Residential real estate – new dwelling exemption certificate [GN8]
Last updated: 1 July 2016
Property developers and other vendors can apply for an exemption certificate to sell new dwellings in a specified development to foreign persons, so each foreign person purchaser is not required to seek their own foreign investment approval (similar to what has previously been known as an ‘advanced off the plan’ certificate). The certificate will be granted for a specified development on the condition that the dwellings for sale in the development are marketed in Australia. Developers can also choose to market the development overseas if they wish.
This Guidance Note sets out the factors that will be considered when assessing an application for a new dwelling exemption certificate and the conditions that will normally apply to such certificates. It also provides information for foreign persons seeking to purchase dwellings covered by a new dwelling exemption certificate.
New dwelling exemption certificate requirements
Developers (either Australian or foreign) can apply for a new dwelling exemption certificate for a specified development provided that the development:
- will consist of 50 or more dwellings (other than townhouses);
- has development approval from the relevant government authority; and
- if applicable, that foreign investment approval was sought to purchase the land and that any conditions are being met.
A development comprises one or more multi-storey buildings that will or have been built under one development approval. This does not include house and land packages.
The developer must have unconditional approval to commence development from the relevant government authority to meet this criterion. Any preliminary decision issued by the relevant government authority stating that further approval or action is required before construction may commence will not meet this criterion.
Applications for a certificate will be considered on a case-by-case basis to ensure they are not contrary to the national interest.
Factors that will be considered as part of the decision making process include:
- a marketing or advertising schedule that outlines when, where and how the development will be marketed in Australia, including dates and budgeted expenditure;
- a schedule of the number of dwellings to be built in the development or stage of the development, including unit number, number of bedrooms, allocated car spaces and the expected purchase price of the unit. Exemption certificates for developments with multiple stages may not be approved for all stages of the development in the first instance, even if development approval has been granted for the entire development.
- ownership information of the development, including shareholders and beneficiaries as applicable;
- architectural plans and artists impressions of the proposed development; and
- compliance standing. If an applicant, or any related person or entity, has held an exemption certificate previously (such as those known as an ‘advanced off-the-plan’ certificate) and has not complied with its conditions, this compliance history will be taken into account when assessing the application (for example, meeting reporting requirements and any existing conditions).
City Builder Co. is a developer who wants to construct a 100 dwelling apartment complex. The local government authority has issued City Builder Co. with a permit for the development subject to the condition that the developer receives approval from the State transit authority. The developer may not commence development until the approval from the State transit authority has been submitted to the local government authority, and the local government authority has issued a development approval. City Builder Co. will not meet the eligibility criteria for a new dwelling exemption certificate prior to receiving the development approval which will enable City Builder Co. to commence development.
Sam’s Building Co. is a developer who wants to construct a 200 dwelling apartment complex in two stages. Sales for the first stage, which will consist of 90 dwellings, are likely to commence in the next six months, and Sam’s Building Co. wants to obtain a new dwelling exemption certificate to be able to sell new dwellings in the development to foreign persons. Sam’s Building Co. applies for a new dwelling exemption certificate and supplies detailed plans for the first stage, however, is unable to provide details for the second stage, which is still waiting on local government approval. Sam’s Building Co. is granted an exemption certificate for stage one of the development and will need to apply for an exemption certificate for stage two in the future.
Applications for a new dwelling exemption certificate will normally be approved subject to conditions that the developer:
- provide a copy of the new dwelling exemption certificate to each foreign purchaser;
- market dwellings for sale in Australia;
- report in accordance with the conditions of their certificate on dwellings acquired by foreign persons covered by the certificate, including purchaser details and the value of dwellings (until all dwellings in the development have been sold).
New dwelling exemption certificates will normally exempt prospective foreign persons from individually seeking foreign investment approval to purchase interests in new dwellings up to a cumulative total of $3 million in the specified development. If they wish to purchase further interests in new dwellings in the development, the certificate will not cover these purchases and the foreign person will individually need to seek foreign investment approval. Other than the $3 million limit, there is no limit on the number of dwellings that can be sold to foreign persons under the certificate.
Applications to vary an approved new dwelling exemption certificate will be considered on a case-by-case basis. A fee will apply for this. As part of granting a variation, generally the conditions of the exemption certificate will be updated to reflect the conditions that certificates are normally subject to at the current time.
Lauren is a foreign person who wants to acquire a new dwelling off-the-plan worth $2 million from a developer that holds a new dwelling exemption certificate which allows them to sell dwellings in an off-the-plan development to foreign persons up to the value of $3 million. Lauren does not need to seek separate foreign investment approval for the proposed acquisition. The developer would be required to pay the relevant fee for the dwelling in the reconciliation period that Lauren acquires an interest in the dwelling.
Lauren then decides she would like to acquire another dwelling worth $1.3 million off-the-plan in the same development. This would bring the total value of dwellings acquired by Lauren to $3.3 million. As this would take her total interest in the development above the $3 million threshold for purchases in the same development, Lauren would be required to seek separate foreign investment approval to acquire the dwelling and pay the relevant application fee on the $1.3 million dwelling.
Mitchell is a foreign person who wants to acquire a new dwelling worth $3.5 million off-the-plan from a developer that holds a new dwelling exemption certificate. As the value of the single dwelling is above the $3 million threshold for acquisitions in the specified development, Mitchell would be required to seek separate foreign investment approval to purchase the dwelling and pay the relevant application fee.
Purchasing property under a new dwelling exemption certificate
When a developer holds a new dwelling exemption certificate, foreign persons will normally not require separate foreign investment approval before acquiring a new dwelling in the development specified in the certificate.
Foreign persons should ask for a copy of the exemption certificate for the development in which they are intending to purchase and ensure that it covers their intended purchase.
For more information on purchasing new dwellings where the developer does not hold a new dwelling exemption certificate or where a foreign person proposes to acquire an interest that would exceed the total $3 million limit, see Guidance Note 1.
An application for a new dwelling exemption certificate will not be considered until the relevant initial application fee has been paid.
Developers are also liable to pay a fee for each interest in a dwelling that is acquired in the development by a foreign person.
- However, in practice, it is possible for the developer and the foreign person to reach a separate agreement about who will pay the fee to the ATO. Where a foreign person agrees with the developer to pay the application fee directly to the ATO, they can do so using the payment reference number (PRN) listed on the Exemption Certificate.
|Initial application for the certificate||$25,300|
|Fee for each dwelling in the development acquired by foreign persons||Per dwelling acquired for $1 million or less — $5,000|
|Per dwelling acquired for over $1 million and less than $2 million — $10,100|
|Per dwelling acquired for between $2 million and less than $3 million — $20,300|
|Variation of a new dwelling exemption certificate||$5,000|
For more information, see Guidance Note 30.
Purchasing a new dwelling in a development that does not have a new dwelling exemption certificate
Developers who do not wish to apply for a New Dwelling Exemption Certificate, may apply for a streamlined bulk approval process by sending an email to FIRBresidential@ato.gov.au). The developer will not be charged a fee for this process. The ATO can streamline approvals for properties in the development valued under $3 million where the developer:
- meets the New Dwelling Exemption Certificate requirements;
- has a strong compliance history; and
- has already marketed, and will continue to market, the development in Australia.
Where the ATO has agreed to streamline approvals for a developer, the developer can apply as an agent on behalf of the purchaser using the ATO’s residential real estate application form. A separate application must be submitted for each foreign investor purchasing a dwelling in the development. The foreign investor must pay the relevant fee when the application is submitted because if the developer does not have an exemption certificate, liability for the payment of fees rests with the foreign investor. The ATO will then undertake streamlined processing of each individual application, with approval contingent on the payment of the correct fee. The ATO will undertake to provide decision outcomes to the developer within 10 working days of payment of the correct fee.
How to apply
If you would like to apply for an exemption certificate for a new dwelling exemption certificate please apply using the Australian Taxation Office’s foreign investment application form.
Applicants should take care to ensure they supply the correct details and all required information as part of their application, as changes to details such as name or property address after an approval has been granted may require applicants to seek a new approval and be subject to further fees.
Developers who fail to comply with the conditions of a new dwelling exemption certificate may be subject to strict penalties (including civil and criminal penalties).
For example, if a developer that holds a new dwelling exemption certificate fails to market dwellings in the specified development in Australia, they may have committed an offence or breached a civil penalty provision under the legislation. The maximum penalty that may be imposed on an individual found guilty of this offence is three years imprisonment, a fine equivalent to 750 penalty units (currently $135,000) or both. A company who is found guilty of this offence may face a fine equivalent to 3,750 penalty units (currently $675,000). Civil penalties include a fine of up to 250 penalty units ($45,000) for individuals, or 1,250 penalty units ($225,000) for companies.
Civil penalties and infringement notices also apply to developers who fail to meet reporting requirements associated with a new dwelling exemption certificate.
For more information, see Guidance Note 11.
Further information is available on the FIRB website or by contacting 1800 050 377 from Australia or +61 2 6216 1111 from overseas.
Important notice: This Guidance Note provides a summary of the relevant law. As this Note tries to avoid legal language wherever possible it may include some generalisations about the law. Some provisions of the law referred to have exceptions or important qualifications, not all of which may be described here. The Commonwealth does not guarantee the accuracy, currency or completeness of any information contained in this document and will not accept responsibility for any loss caused by reliance on it. Your particular circumstances must be taken into account when determining how the law applies to you. This Guidance Note is therefore not a substitute for obtaining your own legal advice.