Foreign ownership of property

29 Jan

Written By For Good Digital

A foreign buyer can be a natural person, a corporation, or a corporation acting as a trustee.
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 before signing a contract except 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.
Foreign buyers must also register their ownership of certain Australian assets (including land) to the ATO via its online platform within 30 days of settlement. This includes ongoing obligations when the residential property is disposed of in the future, notwithstanding the value of the interest.
If a buyer of property 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 onto the duty payable.
If you are a foreign buyer, you may be entitled to an exemption from paying additional duty if you purchase a PPR 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.
An additional four 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 is in addition to the standard land tax.
As of 1 January 2025 all vendors have to provide a Foreign Resident Capital Gains Witholding Clearance Certificate (FRCGWCC) regardless of sale price and the remittance increases to 15 per cent. They would not be entitled to the capital gains tax main residence exemption unless they meet one of the limited exceptions.
Where a discretionary trust deed does not exclude foreign beneficiaries, the SRO automatically deems the trust to be foreign and an 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 foreign if some or all of the beneficiaries are foreign entities. A buyer should get advice from their solicitor and accountant about whether they are considered to be foreign before signing a contract.
A corporation is considered foreign if it is incorporated outside of Australia or more than 50 per cent of its 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 a foreign entity.