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More homes for Australians: Foreign investment fees set to hike for property investors

By Chong Ming Goh

• 12 March 2024 • 4 min read
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The Federal Government has announced changes to the Foreign Investment Review Board’s (FIRB) foreign investment framework application fee structure in an effort to increase housing stock and provide “more homes for Australians”.

The key changes

The key changes proposed include:

  • tripling of application fees for the purchase of established dwellings – no change in proposed for the purchase of new dwellings or vacant residential land;
  • doubling of vacancy fees for foreign-owned dwellings (purchased after 9 May 2017); and
  • a reduction of application fees for ‘build to rent’ projects, by applying the commercial fee schedule (instead of the residential fee schedule).

Timing

The Foreign Acquisitions and Takeover Fees Imposition Amendment Bill 2024 (Cth) (Bill) is proposed to commence on the later of 1 April 2024 or the day after the Act receives Royal Assent.

However, based on the Federal Government’s announcement, the changes applying to build to rent projects has commenced from 14 December 2023. It is not yet clear how this change is to be effected.

Application fees for established dwellings

Generally, foreign persons cannot purchase established dwellings in Australia except in circumstances where those persons have come to Australia for work or study, or where the purchase is for the development of more than one dwelling.

Currently, to purchase an established dwelling, the foreign person needs submit an application to FIRB along with an application fee. These application fees (indexed annually) range from:

  • $14,100 for properties purchased for $1 million or less;
  • up to a cap of $1,119,100 for properties with purchase prices of $40 million or more.

These application fees are now proposed to be tripled.

The significant increase in application fees for the purchase of established dwellings is aimed at encouraging foreign purchasers to invest in new housing developments, which is then expected to promote additional housing stock and support economic growth.

Application fees are usually not refunded if the application is rejected or the purchase does not go ahead.

Vacancy fees

The doubling of vacancy fees is to discourage foreign investors from leaving their dwellings vacant, with the aim of providing more homes for Australians who need them.

Currently, foreign persons who own dwellings purchased after 9 May 2017 with FIRB approval are required to pay a vacancy fee if their dwelling:

  • is not occupied; or
  • is not genuinely available for rent (continuous period of 30 days or more),

for at least 183 days in a 12 month period.

The vacancy fee is equal to the relevant FIRB application fee at the time of the purchase of the dwelling.

This change, together with the tripling of application fees for established dwellings, means that foreign persons could potentially be subject to a six‑fold increase in vacancy fees for future purchases of established dwellings. However, this should have limited application as only temporary residents are allowed to buy established dwellings, which must in any case serve as their principle place of residence and should not be vacant.

Encouraging build-to-rent (BTR)

The Federal Government announced that their intention for build to rent application fees is to reduce these to “the lowest commercial level – no matter the kind of land involved”. This will be a welcome change, particularly for residential property developers in the BTR space.

Currently, FIRB application fees for the acquisition of residential land for BTR housing projects are much higher than those for the acquisition of commercial land, and may be a disincentive for foreign persons investing in residential BTR projects.

For example, if the acquisition cost is $40 million, then:

  • based on the residential fee schedule, the current FIRB fee (before tripling for existing dwellings) is $1,099,800;
  • based on the agricultural fee schedule, the current FIRB fee is $535,800; and
  • based on the commercial fee schedule, the current FIRB fee is $14,100.

BTR development projects which will benefit from the changes include acquisitions where:

  • the land has one or more dwellings;
  • residential land accounts for the highest value in a mixed use project; or
  • the land is agricultural land.

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By Chong Ming Goh

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