REIA seeks FIRB fee overall given decease in demand
Jonathan ChancellorDecember 7, 2020
The Real Estate Institute of Australia (REIA) has fronted a Senate Economics Committee to give evidence on the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020.
REIA President Adrian Kelly has said that fees should be structured to reflect the cost of undertaking the assessment and administration by the Australian Government, instead of imposing unnecessary impediments on foreign investors in the residential property market.
“Foreign investment in the residential property market is the lowest it has been since 2015 – 2016,” he told the committee.
“We understand from our agents working in this area the cumulative impact of Commonwealth and State government fees has contributed to decreased demand from foreign investors.
“It has been our proposal to Treasury, and now this Committee, that fees should be equitable and simply reflect the cost of assessment and processing by FIRB.”
The Property Council of Australia has also condemned the new proposed fee amounts, that are not set out in the legislation but by way of FIRB fee regulations.
It noted the cost of applying for FIRB approval for the average developed commercial property transaction under this draft fee regime is set to increase from $26,700 to $66,000 – an increase of almost 2.5 times. For investments valued at just below $1b, the proposed fee increase would be more than nine times the current level.
"These very large cost increases for investment in commercial real estate – a very vanilla investment class from a security perspective – is not justifiable by any policy basis," the PCA advised.
"These proposed increases go far beyond administrative cost recovery and would put Australia at a material investment disadvantage to other countries," it noted.
The Treasury claimed updates to the fee framework will ensure that the cost of administering the foreign investment review framework is borne by foreign investors, as well as making the fee framework simpler and fairer.
"While some investors will pay more, they will be the investors proposing to undertake the highest value investments," Treasury advised.
"The reforms ensure that more of the costs of administering the framework are borne by larger investors and investors that currently pay a disproportionately smaller fee for their investment.
"In general, fees represent a small proportion of the costs associated with an investment, and this will continue to be the case.
"The maximum fee for a commercial transaction over $50 million will not be higher than 0.03 per cent of the consideration. For agricultural land over $2 million, it will not be higher than 0.66 per cent."
Mr Kelly said while CV-19 had attracted a welcome and wide-spread commitment from all levels of Australian governments to deregulate and be more business and investment-friendly, the REIA was concerned the fee-setting framework within the Bill did not meet these best practice policy aspirations.
“This is not just across the board but for each category of fees,” he said.
“That is, residential property applications should not be offsetting or subsidising the cost of administration other categories.
“The proposed fee structure within the ‘Fees’ Bill this Committee is tasked to inquire on ignores all of the above.
“In short, unnecessary impediments should be removed for foreign investors looking to invest in Australia’s residential property market.”
“We respect all national security considerations but fees should ultimately reflect the cost of undertaking the assessment and administration.”
Jonathan Chancellor
Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.