Following the Senate enquiry into foreign investment at the end of 2014, the Australian Federal Government last week released an Options Paper on the regulation of foreign investment in Australia. As well as threshold changes and suggestions of tougher enforcement of foreign investment laws, key headlines from the options paper include:
ESTABLISHED RESIDENTIAL DWELLINGS – NO CHANGE
There are no changes proposed to the rules preventing foreign persons purchasing established residential dwellings.
NEW RESIDENTIAL DWELLINGS – APPLICATION FEES
Consistent with existing policy, purchasing new residential dwellings (i.e. off-the-plan in a new development) will continue to be possible, if such purchases are approved by the Foreign Investment Review Board (FIRB). However, it is proposed that an application fee of up to A$5000 for approval to purchase new residential dwellings would apply to properties valued under A$1 million. Applications to purchase new residential dwellings valued at equal to or greater than A$1 million would be subject to a fee of up to A$10,000. This would then increase in increments of up to A$10,000 for each additional A$1 million in property value.
FEES AND CAP FOR DEVELOPER PRE-APPROVAL – APPLICATION FEES
Consistent with existing policy, developers will still be able to apply to FIRB for advanced off-the-plan certificate for sales of new residential dwellings to foreign persons. However, it is proposed that an application fee would be payable based on the number of dwellings sold to foreign purchasers.
In addition, a cap is proposed on such developer advanced off-the-plan certificates, limiting the value of all apartments that can be purchased by a single foreign purchaser to A$3 million in any single development. If foreign purchasers wish to purchase apartments above this value in a development, they would have to seek individual approval under the proposed new regime.
The options paper is undergoing a consultation period, ending on 20 March 2015.
Whatever the outcome of the consultation, greater scrutiny of the regulatory regime around foreign investment is expected. Indeed FIRB issued its first divestment order since 2007 this week in the much reported forced sale of Sydney’s Point Piper mansion Villa del Mare, forcing the sale of that property (originally purchased for A$39 million in 2014) to occur within 90 days.
The proposed new fee structure for foreign investors has been met with strong criticism from key property industry groups and stakeholders.