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Near-New Dwelling Exemption Certificates – FIRB fees

The Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interest) Bill 2019 (Bill) will allow the Foreign Investment Review Board (FIRB) to impose reconciliation fees on developers who have sold dwellings to foreign persons under a Near-New Dwelling Exemption Certificate (NNDEC) from 1 July 2017 onwards.

Background  

On 1 July 2017, the NNDEC was established for failed off-the-plan purchases in a development to foreign persons. A near-new dwelling is a dwelling that has never been lived in, was ‘sold’ by way of a binding purchase agreement but the sale ultimately failed to settle.

The NNDEC allows developers to sell near-new dwellings in a similar way to the sale of new dwellings under a New Dwelling Exemption Certificate (NDEC). This means developers may ‘re-sell’ near-new dwellings to foreign persons without those persons having to make their own application to the FIRB.

Exemption Certificate fees

NDEC Fees

Currently, developers must pay FIRB a fee (also known as a ‘reconciliation fee’) for every new dwelling sold to a foreign person under an NDEC. The fee for each dwelling is equivalent to the amount payable as if each foreign purchaser sought approval from FIRB individually. New dwelling fees are reconciled and paid on a six-monthly basis, starting from the date on which the NDEC was obtained.

NNDEC Fees

However, the Australian Government has not been receiving reconciliation fees for the sale of near-new dwellings under NNDECs. Consequently, the Bill will require developers to pay a fee for the sale of near-new dwellings to foreign persons under an NNDEC.

NNDECs usually include a statement that the Bill is being read in Parliament and therefore alerts developers to the requirement for reconciliation fees to be paid.

When will the new NNDEC fees come into effect?

The Bill was passed by both Houses of Parliament on 5 December 2019. The Bill came into force on 13 December 2019.

Which sales will be affected? 

The Bill will have a retrospective effect. This means these fees will apply to any sales of near-new dwellings under an NNDEC that were made on or after 1 July 2017.

No fees for early new dwelling exemption certificates

Exemption certificates for the sale of new dwelling issued before 1 December 2015 did not impose any reconciliation fees (No Fee NDEC).

In line with this and based on our queries to FIRB, NNDECs relating to projects which already have No Fee NDECs issued should also not incur reconciliation fees.

When are NNDEC reconciliation fees payable?

Similar to sales under an NDEC, developers must pay fees for the sale of near-new dwellings under an NNDEC on a six-monthly basis.

The first fee will be payable as follows:

Date when developer received the NNDEC First fee due First fee includes
Before the Bill is enacted NNDECs before the Bill is enacted

 At the end of the first six-month reporting period that falls at least 30 days after the Bill commences

Any fees payable from sales made by the developer under an NNDEC since the certificate was obtained
After this Bill is enacted NNDECs after the Bill is enacted

 Six months after developer receives the NNDEC

Any fees payable made from sales by a developer under an NNDEC within that six-month period

Quantum of fees

The amount of each six-monthly fee per near-new dwelling is calculated in the same way as sales under an NDEC.

The fees will be calculated according to the fee schedule as at the date of acquisition. For example, if a sale under an NNDEC occurred on 1 July 2017, the fees payable will be calculated according to the fee schedule that applied on 1 July 2017, and not according to the current schedule.

The schedule of fees is as follows:

Price of the acquisition Fee schedule for acquisitions made between 1 July 2017 – 30 June 2018 Fee schedule for acquisitions made between 1 July 2018 – 30 June 2019 Fee schedule for acquisitions made between 1 July 2019 – 30 June 2020
$1 million or less $5,500 $5,600 $5,700
More than $1 million and less than $2 million $11,100 $11,300 $11,500
Between $2 million and less than $3 million $22,300 $22,700 $23,100
$3 million $33,400 $34,000 $34,600

 

AUTHOR
Chong Ming Goh | Partner
+61 3 9258 3537
ChongMing.Goh@maddocks.com.au

 

The Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interest) Bill 2019 (Bill) will allow the Foreign Investment Review Board (FIRB) to impose reconciliation fees on developers who have sold dwellings to foreign persons under a Near-New Dwelling Exemption Certificate (NNDEC) from 1 July 2017 onwards.

Background  

On 1 July 2017, the NNDEC was established for failed off-the-plan purchases in a development to foreign persons. A near-new dwelling is a dwelling that has never been lived in, was ‘sold’ by way of a binding purchase agreement but the sale ultimately failed to settle.

The NNDEC allows developers to sell near-new dwellings in a similar way to the sale of new dwellings under a New Dwelling Exemption Certificate (NDEC). This means developers may ‘re-sell’ near-new dwellings to foreign persons without those persons having to make their own application to the FIRB.

Exemption Certificate fees

NDEC Fees

Currently, developers must pay FIRB a fee (also known as a ‘reconciliation fee’) for every new dwelling sold to a foreign person under an NDEC. The fee for each dwelling is equivalent to the amount payable as if each foreign purchaser sought approval from FIRB individually. New dwelling fees are reconciled and paid on a six-monthly basis, starting from the date on which the NDEC was obtained.

NNDEC Fees

However, the Australian Government has not been receiving reconciliation fees for the sale of near-new dwellings under NNDECs. Consequently, the Bill will require developers to pay a fee for the sale of near-new dwellings to foreign persons under an NNDEC.

NNDECs usually include a statement that the Bill is being read in Parliament and therefore alerts developers to the requirement for reconciliation fees to be paid.

When will the new NNDEC fees come into effect?

The Bill was passed by both Houses of Parliament on 5 December 2019. The Bill came into force on 13 December 2019.

Which sales will be affected? 

The Bill will have a retrospective effect. This means these fees will apply to any sales of near-new dwellings under an NNDEC that were made on or after 1 July 2017.

No fees for early new dwelling exemption certificates

Exemption certificates for the sale of new dwelling issued before 1 December 2015 did not impose any reconciliation fees (No Fee NDEC).

In line with this and based on our queries to FIRB, NNDECs relating to projects which already have No Fee NDECs issued should also not incur reconciliation fees.

When are NNDEC reconciliation fees payable?

Similar to sales under an NDEC, developers must pay fees for the sale of near-new dwellings under an NNDEC on a six-monthly basis.

The first fee will be payable as follows:

Date when developer received the NNDEC First fee due First fee includes
Before the Bill is enacted NNDECs before the Bill is enacted

 At the end of the first six-month reporting period that falls at least 30 days after the Bill commences

Any fees payable from sales made by the developer under an NNDEC since the certificate was obtained
After this Bill is enacted NNDECs after the Bill is enacted

 Six months after developer receives the NNDEC

Any fees payable made from sales by a developer under an NNDEC within that six-month period

Quantum of fees

The amount of each six-monthly fee per near-new dwelling is calculated in the same way as sales under an NDEC.

The fees will be calculated according to the fee schedule as at the date of acquisition. For example, if a sale under an NNDEC occurred on 1 July 2017, the fees payable will be calculated according to the fee schedule that applied on 1 July 2017, and not according to the current schedule.

The schedule of fees is as follows:

Price of the acquisition Fee schedule for acquisitions made between 1 July 2017 – 30 June 2018 Fee schedule for acquisitions made between 1 July 2018 – 30 June 2019 Fee schedule for acquisitions made between 1 July 2019 – 30 June 2020
$1 million or less $5,500 $5,600 $5,700
More than $1 million and less than $2 million $11,100 $11,300 $11,500
Between $2 million and less than $3 million $22,300 $22,700 $23,100
$3 million $33,400 $34,000 $34,600

 

AUTHOR
Chong Ming Goh | Partner
+61 3 9258 3537
ChongMing.Goh@maddocks.com.au