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Tax Insight: Legislation introduced on foreign owner annual vacancy fee

As foreshadowed in the 2017-18 Federal Budget, on Thursday 7 September 2017 the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 was introduced in the House of Representatives to implement an annual vacancy fee on foreign owners of residential real estate. In this Tax Insight we explore this new cost on foreign investment.

When will the vacancy fee apply?
  • The vacancy fee will apply to you if you are a foreign owner of Australian residential real estate and that property is not occupied or genuinely available on the rental market for at least 6 months in a 12 month period.
  • In determining who is a foreign owner, indirect interests held via companies and trusts will also be captured.
  • These new rules are proposed to apply to relevant applications submitted to the Foreign Investment Review Board (FIRB) from 7.30pm (AEST) on 9 May 2017.
How will the vacancy fee be administered?
  • General administration of the vacancy fee will rest with the Commissioner of Taxation (Commissioner) and therefore, the Australian Taxation Office (ATO). The Treasurer will also have the power to recover unpaid amounts.
  • A foreign owner will be required to lodge annually a ‘vacancy fee return’ to the Commissioner who will then issue a notice to the foreign owner if a vacancy fee is payable, explaining why the liability has arisen.
  • Where the vacancy fee is payable, the amount of the fee will equal the amount that was payable at the time of the FIRB application.
  • Penalties will apply for non-compliance.
When will the vacancy fee NOT apply?

The vacancy fee will not apply if the relevant property is:

  • Occupied for 183 days or more in a 12 month period by the owner or their relatives;
  • Subject to lease(s) or licence(s) with a minimum duration of 30 days which total 183 days in a 12 month period;
  • Made genuinely available on the rental market, with minimum durations of 30 days, for a total of 183 days in a 12 month period; or
  • Residential land, without a dwelling.

This article was written by Alina Sedmak, Associate and Nima Sedaghat, Partner.

Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.