Changes To The Foreign Investment Review Board Rules

The Australian Government has recently announced the introduction of new disclosure rules and fees for all foreign investment in Australia.
The current rules require the following investors to register and seek approval with the Australian Government’s Foreign Investment Review Board:

  • 1. Foreign Governments
    All foreign government investors must notify the Australian government and get prior approval before making a direct investment in Australia
  • 2. privately-owned foreign investors – business acquisitions
    Foreign persons should notify and get prior approval before acquiring a substantial interest in, or control of, an australian business that is valued above $252 million. Foreign persons also need to notify for prior approval if they wish to acquire a substantial interest in an offshore company whose Australian subsidiaries or gross assets are valued above $252 million.
  • 3. privately-owned foreign investors – agricultural/rural land
    Foreign persons must seek prior approval for a proposed acquisition of an interest in rural land where the cumulative value of rural land that the foreign person (and any associates) already holds exceeds, or immediately following the proposed acquisition is likely to exceed, $15 million.
  • 4. privately-owned foreign investors – real estate
    Regardless of value, foreign persons generally need to notify the Government and get prior approval to take an interest in residential real estate, vacant land or to buy shares or units in Australian urban land corporations or trusts. Foreign persons also need to notify for prior approval if they want to take an interest in developed commercial real estate that is valued at $55 million or more.

Residential Real Estate Detailed Explanation

Temporary Residents

Temporary residents may acquire one established dwelling (second-hand) only and it must be used as their primary place of residence in Australia. They may not rent the property and it must be sold once it ceases to be primary place of residence or the temporary resident departs australia. Temporary residents are not permitted to buy established dwellings as investment properties. Temporary residents are allowed to purchase new dwellings (purchased directly from the developer and not previously occupied for more than 12 months in total) and vacant land for residential development. However, they must apply to the FIRB for approval of these purchases.

Foreign non-residents

Foreign Non-Residents cannot buy established dwellings as investment properties or as homes. They may acquire an existing dwelling for the purpose of redevelopment (demolish an existing dwelling and replace it with multiple dwellings). However, there has been talk in the media that the Government is looking to tighten up the rules and no longer allow the purchase for redevelopment. Foreign Non-Residents are allowed to purchase new dwellings and vacant land for development.

New Rules – Fees For All Foreign Investment Applications

Fees on all new foreign investment applications will commence from 1 December 2015. any applications prior to this date will have no application fees charged. The fees will be required to be paid before the investment application is processed. The 30 day time period for assessment will commence after the payment of the fee. Fees include the following

  • Residential property valued at $1 million or less – $5,000
  • Residential property valued over $1 million – $10,000 plus $10,000 for each additional million
  • Commercial real estate – $25,000
  • Business Acquisitions valued at less than $1 billion – $25,000
  • Business Acquisitions with value greater than $1 billion – $100,000
  • Internal Re-organisations – $10,000

New Rules – Registration with the Australian Taxation Office

Agricultural/rural land interests

The new rules require registration of agricultural interests with ATO regardless of land value. all existing holdings must be registered by 31 December 2015. Any new interests or changes in holdings of agricultural land must be registered within 30 days. The following details will be required for registration: entity details, Foreign Investment Review Board approval number (if applicable), land location, size and usage details, land title information, size or level of
foreign interests.
Register agricultural land interests at www.ato.gov.au/aglandregister.

Australian residential real estate

From 1 July 2016 ATO will record foreign ownership of all Australian Residential real estate.
All breaches to the Australian Residential Real Estate rules should be disclosed by 30 November 2015 to take advantage of reduced penalties:

  • Breach includes failure to seek approval from FIRB prior to purchasing new residential real estate in Australia or breached conditions of approval (such as renting out premises or purchased additional properties while on provisional visa)
  • May receive retrospective approval and up to 12 months to divest the property
  • Avoid criminal prosecution and penalties
  • New penalties apply for those who do not follow the rules from 1 December 2015
  • Disclose at www.ato.gov.au/rpp