ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN AUSTRALIA]

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Foreign Investment Review Board – foreign purchasers The Foreign Acquisitions and Takeovers Act 1975 (Cth) (“ FATA ”), Foreign Acquisitions and Takeovers Regulations 2015 (Cth) and the Australian Federal Government’s specified Foreign Investment Policy provide the framework for dealing with a “foreign person” or a “foreign government investor” who propose to purchase property in Australia. Depending on the type of property being purchased, if you are a “foreign person” for the purposes of FATA, you must apply for foreign investment review board (“ FIRB ”) approval prior to the property being transferred. This means that contracts of sale for property by a “foreign person” are typically conditional on the purchaser obtaining FIRB approval within a specified time. If FIRB approval is not obtained, then the contract can be terminated. A “foreign person” not only includes an individual who is not ordinarily resident in Australia, but it also includes:

commercial pro perty by “foreign persons”. Generally, foreign persons are unable to purchase existing residential dwellings unless they are a temporary resident (at a minimum). By way of contrast, foreign non-residents have the ability to purchase ‘new dwellings’ within Australia. A new dwelling is defined as being a dwelling that has not been previously occupied or a dwelling within a development that has not been occupied for more than a total of 12 months. These parameters aim to encourage the creation of jobs within Australia and also increase the number of new residences being developed. There is no threshold for the purchase of residential property, but there is a threshold for the purchase of developed commercial property. If you are a foreign non-resident investing in commercial land, there are specific thresholds that determine whether you are required to notify the FIRB prior to acquiring an interest in property. However, if you are purchasing commercial vacant land, there is no threshold, and you must notify the FIRB. The same situation applies if you are a foreign government investor. Contracts of sale are generally conditional upon a purchaser obtaining FIRB approval within 30- 45 days of the day of sale. If you are a permanent resident in Australia or if you are from New Zealand, exemptions apply and FIRB approval is not required prior to acquiring an interest in Australian property. If you are a temporary resident, it is likely that you will be granted FIRB approval to purchase vacant land or a residential dwelling off-the- plan, however, the approval is likely to be subject to conditions. Importantly, there have been significant changes to Australia’s foreign investment framework as a result of the COVID-19 pandemic. Any person or entity seeking to

a corporation or the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; and a corporation or the trustee of a trust in which 2 or more persons, who together hold an aggregate substantial interest , are: (a) not ordinarily resident in Australia; (b) a foreign corporation; or (c) a foreign government entity.

A “substantial interest” for the purposes of the above means an interest of 20% or more in the relevant company or trust. There are certain restrictions imposed when dealing with the purchase of residential and

ILN Real Estate Group – Buying and Selling Real Estate Series

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