16 May 2021
Buying a Property in Australia: FIRB Approval
Buying a property in a new country can always come with its challenges. The FIRB regime is a complex area that needs to be considered when foreign persons begin the property process. This article will provide an overview of FIRB and aspects to take note of.
The Foreign Investment review board is a regulatory framework that oversees foreign investment in Australia. The Foreign Investment Review Board (FIRB Board) is a non-statutory government department that evaluates application from foreign individuals who intend to invest or buy property in Australia. The main purpose of FIRB is to provide guidance to foreign persons on the policy and the Act. The Government overlooks foreign investments to ensure they remain consistent with community interests. The general stance of this policy is to welcome foreign investments. The policy is comprised of the following legislations:
- the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“the Act”)
- the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (“the Fee Regulation”)
- the Foreign Acquisitions and Takeovers Amendment (Exemptions and Other Measures) Regulations 2017 (Cth)
- the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Cth)
The decisions under the above framework are made by the Commonwealth Treasurer, who is advised by the FIRB Board.
Who does and doesn’t require FIRB Approval?
The FIRB administration applies to foreign persons (including holders of TSS visa, work visa or student visa or a corporation or trusts in which foreign person hold a substantial or controlling interest) seeking to invest in Australian land or entities. Prior to entering into relevant transaction an application for an approval of the proposed transaction is required.
As regards residential property, foreign persons would usually be granted approval to purchase already established dwelling provided that the property is to be used as their primary place of residence and further that they dispose of the property when they leave Australia. Investment in existing residential land by foreign persons is otherwise generally prohibited.
If investment is residential property is intended by a foreign person, approval will only generally be granted for new dwellings or vacant land.
Fees apply for any application for approval and additional duty is usually also payable for any foreign acquisition in residential land.
Some exemptions are applicable for foreign individuals, such as, if a relevant property has been inherited, was granted via a court order or if purchasing a vacant land, the property developer obtained an exemption certificate for the property being purchased.
There are also exemption for acquisitions by foreign persons who acquire land with a spouse who is an Australian citizen or permanent resident and the property is acquired by them as their principle place of residence as joint tenants. This exemption does apply to de-facto relationships but does not apply to business partners, longtime friends, parents/child or siblings.
What’s the costs and how do you apply?
Foreign persons are required to pay a fee for each application made under the Act.
The fee for an application will generally depend on the value of the purchase price of the property.
Fees are paid when the application is lodged and the application process does not begin until the correct payment is received.
For residential land, fee tiers increase every 1 million of consideration; fees start at $6,530.00 for purchases of $1,000,000.00 or less rising to a maximum of $500,000 for purchases of more than $40,000,000.00.
Under section 53 of the Fee Regulation, a lesser fee of $2,000.00 will apply where the purchase price is less than $75,000.00.
For further information about these fees, we would recommend referring to the official FIRB application fees page.
The FIRB regime is complex and requires careful consideration. If you need any assistance determining whether any proposed acquisition of land is or would be subject to the FIRB regime, please contact us for appropriate advice.
How we can help you?
If you are seeking to purchase property and are concerned about FIRB, we can assist. JHK Legal’s subsidiary MKP Property Lawyers pride themselves in advising and assisting their clients to ensure they have a smooth process and are available via phone, email or face to face to discuss your concerns.
Written by, Christine Cherian