New Fees Are on the House
November 25, 2015
Temporary visa holders should be aware of important changes to the rules relating to the purchase of Australian property.
Holders of temporary or provisional visas, such as a 457 Temporary Work (Skilled) visa or a stage 1 Spouse Visa, need approval from the Foreign Investment Review Board (FIRB) to purchase a residential property in Australia. The FIRB exercises wide powers to prohibit the purchase, or to allow it subject to conditions. Generally the FIRB will approve applications by temporary visa holders to purchase:
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New dwellings that have not previously been occupied;
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Vacant land for the purpose of building a new dwelling; and
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A maximum of one established dwelling, on condition that the visa holder uses it as their primary place of residence, and sells it once they no longer live in the property.
Over the last year, the Australian government has increased efforts to identify and sanction property purchases made without appropriate FIRB approval. A taskforce of 50 officers have investigated hundreds of cases in which foreigners were suspected of having bought property unlawfully. In November 2015, Treasurer Morrison ordered the forced sale of $9.7 million worth of property. This followed the forced divestment of six properties ordered by the previous Treasurer Hockey in August, and famously, the forced sale of the $39 million mansion Villa Del Mare on Sydney Harbour in March.
These efforts are gearing up to the introduction of additional rules that will come into effect on 1 December 2015. They include the following:
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The introduction of an application fee;
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Widened civil penalties for non-compliance include ‘on-the-spot’ fines; and
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Increased criminal penalties.
Application Fees
For the first time, applicants for FIRB approval will be charged a fee from 1 December. For land valued at less than $1 million, the proposed fee is $5000; for land valued over $1 million, the fee is $10,000 per each million or part thereof: for example, a property valued at $2.35 million would attract a fee of $30,000.
Civil Penalties
From 1 December, the government will have the power to issue fines of up to $10,800 for an individual, or $54,000 for a corporation, for acquiring new property without approval. Alternatively, in lieu of a fine, the government is able to apply for higher civil penalties consisting of the relevant application fee plus:
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10% of purchase price; or
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10% of market value of the property.
For acquisition of established property, the civil penalty will be the greater of:
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the capital gain made on divestment of property;
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25% of purchase price; or
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25% of market value of the property.
Criminal Penalties
The FIRB is able to pursue criminal penalties for breaches such as a failure to comply with a refusal of an application for approval, a condition imposed on approval or a divestment order. From 1 December the maximum penalties will be as follows:
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$135,000 fine and/or 3 years imprisonment for an individual
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$675,000 fine for a corporation.
What this means for temporary residents
Should you currently be negotiating a property purchase that will require FIRB approval, you should lodge your FIRB application by 30 November in order to avoid the new application fees. Applications must be prepared carefully to ensure that there are no errors, otherwise a new application will be required. Contracts for the purchase of residential land should be made conditional on FIRB approval.
Amnesty until 30 November
Reduced penalties have been arranged for investors who voluntarily disclose an unapproved property acquisition to the FIRB by 30 November. The government has undertaken not to pursue criminal penalties in such cases, and will allow 12 months for divestment of the property.
Should you have any questions about the FIRP approval process or requirements, please contact us.
