The Australian Tax Office (ATO) has recently changed its position on rules regarding resales of property to foreign buyers.
The ATO’s new position is based on the Foreign Acquisitions and Takeovers Act 2015. Broadly, when reselling residential property to foreign buyers where the property in question has previously been “sold”, but no settlement took place, the rules are as follows:
A dispute arose as to whether the contract had been validly terminated with the Purchaser seeking the return of the deposit money and relevant damages. On the other hand, the Vendor sought the residue of the deposit and damages in relation to the resale of the Property.
The Court had to determine whether sending an email to the real estate agent validly terminated the Contract. Therefore, the Court considered whether real estate agents are authorised to receive notices of termination in relation to purchasers exercising their cooling off rights.
- Only a new dwelling can be sold to a foreign buyer;
- A new dwelling is a dwelling that is being built or has been built on residential land that has not been previously sold as a dwelling;
- A property will no longer be a new dwelling if it has been previously sold. In this context, sold includes if the property was sold under a sale contract which did not proceed to settlement – for example, terminated contracts; and
- Accordingly, if an apartment has been sold and does not proceed to settlement, it cannot be resold to a foreign buyer.
The FIRB website definition of new dwelling continues to suggest the old position, that is, that a dwelling will be a new dwelling even if it has been sold, provided the dwelling has not previously been occupied for more than 12 months.
- HWL Ebsworth Lawyers is making enquiries to clarify the position of the ATO. They are also raising the matter with the Property Council; and
- Until this issue has been resolved, you should not sell to foreign buyers any dwellings that have been previously contracted to be sold but did not proceed to settlement.
This article was written by Jonathan East, Partner and Jason Warat, Partner.