In October 2016, it was reported that the Australian Taxation Office (on behalf of the Foreign Investment Review Board (FIRB)) took the view that if an off-the-plan contract did not settle and was rescinded, the dwelling sold under that contract would be considered an established dwelling for the purposes of the foreign investment rules. The consequence would be that the FIRB rules would prohibit such a dwelling from being ‘re-sold’ to a foreign buyer.
The Government’s position has now changed, with Treasurer The Hon. Scott Morrison MP announcing on 26 November 2016 that in this scenario, the dwelling will still be treated as a new dwelling for FIRB purposes, for which a foreign buyer will be able to obtain FIRB approval.
The Treasurer’s announcement notes it is ‘common sense’ that an apartment or house that has just been built or is still under construction and for which the title has never changed hands is not considered an established dwelling for the purposes of the foreign investment rules.
If a New Dwelling Exemption Certificate (or Advanced Off The Plan Certificate) has been obtained by the developer, this can still be relied upon by the foreign buyer when the dwelling is re-sold.
It is important to note, however, there are a number of strategies to consider when managing purchasers who are facing challenges to settle. Rescission is not the only option. We encourage you to speak to us to help you navigate this challenging landscape and achieve the best outcome.
To view the Treasurer’s media release click here.
If you have any queries or would like to discuss, please contact a member of the Maddocks Development team.