The Federal Parliament has just passed the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2024, which will make amendments to the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Fee Act) and the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 (Regulations).
The Bill will:
- triple the existing fees for acquiring established residential dwellings; and
- double the vacancy fees for all foreign-owned dwellings purchased since 9 May 2017.
Foreign investment in residential land
Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), foreign persons must apply to the Foreign Investment Review Board (FIRB) and obtain approval before acquiring any residential land, regardless of value.
Foreign persons are generally permitted to acquire ‘new dwellings’, subject to obtaining FIRB approval.
However, to protect Australia’s existing housing stock, foreign persons are generally prohibited from purchasing residential land which contains an ‘established dwelling’. There are limited exceptions to this prohibition. For example, foreign persons can apply for FIRB approval to purchase an established dwelling:
- if they are temporary residents, provided that they can only buy one established dwelling to live in, and must sell the dwelling within 6 months of leaving the country; or
- for redevelopment if the redevelopment:
- will genuinely increase Australia’s housing stock; or
- is a commercial development (which will be subject to development conditions imposed by FIRB).
Current fee regime
When making an application to FIRB to purchase residential land, foreign persons are generally required to pay an application fee calculated based on the value of the land.
The current application fee to acquire residential land is the same irrespective of whether the residential land contains a new dwelling, an established dwelling or is vacant land.
In addition, foreign persons who own residential property purchased after 9 May 2017 are required to pay an annual vacancy fee if their property is not residentially occupied or genuinely available for rent for more than 183 days (approximately 6 months) during a year.
The vacancy fee (if payable) is generally equivalent to the residential land application fee that was paid by the foreign person at the time the application for FIRB approval was made.
Amendments to the FIRB residential land fee regime
The Bill, which includes several additional changes to the Fee Act and the Regulations, will:
- triple the existing fees for acquiring established residential dwellings; and
- double the vacancy fees for dwellings purchased since 9 May 2017.
The Australian Government’s intention in implementing these changes is to encourage foreign persons to invest in new housing developments (rather than established dwellings), create additional housing stock and support economic growth, as well as encourage foreign persons to make their unoccupied properties available to renters.
Increased fees
The following tables provide examples of the impact of tripling fees for established dwellings and doubling of vacancy fees:
Established dwelling application fee comparison
| Acquisition Value | Current Application Fee | New Application Fee |
|---|---|---|
| $1 million or less | $14,100 | $42,300 |
| $2 million or less | $28,200 | $84,600 |
| $3 million or less | $56,400 | $169,200 |
| $4 million or less | $84,600 | $253,800 |
| $5 million or less | $112,800 | $338,400 |
| ... | ||
| More than $40 million | $1,119,100 | $3,357,300 |
Vacancy fee comparison
| Acquisition Value | Previous annual vacancy fee for residential dwellings (for land acquired between 1 July 2023 and 31 March 2024) | New annual vacancy fee for: any residential dwellings acquired between 1 July 2023 and 31 March 2024 and new residential dwellings acquired on or after 1 April 2024 | New annual vacancy fee for established residential dwellings acquired on or after 1 April 2024 |
|---|---|---|---|
| $1 million or less | $14,100 | $28,200 | $84,600 |
| $2 million or less | $28,200 | $56,400 | $169,200 |
| $3 million or less | $56,400 | $112,800 | $338,400 |
| $4 million or less | $84,600 | $169,200 | $507,600 |
| $5 million or less | $112,800 | $225,600 | $676,800 |
| ... | |||
| More than $40 million | $1,119,100 | $2,238,200 | $6,714,600 |
Amendments to the build-to-rent fee regime
Separate to the changes to implemented by the Bill, as of 14 December 2023 the FIRB application fee for residential land to be used for build-to-rent (BTR) projects was reduced. This change means that the application fee for BTR projects will now be imposed at the lowest commercial land fee level rather than the higher residential land fee level.
Importantly, no enabling legislation has been passed for this change. It is assumed, at this stage, that this change will be administered under FIRB’s general discretion to waive or reduce fees.
Next steps
The Bill commences on either the day after Royal Assent or 1 April 2024, whichever occurs later.
HWL Ebsworth’s Property Team has extensive experience advising foreign investors on residential, industrial and commercial real estate transactions and redevelopment projects, and regularly partners with our Corporate & Commercial team to assist foreign investors in navigating the FIRB approval requirements, application process and ongoing compliance issues relating to these projects. If you are concerned your land acquisition may be affected by these upcoming changes to the fee regime, please contact us for further information on how we can assist you prior to the 1 April 2024 commencement date.
Amendments to the FIRB residential land fee regime
The Bill will not impact the application fees for the acquisition of new (or near-new) dwellings within the scope of a New (or Near-New) Dwelling Exemption Certificate held by a developer.
This article was written by Cam Steele, Partner and Matthew Powell, Partner.
