What are the restrictions of foreigners purchasing property in Australia?
The Australian Government's approach to foreign investment is to encourage and welcome foreign investment as long as it is consistent with community interests and concerns. To balance these concerns the Government requires foreign citizens or companies who are looking into buying real estate, to apply to the Foreign Investment Review Board (FIRB).
A foreign person is a person who does not ordinarily reside in Australia. A foreign company is a company that is 15% owned by a foreign national or 40% owned by a number of foreign nationals. As such, Board approval is not required for acquisitions made by Australian citizens abroad, of property zoned residential by foreign nationals who hold permanent resident visas, or who are eligible to hold a special category visa such as New Zealand citizens and foreign persons purchasing as joint tenants with their Australian citizen spouse.
Where a foreigner or foreign company is trying to acquire an interest in real estate which includes urban land, an application must be submitted to the Board for its approval in the following situations:
- development of non-residential commercial real estate where the property is subject to a heritage listing, valued at $5 million or more;
- development of non-residential commercial real estate where the property is not subject to heritage listing, valued at $50 million or more;
- accommodation facilities;
- vacant real estate;
- residential real estate; or
- shares or units in Australian urban land corporations or trust estates.
If FIRB approval is given for a foreign citizen or company to buy vacant land or an existing property which is to be converted into residential property, approval is usually subject to specific conditions requiring continuous substantial construction to commence within 12 months, or 5 years in the case of commercial developments, of receiving that approval.
A foreign person or company should ensure when they are purchasing property that the contract of sale contains a clause saying that the contract is subject to the purchaser obtaining FIRB approval, unless approval is obtained prior to entering into the contract.
Where real estate is purchased by a foreign company or citizen without the prior approval of FIRB substantial monetary penalties may apply.
Please note that this is a complex area and you should obtain legal advice before entering into any transactions if you believe you may be a foreign person or entity.
