Foreign Investment in Australia

Foreign investment in Australian real estate is becoming more complex by the day. And this can be attributed to the spate of guidelines and restrictions that federal government has in place.  

The Foreign Investment Review Board (FIRB) ensures that every property purchaser classified as a ‘foreign person’ has to seek their approval before they can purchase real estate in Australia. Compliance to the rules is crucial, and failure to do so constitutes a penalty or multiple penalties.

It’s in every foreign investor’s interest now to know what to do before engaging in any real estate transaction in Australia.

In the following article, we make light of some of the overarching principles of the often complex FIRB requirements pertaining to property investment in Australia for foreign persons.

Here’s what you need to know about foreign investment in Australia

1 – What’s Investible and What’s Not?

  • New Dwellings and Vacant Land

New dwellings and vacant land are investible by foreign persons on par with the Australia’s foreign investment framework.

A dwelling is regarded as a NEW DWELLING if it will be, is being, or has been built on residential land, and has not sold as a dwelling before. It shouldn’t have been occupied previously. Or, as part of a development, it shouldn’t have been occupied for more than 12 months in total since the developer sold it.

Foreign persons have to apply and receive approval before they can buy new dwellings. Usually, these applications are granted without conditions. However, applications to purchase vacant land are approved subject to construction being completed within four years from the time of approval.  

It’s also worthy to note that land that’s had an established dwelling on it before is not treated as vacant land.

  • Established Dwellings

Non-resident foreign persons are not allowed to purchase established dwellings in Australia. However, foreign persons who are temporary residents can apply to purchase one established dwelling on the basis that they need a residence during their time in Australia. Under these circumstances, the purchase of an established dwelling is conditional provided the foreign person sells the property when they leave Australia.

Foreign persons can also seek approval to buy established dwellings for redevelopment. That is demolishing the current dwelling and constructing a new one in its place. These applications are normally approved with a caveat—at least two dwellings have to be built for everyone that’s demolished.


2 – What’s needed for Foreign Investment Approval?

  • What is the Approval Process?

It is considered a breach of the law if a foreign person takes an interest in residential property without receiving approval. If one is faced with a situation where they stand to lose a property that they want to buy simply because they’re yet to receive foreign investment approval, they can enter into a contract with the seller in which they consider this factor.

  • When does a foreign person need to seek approval for a proposed purchase?

Before they can gain an interest in residential real estate, foreign persons must receive approval.

According to the FIRB, an interest in residential real estate refers to any one of the following:

  • signing an unconditional contract agreeing to purchase a dwelling;
  • signing an unconditional contract agreeing to purchase a share of a dwelling (such as joint tenants or tenants in common with any number of other people);
  • a security interest under a real property mortgage, even if the person that possesses the property is an Australian citizen or permanent resident;
  • an option that provides the right to purchase a property at an agreed price at some time in the future (such as a put and call option);
  • a leasehold agreement that is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years;
  • increasing the share of ownership of a dwelling that the foreign person already has an interest in;
  • acquiring shares in a corporation or units in a unit trust where interests in residential real estate exceeds 50 per cent of the entity’s assets; or
  • any other acquisition that meets the definition of an interest in Australian land under the Foreign Acquisitions and Takeovers Act 1975.
  • How long does the approval process take?

In the approval process, the decision making body is statutorily required to make a decision within 30 days from the date of full payment of the relevant application fee, and has a period of no more than 10 more days in which to notify the applicant of the outcome.

  • Who is exempt from application for approval?

Not all purchasers of residential real estate require approval. Those that don’t include:

  • Australian citizens, regardless of whether they are resident in Australia or not.
  • New Zealand citizens;
  • holders of Australian permanent residency visas;
  • And those whose spouses are one of the above, given the property is to be purchased in both their names as joint tenants.
  • How to apply for approval

For those that wish to apply for foreign investment approval, the Australian Taxation Office provides information on its website to guide you as you fill out the residential real estate application form.

The application form consists five sections that should be filled out correctly by the foreign person. They include contact details, applicants, application type, property details, and the declaration.

The form requires that you fill it out in full and submit it in one sitting. While any changes to the application form after it’s been approved may require that you seek new approval which is subject to further fees.

  • Penalties

There are penalties that may apply for breach of Australia’s foreign investment rules. Cases of non-compliance with the foreign investment framework of Australia may also be forwarded to law enforcement agencies.

Enforcement measures for non-compliance include criminal prosecution, civil penalty orders, disposal orders, and infringement notices. In addition, the Treasurer may be able to require the interest in residential real estate to be sold.

For more information, see the FIRB website guidance note on penalties.