$10,000 FIRB fee to buy $1 million plus home: Tony Abbott policy unveiled

$10,000 FIRB fee to buy $1 million plus home: Tony Abbott policy unveiled
$10,000 FIRB fee to buy $1 million plus home: Tony Abbott policy unveiled

Foreigners approved to buy established residential properties will have to pay extra when they purchase through the Foreign Investment Review Board (FIRB) under laws proposed by the federal government.

A $5,000 fee will be payable on FIRB approved properties valued under $1 million, while a $10,000 application fee will apply at over $1 million. It will be $20,000 above $2 million, then rising incrementally.

Fines of up to 25% of the value of the property will be made for non-compliance as part of the Abbott government's new regime.

There will be a four week community consultation to consider the proposals by the Australian Treasury.

There are big changes which will affect the off the plan market, though no plan to put a buyer fee for off-the-plan.

Property developers seeking an advanced off-the-plan certificate will instead be levied an application fee based on the number of dwellings sold to foreign investors, based on the $5,000 under $1 million fee, and then the rising scale. 

Currently, property developers can apply for an advanced off-the-plan certificate to sell new apartments in a development of 100 or more to foreign investors (the investor does not then need to obtain separate approval).

These certificates are granted on the condition that the apartments are marketed in Australia, as well as overseas, to ensure that domestic buyers have the same opportunity to purchase the apartments. However, there are currently no penalties for breaching this condition.

The House Economics Committee report recommended a tightening of the rules around advanced off-the-plan certificates to ensure developers comply with their obligations to market properties to domestic buyers.

Recognising these concerns, the Government proposes to strengthen enforcement options by subjecting developers to civil and criminal penalties under the Act.

In addition, the Government is proposing to tighten the rules around the use of advanced off-the-plan certificates by limiting the value of all apartments that can be bought by a single foreign investor to $3 million in any single development.

If foreign investors want to purchase apartments above this value, they would have to seek individual approval. This would reduce the scope for any criminal behaviour (such as money laundering) by ensuring that high wealth investors are subject to the upfront screening process. 

Many of the proposals go further than those recommended by Kelly O'Dwyer's Parliamentary committee, but Prime Minster Tony Abbott said it will mean that foreigners who aren't playing by the rules won't be in the system.

"There are millions of Australians who want to realise the dream of owning their own home," said Abbott.

"Obviously we want the dream to continue."

Abbott said the fee structure was comparable with a system in New Zealand, through less punitive than regimes in Singapore and Hong Kong.

The fees would raise $200 million a year which would fund FIRB scrutiny and the establishment of a register of foreign home owners.

Non-resident foreign persons are generally prohibited from purchasing established dwellings in Australia.

However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia. 

The purchase of an established dwelling is conditional on the foreign person selling the property when they leave Australia.

Temporary residents cannot acquire established dwellings for investment (rental) or holiday purposes.

Under the Act, it is a requirement that each proposed acquisition of real estate be individually notified and reviewed, unless specifically exempted.

However, property developers (Australian or foreign) can apply for an advanced off the plan certificate to sell all new dwellings in a development of 100 or more dwellings to foreign persons, provided the development is marketed locally as well as overseas.

Foreign persons purchasing dwellings in a certified development do not require separate approval. 

But the government seeks feedback on proposed changes to advanced off the plan certificates, including:

  • Should penalties be introduced for developers that fail to comply with obligations to market domestically?
  • If so, what should developers be required to do to prove they have marketed domestically?
  • What level of penalty would be appropriate for developers that fail to comply with obligations to market domestically?
  • Are there alternative approaches that should be considered 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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