and vacant residential land. Applications to purchase new houses are usually approved without conditions. Applications to purchase vacant land are normally approved subject to construction being completed within four years of being purchased. Once new houses are built or purchased, they may be rented out, sold, or retained for the foreign investor’s own use.

When does a foreign person need FIRB approval?

Foreign persons must have received FIRB approval before they acquire an interest in residential real estate. Examples of interests in residential real estate include:

  • signing an unconditional contract agreeing to purchase a house or a share of a house;
  • a security interest under a real property mortgage, even if the person that possesses the property is an Australian citizen or permanent resident;
  • an option that provides the right to purchase a property at an agreed price at some time in the future (such as an option to purchase);
  • a leasehold agreement that is reasonably likely, at the time the interest in the agreement is acquired, to exceed 5 years;
  • increasing the share of ownership of a house that the foreign person already has an interest in; or
  • acquiring shares in a corporation or units in a unit trust where interests in residential real estate exceeds 50 per cent of the entity’s assets.

Summary

Foreign persons should apply for approval before taking an interest in residential real estate.

Applicants must wait to receive that approval before taking an interest in residential real estate.

If you think that you might need FIRB approval to purchase a property but want to sign a contract, it is important to ensure that the contract is made subject to obtaining FIRB approval.  This way if FIRB does not grant approval to the contract, it can be terminated.  You should seek legal advice to ensure that the contract is drafted to protect you.

If you think you might need FIRB approval for your purchase of Australian property, contact us before you sign a contract. You can call us on 03 6332 9353 or use our Contact Us form http://www.cormistonlegal.com.au/contact

 

Latest News