If you want to buy property but aren’t an Australian citizen or permanent resident, you’ve probably heard about applying for FIRB approval from the Foreign Investment Review Board.
The Foreign Investment Review Board (FIRB) is an Australian government department that assesses applications from foreign buyers who want to buy property in Australia for investment or owner-occupation purposes.
The objective is to channel foreign investments into new dwellings, creating additional jobs in the construction industry and supporting economic growth. The proposed investment should seek to increase Australia’s housing stock.
Who needs FIRB approval?
You need approval before purchasing any residential property in Australia if you are a foreign person or entity.
Foreign persons include:
- People who are not ordinarily residents of Australia.
- Visa holders permitted to remain in Australia for a limited period, such as temporary residents on the spousal visa, the 457 work visa, the Temporary Skill Shortage (TSS) visa, and the student visa
- companies, partnerships, or trusts registered and domiciled outside Australia.
Who doesn’t need FIRB approval?
You do not require FIRB approval if you are:
- A non-resident or temporary visa holder purchasing with an Australian citizen spouse or permanent resident spouse as joint tenants. Tenants in common need FIRB approval.
- An Australian permanent resident, citizen, or expat living overseas.
- A New Zealand citizen with a Special Category Visa (subclass 444). New Zealand permanent residents need FIRB approval.
What can a foreign investor buy?
New property
You may purchase unlimited new dwellings but need approval before each purchase.
Developers may hold an exemption certificate for a particular development. If the certificate covers the intended purchase, you won’t need to lodge for a separate approval.
New dwellings:
- Must not have previously sold as a dwelling.
- Must not have been previously occupied unless it was part of a residential development where the property developer is the seller who previously tried to sell, but the transaction failed to settle. In this case, the previous occupants cannot have occupied the home for over 12 months.
- Are not established residential properties that have been refurbished or renovated.
- Are not single houses built to replace established dwellings demolished for FIRB purposes.
Vacant land and redevelopment of an established dwelling
There are conditions for purchasing vacant residential land to build residential dwellings. You must complete the development within four years from the approval date.
You must submit the evidence of completion within 30 days of receiving it, including the final occupancy or builder’s completion certificate. An exemption will be considered case-by-case, and a fee will apply.
Vacant land with a demolished house will not be treated as vacant for FIRB purposes unless the foreign person proposes constructing multiple dwellings to increase the housing stock.
Established home
Temporary residents can apply to purchase one established home only if they intend to use it as their principal place of residence while they live in Australia. You cannot rent out the property; it must be vacant at settlement. You must sell the home if you relocate or cease to remain a temporary resident, except for becoming a permanent resident.
Foreign buyers can apply to purchase an established dwelling for redevelopment if the redevelopment will genuinely increase Australia’s housing stock.
In limited circumstances, foreign-controlled companies can apply to purchase an established dwelling to house their Australian-based staff.
Vacancy fee
Foreign investors who own residential property will be required to pay an annual vacancy fee if your property doesn’t have a residential tenant or is genuinely available for rent for more than approximately 6 months a year.
How much is the FIRB application fee?
The application fee changes every year. Between July 2023 and June 2024, it starts at $4,200 for properties valued under $75,000; it goes up in $1 million brackets. The fees are three times higher for established dwellings.
FIRB Approval Process and Timeline
The FIRB approval typically takes up to 30 days but can vary depending on individual circumstances and the complexity of the application.
The application process involves submitting an online form through the Australian Tax Office (ATO) website, providing necessary information, and paying the associated fees.
Providing accurate and complete information in the application will avoid delays in the approval process. We suggest applying for FIRB approval once you have identified a specific property to purchase.
Foreign Buyer Stamp Duty Surcharge
Foreign buyers may need to pay a stamp duty surcharge of up to 8%, depending on the property location. This surcharge is in addition to the standard stamp duty. Some states also impose a land tax surcharge on foreign investors.
The surcharges curb the strong demand for foreign investment into residential properties to control local housing affordability and generate extra revenue for the state governments.
Australian citizens and permanent resident visa holders are not required to pay the surcharge even if living overseas.
The surcharge does not apply if you are a New Zealand citizen with a Special Category Visa (subclass 444)
Financing Options for Foreign Investors
Australian Mortgages
Most mainstream lenders in Australia will not lend to people who are not ordinarily residents of Australia without an approved temporary or permanent visa.
Some lenders will consider financing your purchase if you are an Australian permanent resident or citizen living overseas.
Some wholesale lenders will lend you the money if you meet the eligibility and loan assessment criteria.
Foreign currency loans
The alternative to getting a loan from an Australian-based lender is to approach your local lenders to see if their policy allows for borrowing against an Australian property.
Some local lenders may restrict the leverage ratio, type of property, and location of your purchase. You may also face foreign exchange risk.
In some cases, if the foreign exchange rate movements affect your loan-value ratio (LVR), you may have to provide additional security or make a lump sum payment to balance the portfolio.
To illustrate, say you have a residential dwelling in Australia valued at AUD 1,000,000 and borrowed AUD 800,000 equivalent in your local currency at a rate of 1 to 1. Your LVR is 80%. Suppose your local currency weakens to 80c in Australia for every dollar of your local currency. Your borrowing will increase from AUD 800,000 to AUD 1,000,000; your LVR is now 100%. You may have to provide additional security in Australia of $250,000 in the form of property or cash or pay your loan down by AUD 200,000 in the equivalent of your local currency to bring the LVR back to 80%
It will be prudent to compare all options to decide on the best action.