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Accommodation facilities [GN15]

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Last updated: 1 July 2016

Foreign persons may be required to notify and receive a no objection notification before acquiring an interest in a dwelling that is part of an accommodation facility. Different rules apply depending on whether the proposed acquisition is considered to be an acquisition of developed commercial or residential land.

This Guidance Note sets out whether acquisitions in different types of accommodation facilities are notifiable actions for either developed commercial or residential land.

Commercial residential premises

Land in Australia on which the only dwellings are commercial residential premises are considered developed commercial land.

‘Commercial residential premises’ has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and includes:

  • a hotel, motel, inn, hostel or boarding house;
  • premises used to provide accommodation in connection with a school;
  • a marina with berths occupied by ships used as residences;
  • a caravan park or camping ground; or
  • any other premises similar to those outlined under the GST Act, other than premises used to provide accommodation to students in connection with an education institution that is not a school.

Acquisitions of dwellings in serviced apartments will be subject to the same requirements as dwellings that are part of other commercial residential premises.

‘Commercial residential premises’ does not include retirement villages and aged care facilities.

For more information about the characteristics of commercial residential premises, refer to GSTR 2012/6 Goods and services tax: commercial residential premises.

Acquisitions considered to be developed commercial land

An acquisition of an interest in a dwelling that is part of the ordinary business operations of the commercial residential premises is considered to be an acquisition of developed commercial land if:

  • the dwelling will be leased back to and/or managed by the facility operator as part of the business operation, and be available for rent or use as part of the business; and
  • the management agreement limits the rights of the owner to receipt of an income stream, not occupancy.

Conversely, where the owner of the business is a foreign person, an acquisition of an interest in a dwelling that is a buy back or lease back arrangement that is part of the ordinary business operations of the commercial residential premises will be considered to be an acquisition of developed commercial land. Foreign investment approval is only required if the relevant monetary thresholds are triggered.

For more information, see Guidance Note 14.

Example 1

Jane is a foreign person proposing to acquire a dwelling in a serviced apartment complex that is used as short-term rental accommodation under agreement with the business operator. Jane intends on continuing the management agreement with the business operator and will not have a right to occupy the dwelling. The proposal is considered to be an acquisition of developed commercial land and will be subject to the relevant commercial land notification thresholds. For more information, see Guidance Note 14.

Acquisitions considered to be residential land

An acquisition of an interest in a dwelling that is physically located within the property of commercial residential premises is considered to be an acquisition of residential land if the dwelling is not part of the business operation and is for private use, either as owner-occupied or for private rental by the owner.

Example 2

Ben is a foreign person proposing to acquire a dwelling in a serviced apartment complex from a private vendor. Ben intends on using the apartment for part of each year and privately leasing the apartment out when he is not using it. The proposal is considered to be an acquisition of an interest in residential land and Ben will be required to notify and receive a no objection notification before acquiring the dwelling. Ben will also be subject to the eligibility requirements that would normally apply to an acquisition of an established residential dwelling by a foreign person. For more information, see Guidance Note 1.

Retirement and aged care facilities

An acquisition of an interest in a dwelling that is physically located within the property of a retirement village or aged care facility is considered to be an acquisition of residential land, regardless of whether the dwelling is part of the business operations.

However, where the owner of the business is a foreign person, an acquisition of an interest in a dwelling that is a buy back or lease back arrangement that is part of the ordinary business operations of the retirement village or aged care facility will be considered to be an acquisition of developed commercial land.

Example 3

Myrtle is a foreign person proposing to acquire a dwelling in a retirement village directly from the facility operator. The proposal is considered to be an acquisition of an interest in residential land and Myrtle will generally be required to notify and receive a no objection notification before acquiring the dwelling. Myrtle may also be subject to the rules and restrictions that would normally apply to an acquisition of an established residential dwelling by a foreign person. For more information, see Guidance Note 1.

Bed and breakfast/guesthouse businesses

Bed and breakfast and guesthouse businesses are often closely linked with residential property use through shared facilities for owners or through other non-commercial related accommodation uses.

Proposals to acquire a bed and breakfast or guesthouse facility will be considered to be an acquisition of developed commercial land if the proportion of the land that is residential real estate (and used for residential purposes) is less than 10 per cent of the total area and less than 10 per cent of the total value of the land. If the bed and breakfast or guesthouse does not meet these criteria, it will generally be considered to be residential real estate.

Similarly, proposals by a foreign person to purchase a residential dwelling to convert for use as a bed and breakfast or guesthouse facility will generally be subject to the normal rules and eligibility requirements for acquisitions of interests in residential land.

Example 4

Pablo is a foreign person proposing to acquire a dwelling that currently operates as a bed and breakfast business. Three rooms are available for rent by members of the public and the remainder of the dwelling is currently used by the owners as their private residence. Although Pablo intends to continue operating the bed and breakfast business, the proposal is considered to be an acquisition of residential land. Pablo is required to notify and receive a no objection notification before acquiring the dwelling, and may also be subject to the rules and restrictions that would normally apply to an acquisition of an established residential dwelling by a foreign person.

Summary of treatment of accommodation facilities
Acquisition Considered as an acquisition of
An interest in a dwelling that is part of the business operations of the commercial residential premises Developed commercial land
An interest in a dwelling that is physically located within the property of the commercial residential premises, but is for private use Residential land
An interest in a dwelling in a retirement village or aged care facility Residential land
An interest in a dwelling where the owner of the business of the commercial residential premises, retirement facility or aged care facility buys or leases back the dwelling as part of ordinary business operations Developed commercial land
An interest in a dwelling that also operates a bed and breakfast or guesthouse business Case-by-case basis depending on the size and value of the residential part of the land
An interest in a residential dwelling with the intent of converting the dwelling into a bed and breakfast or guesthouse business Residential land

Notification thresholds

Developed commercial land

Foreign persons will be required to notify and receive a no objection notification for acquisitions of developed commercial land where it meets the relevant threshold.

For commercial land thresholds, see Guidance Note 14.

Residential land

Foreign persons are generally required to notify and receive a no objection notification for any acquisition of residential land, regardless of the value of the proposed acquisitions. Foreign persons are also subject to different rules depending on the type of residential land they are seeking to acquire.

For more information, see Guidance Note 1.

Fees

An application to acquire an interest in commercial or residential land will not be considered until the relevant application fee has been paid in full. For more information, see Guidance Note 29 and Guidance Note 30.

Penalties

Strict penalties (including civil and criminal penalties) may apply for breaches of Australia’s foreign investment rules. For more information, see Guidance Note 11.

Cases of non-compliance with Australia’s foreign investment rules may also be brought to the attention of law enforcement agencies and other Commonwealth departments such as the Department of Immigration and Border Protection.

Further information

Further information is available on the FIRB website or by contacting +61 2 6263 3795.


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.