In breaking news, from 29 July 2022, all Foreign Investment Review Board (FIRB) application fees will double. This will increase the cost of investing in Australia by foreign persons. FIRB is the body responsible for screening inbound foreign investment in Australia.

Key changes

On 21 July 2022, the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Doubling) Regulations 2022 (Cth) was made by the Federal Government, doubling all FIRB fees that become payable on or after Friday 29 July 2022.

The doubling of fees will affect all categories of investment, including acquisitions of land (commercial, agricultural and residential), business, exemption certificates, internal reorganisations etc.

For example:

• the acquisition of residential land of $2 million or less (or agricultural land of $4 million or less, or commercial land, tenements and business of $100 million or less) will increase from $13,200 to $26,400;
• for off-the-plan sales, the application fees for new dwelling and near-new exemption certificates will double from $28,300 to $56,600; and,
• the maximum application fee will double from $522,500 to $1,045,000 (for acquisition of residential land of more than $40 million, agricultural land of more than $80 million, or commercial land, tenements or business of more than $2,000 million).

What is the effect on Existing FIRB Exemption Certificates?

For developers who already have the following:

• New Dwelling Exemption Certificates (NDEC); and
• Near-New Dwelling Exemption Certificates (NNDEC).

The reconciliation fees payable by developers every 6 months will also double in relation to contracts of sale that are signed up with purchasers on or after 29 July 2022.

The reconciliation fees for contracts of sale signed up to 28 July 2022 will be based on the existing FIRB fees.

What About Applications Currently Being Drafted?

If you are in the process of drafting an application for FIRB approval, to avoid the fee increase for such pending applications:

• the FIRB application should be lodged; and,
• the FIRB fee should be received by FIRB by close of business on the Thursday 28 July 2022 if you are able to finalise your application by then.

Why has this happened?

An Australian Labor Party 2022 federal election promise was to tackle housing affordability with its new ‘Help to Buy’ programme. To help pay for this, Labor foreshadowed a doubling of FIRB filing fees and an increase in penalties, which it is now putting into place.

Based on the Government’s media release, the doubling of fees is expected to generate an additional $455 million in Budget revenue over the forward estimates.

What does this mean for you?

If FIRB approval is needed, then investing in Australia will become more expensive due to the fee increase. The increase may be significant depending on what is acquired and the value of the acquisition, with a new cap of $1,045,000.

The guidance note that explains how FIRB application fees apply is now 43 pages long, and there are now more than 14 guidance notes in total on various FIRB approval subjects. As a result, it is more important than ever to seek advice and correctly categorise the land in question and make the correct FIRB application.

Contact

Please contact Chong Ming Goh at [email protected] or +61 3 9258 3537, or Nicholas Sparks at [email protected] or +61 3 9258 3523 to discuss how these changes may affect you.