The Foreign Investment Review Board (FIRB) is responsible for screening inbound foreign investments in Australia, and it has recently provided updates on guidance notes.

Introduction

The key updates introduced include:

• a temporary ban on foreign persons from buying established dwellings, subject to limited exceptions;
• availability of refund or credit of application fees in competitive bid processes;
• concessional FIRB fee treatment for Build to Rent (BTR) investments;
• greater scrutiny of tax arrangements; and
• updates to the Foreign Investment Portal for applications.

Double vacancy fees for certain foreign owned residential dwellings will also commence shortly.

Key changes

General ban on foreign persons buying established dwellings

From 1 April 2025 to 31 March 2027, foreign persons are banned from purchasing established dwellings. The exceptions to this policy include:

• the established dwelling is purchased for redevelopment and increases housing stock by at least 20 additional dwellings;
• the purchase supports the availability of housing on a commercial scale, such as retirement villages, assisted living or aged care facilities, and student accommodation;
• foreign controlled companies that employ workers from Pacific island countries and Timor-Leste and purchase housing for their Australian-based workers; and
• the purchase of an established BTR development, where the development continues to operate as a BTR.^[1] The development needs to consist of at least 50 dwellings owned by a single entity, offer lease terms of at least five years to the general public, and 10% of these dwellings need to be ‘affordable dwellings’.

Refund or credit of application fees in competitive bid processes

If foreign investment applicants are unsuccessful in a competitive bid process, they have a choice between a 75% refund or a 100% credit of their FIRB application fees. The refund must be applied for within six months after being informed of an unsuccessful bid. The credit must be used on a new application that is made within 24 months of the failed bid, and can only be used once, regardless of whether the full credit is used in its entirety.

Eligibility:

• Give notice of an acquisition of an interest through a competitive bid process.
• If requesting a refund, give notice of that action after 1 May 2024.
• Participation in the competitive bid process, which involves two or more participants placing bids for a particular asset with an outcome that is uncertain when the bids are made.
• Have been genuinely unsuccessful in the competitive bid process.^[2]
• Actions involving residential property (e.g. auctions of residential property) or actions covered by an exemption certificate are not eligible for the competitive bid refund or credit.

The treatment of concessional fees for BTR investments

Foreign persons who purchase BTR developments may be eligible for concessional fee treatment, which considers the land as ‘commercial’ for fee purposes only (i.e. instead of ‘residential’ or ‘agricultural’ fees, which are significantly higher), reducing the fee payable.

If the proposed investment involves interests in BTR and non-BTR related actions, the amount of the fee waiver will be calculated based on a case-by-case basis.

For the fee treatment to be considered, this must be requested in the application.

Greater scrutiny of tax arrangements

The guidance outlines specific tax issues of interest and that additional scrutiny will be applied to foreign investment proposals with certain characteristics likely to be considered of a higher risk.

The update provides examples of specific arrangements that will attract the Australian Taxation Office’s (ATO) attention and no longer sets out ‘standard’ and ‘additional tax conditions’ relating to the compliance with Australia’s tax laws. Instead, it lists examples of conditions under the headings ‘general’, ‘provision of information’, ‘restructures/reorganisations’, ‘thin capitalisation’, ‘financing’, ‘private equity/private capital’ and ‘conditions reporting’.

The guidance note also updates the Tax Checklist which details the tax-related information that the ATO requires to be included in a FIRB application.

Managed Investment Trusts

The ATO released Taxpayer Alert 2025/1. The alert identifies that the ATO have increased scrutiny of certain arrangements, such as existing trusts, that have been restructured to improperly gain access to the managed investment trust (MIT) withholding regime. Such inappropriate use results in access to reduced tax rates on capital gains and income.

The ATO has advised that such actions could attract the application of the general anti-avoidance rules and is encouraging individuals who have engaged in such arrangements to contact the ATO.

Vacancy fees

Certain changes were introduced in 2024 regarding fees for foreign investments in residential real estate. If a foreign owned dwelling was purchased since 9 May 2017, for vacancy years starting on or after 9 April 2024, the vacancy fees are doubled. This means that foreign owners of these properties have to pay double vacancy fees from 8 April 2025. The amount of the vacancy fee for these owners is double the amount of the original application fee they paid before they acquired the dwelling.

Updates to the Foreign Investment Portal (the Portal)

Since 24 February 2025, all compliance reports under non-residential no objection notifications and exemption certificates must be submitted via the first stage of the new Foreign Investment Portal (Portal). The final stage of the Portal is expected to be in use by the end of April 2025. By that time, the entire Treasury FIRB application process will go through the Portal (residential FIRB applications are through a separate ATO portal, which has been in operation for some time).

Practical changes of the final stage of the Portal:

• Foreign investors will need to set up a Portal account or use an adviser’s account to submit FIRB applications.
• Applicants will need to insert specific information as requested by the Portal, instead of using a cover letter. This will result in applications needing to be submitted with all required information included.
• All correspondence will be in writing through the Portal. It is likely that Treasury will only take phone calls or meetings in exceptional circumstances.

What does this mean for you?

The updated guidance notes means that there are stricter rules for foreign persons wanting to purchase residential property in Australia, with few exceptions available.

Concessional fee treatment for BTR investments, and the refund or credit of application fees in a competitive bid process are positive measure, so long as they fit the guidance note criteria.

The Government’s increased scrutiny of tax arrangements means that close consideration needs to be given to the potential tax condition examples provided for in the guidance note.

The practical changes of the Portal being implemented means that the process for FIRB applications change, and applicants need to be across this.

_{[1] To be considered for the BTR exemption, the development needs to be a BTR development and remain as such. For land acquisition for new BTR development, the shorter of the period in which the foreign person holds an interest in the development or 15 years after development completion. For acquisitions of established BTR developments, the period during which the foreign person holds an interest in the development.}

_{[2] ‘Genuinely unsuccessful’ means the foreign person needs to have made a bid (whether it was non-binding or binding), not have withdrawn from the process before they knew the bid would be unsuccessful, acted at arm’s length from the person conduct the process and been told by the person conducting the process that their bid was unsuccessful.}