On 29 July 2022, the Australian Taxation Office increased foreign investment fees, impacting every person and entity that are foreign to Australia. While these fees increase at the beginning of every financial year, the 29 July increase was unique, as the federal government increased the fees significantly. Because off the plan purchases can take years between the contract being signed and the contract being ready to settle, it is imperative that all foreign buyers are aware where they stand and budget accordingly.
Foreign Buyer Fee Overview
Any foreign buyer must pay a fee to the Foreign Investment Review Board (“the Board”) in order to be eligible to purchase certain properties in Australia, as regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth). If a foreign buyer fails to make an application to the Board to purchase in Australia, then they face significant penalties, such fines and imprisonment. For the Board to consider the application, the foreign buyer must pay the application fee.
When to pay the fee and what are the new fees?
The fee is generally payable around the time the foreign buyer lodges the application with the Board or the Board is notified that the foreigner is buyer or looking to purchase a property in Australia. The Board will not review the application until the fee is paid and then it will take up to 30 days for the Board to make a decision.
The amount a foreign buyer will pay as a fee depends on the purchase price in the Contract. However, the new application fees for residential and commercial lands are as of October 2022:
- if the purchase price is under $75,000 -> $4,000;
- if the purchase price is under $1,000,000 (for residential land) or under $50,000,000 (for commercial land) -> $13,200;
- if the purchase price is under $2,000,000 (for residential land) or under $100,000,000 (for commercial land) -> $26,400;
- if the purchase price is under $3,000,000 (for residential land) or under $150,000,000 (for commercial land) -> $52,800.
We have only touched on the most common purchase prices for residential and commercial lands. The fees will increase if you are purchasing residential land above $3,000,000, or commercial land above $150,000,000.
Which foreign buyers will have to pay the increased fee?
The crucial date is what date was the ATO notified that the foreign buyer intended to purchase a property in Australia, rather than what date the contract was signed. If a foreign buyer:
- made an application to the Board, to obtain approval to purchase land in Australia on or after 29 July 2022; or
- notified the Board of their Contract on or after 29 July 2022,
then the buyer will pay the increased fee. If a foreign buyer made an application to the Board, or notified the Board of their Contract, on or before 28 July 2022, then the foreign buyer will pay the pre-29 July fee.
What about an exemption certificate?
An exemption certificate is obtained where the Board provides blanket approval for any foreign buyer to purchase land in that development. The blanket approval is capped so no more than 50% of the buyers in the development can be foreign. This means that if an exemption certificate has been obtained, then the foreign buyer does not need to apply to the Board for approval because they have already received approval to purchase an Australian property.
Instead of lodging an application, the person who obtained the exemption certificate will notify the Board that the foreign buyer has entered into a contract to purchase land. The fee will then become payable to the Board once notified that a foreign buyer has purchased land in the area where an exemption certificate has been obtained.
The grey area is when an exemption certificate had been issued or applied for prior to 29 July 2022. The announcement was not clear which fee would be payable, the pre-29 July fee, as the exemption certificate was applied for before 29 July 2022, or the increased 29 July fee, if notification of the foreign buyer’s contract was given to the Board after 29 July 2022.
However, it appears that a foreign buyer will pay the pre-29 July 2022 fee if the exemption certificate had been obtained or applied for prior to 29 July 2022. Therefore, the increased fee will be payable if:
- the exemption certificate is applied for on or after 29 July 2022; or
- notice of the foreign buyer’s contract was given to the board on or after 29 July 2022.
Friday 29 July 2022 was a critical date for any foreign person or entity looking to purchase a property in Australia, as Foreign Investment Review Board fees doubled for any application made for a foreign buyer purchasing in Australia. Foreign buyers should be aware of what fee they pay, especially if on or after 29 July 2022:
- an application was made for Foreign Investment Review Board approval;
- an application to obtain an exemption certificate for Foreign Investment Review Board approval was made; or
- the Foreign Investment Review Board was notified that a foreign buyer had purchased a property where an exemption certificate had already been obtained.
If any of the above apply, then the foreign buyer will be paying the new Foreign Investment Review Board fees, which came into effect on 29 July 2022.
If you have any questions as you are a foreign buyer looking to purchase a property in Queensland, please contact the property team at NB Property Law for more information. We can also assist you in drafting your FIRB application or assisting you with your off the plan purchase.
Kayleigh Swift, Associate
Kayleigh Swift is an associate in our Commercial and Property team who assists with Employment Law matters. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions, property development and employee relations, Kayleigh provides practical advice to ensure smooth business transactions.
Chloe Skubis, Lawyer
Chloe Skubis is a Lawyer in our Property team who assists with various conveyancing transactions. Chloe is very experienced in residential conveyancing and is a problem solver. She always provides efficient service to all her clients.