With the government encouraging the return of foreign investors to Australia and the gradual reopening of international borders, many foreign workers and investors may soon be making their way onto Australian shores. One of the main things they may be considering is participating in the great Australian dream of home ownership. However, for a foreign resident, there are several steps to take.
Generally, foreign individuals will require approval from the Foreign Investment Review Board (FIRB) before acquiring an interest in residential land, regardless of the value. In line with the government’s policy of increasing housing stock, foreign individuals are also generally prohibited from purchasing established dwellings.
There are exemptions to this rule to allow temporary residents to purchase one established dwelling to use as their place of residence while they live in Australia, subject to certain conditions and FIRB approval. The property purchased cannot be rented out in whole or part or used for investment purposes. If the dwelling ceases to be the principal place of residence of the temporary resident, under the foreign investment rules, they will be required to sell, transfer or otherwise dispose of their interest in the dwelling within 6 months.
Temporary residents should be aware that if they are approved to purchase an established dwelling to live in as their principal place of residence but then conduct a substantial renovation that necessitates moving out of the property, that dwelling will no longer be considered their principal place of residence. Conditions of purchase will be breached, and penalties may apply.
Any redevelopment of the principal place of residence will require a variation of the foreign investment approval prior to commencement and conditions, including the requirement to genuinely increase housing stock, may be attached. An application or a variation seeking approval to purchase an established dwelling to redevelop into a single dwelling will not likely be approved even if the temporary resident intends to live in the dwelling once the development is complete.
In addition to purchasing one established dwelling to use as their main residence, temporary residents may also purchase new dwellings, vacant land, and/or established dwellings for redevelopment. There is no limit on the number of these other dwellings that a temporary resident may purchase, but approval is generally required before each acquisition.
Foreign individuals who want to purchase a dwelling, but do not have a specific property in mind can apply for an exemption certificate. This will allow them to bid or make offers on multiple properties within a specific State or Territory, but only one property may be purchased. Exemption certificates are valid for 12 months from the date of approval and set out the value limit and also the type of property that may be purchased.
It is worth remembering that for foreign individuals, approval must be sought from the FIRB before any purchase. A recent Federal Court case in which a foreign individual purchased 4 properties without permission, was caught out by the ATO’s use of extensive data sources and hit with $250,000 in penalties highlights the pitfalls of not properly seeking approval.