Foreign ownership of property
Foreign buyers
A foreign buyer can be a natural person, a corpor ation, or a corporation acting as a trustee.
Foreign Investment Review Board
The Australian Government’s Foreign Investment Review Board (FIRB) decides whether a foreign buyer is eligible to acquire land in Australia.
In general, a foreign buyer of residential property (including vacant land) in Australia must obtain the FIRB’s approval of the purchase before entering into a contract of sale. There is an exception where a foreign buyer is purchasing a home with their Australian spouse as joint tenants.
The FIRB’s powers to enforce this requirement are extensive. The buyer may also have to pay damages to the vendor for breach of contract if a sale is found to be void because the buyer failed to obtain the FIRB’s approval.
For more information about the FIRB, see www. firb.gov.au.
Register of Foreign Ownership of Australian Assets
From 1 July 2023, foreign buyers must also register their ownership of certain Australian assets (including land) to the ATO via its online platform within 30 days of the acquisition. This includes ongoing obligations when the residential property is disposed of in the future, notwithstanding the value of the interest.
Additional land transfer duty
If a buyer of property in Victoria is not one of the following:
- an Australian citizen;
- the holder of a permanent visa; or
- a New Zealand citizen holding a special category visa (sub-class 444) who is in Australia at the time of settlement, then the SRO adds eight per cent of the purchase price of the property onto the duty payable. This rate applies to contracts entered into on or after 1 July 2019. If you are a foreign buyer, you may be entitled to an exemption from paying an additional duty if you purchase a principal place of residence jointly with your spouse or domestic partner who is an Australian citizen or permanent resident or a New Zealand citizen who holds a special category visa.
Absentee owner land tax surcharge
An additional 2 per cent land tax surcharge applies to all land owned by an ‘absentee owner’, an owner who is not an Australian citizen and does not reside in Australia. This will increase to 4 per cent in the 2024 land tax year. This is in addition to the standard land tax.
Capital gains tax withholding
When foreign owners sell property, if the sale price is more than $750 000 and the vendor cannot produce a clearance certificate from the ATO, purchasers will need to withhold 12.5 per cent of the sale proceeds and remit it to the ATO. They would not be entitled to the capital gains tax main residence exemption unless they met one of the limited exceptions.
Foreign trusts and stamp duty
Where a discretionary trust deed does not exclude foreign beneficiaries, then the SRO automatically deems the trust to be a foreign trust. In these circumstances, the extra eight per cent land transfer duty applies. This can also apply to unit trusts where more than 50 per cent of the units are held by foreign entities (i.e. foreign residents, foreign corporations and discretionary trusts that don’t exclude foreign beneficiaries).
Other trusts can also be considered to be foreign if some or all of the beneficiaries are foreign entities. A buyer should get advice from their solicitor and accountant about whether they or their purchasing entity is considered to be foreign before signing a contract.
Foreign corporations and stamp duty
A corporation is considered to be foreign if it is incorporated outside of Australia or more than 50 per cent of voting power/shares/potential voting power is held by a foreign entity. The extra eight per cent land transfer duty applies if a corporation is considered to be a foreign entity.
