In the 2017-18 Budget, the Australian Government announced several changes regarding the foreign investment framework. Information on each of these changes is provided below. The final details will be subject to the passage of legislation.
Further information on the 2017-18 Budget is available at the Budget website.
50 per cent foreign ownership cap for New Dwelling Exemption Certificates
A 50 per cent cap on the total amount of dwellings a developer can sell to foreign persons under a New Dwelling Exemption Certificate has been introduced for applications made from 7:30pm (AEST) 9 May 2017. Applications submitted prior to 7.30pm (AEST) 9 May 2017 are not subject to the 50 per cent cap. For more information, see Guidance Note 8.
Annual vacancy charge
The Government will introduce an annual vacancy charge on new foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months each year. The charge will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired by the foreign investor. It will be implemented on foreign persons who make a foreign investment application for residential property from 7:30pm (AEST) on 9 May 2017.
Foreign persons who are purchasing in a development which has a New Dwelling Exemption Certificate will be subject to the charge where the acquisition was made after 7.30pm (AEST) on 9 May 2017. Investments approved prior to this time will not be subject to the charge.
For more information, see Guidance Note 48 for more information.
Ten per cent increase to residential application fees
Application fees for foreign purchases of residential properties valued at less than $10 million will increase by 10 per cent on the current fees, effective 1 July 2017. This increase will fund the establishment of the Critical Infrastructure Centre within the Attorney-General's Department (announced 23 January 2017) and strengthen the review process for foreign investment within the Treasury.
Streamlining Australia's foreign investment framework
The Government will introduce a range of amendments that will reduce the requirement for investors to seek multiple approvals for similar low risk transactions, amend the commercial fee framework to improve transparency and consistency, and improve the treatment of low risk commercial transactions to enable the system to operate more efficiently and reduce regulatory burden.
The amendments will take effect from 1 July 2017, and were developed with stakeholders and following public consultation on options to improve the foreign investment framework.
Key changes include:
- Streamlining and simplifying the commercial fee framework:
- Application fees for acquiring interests in agricultural land, commercial land, businesses securities and assets will be better aligned and standardised by implementing a three-tier fee structure. This will reduce the number of fee tiers in some categories (for example agricultural land) to three fee tiers.
- Legislating some current fee relief arrangements, including building in additional low value fee rules.
- A summary of the proposed commercial framework is below.
- Introducing a new business exemption certificate:
- Foreign investors (including foreign government investors) in securities will have access to an exemption certificate allowing pre‑approval for multiple investments in the one application rather than having to apply separately for each investment.
- Further guidance on the types of transactions that will be eligible for the exemption certificate will be released prior to 1 July 2017.
- Introducing two new Residential Exemption Certificates:
- An exemption certificate will be introduced to allow developers to re-sell off‑the‑plan dwellings that failed to settle and would be technically considered 'established' to foreign persons.
- An exemption certificate will be introduced so that only one approval is required for individuals considering a number of residential properties with the intention to only purchase one. This exemption certificate is currently available for purchases of established dwellings and this will be extended to new dwellings.
- Amending the treatment of residential land used for commercial purposes:
- Currently, the statutory definition of commercial residential premises excludes some property that for the purposes of the foreign investment framework are considered commercial in nature, for example student accommodation and aged care facilities.
- This will be addressed by bringing these types of residential dwellings that are used for a commercial purpose within the meaning of commercial residential premises.
- Narrow the scope of the 'low threshold' non-vacant commercial land definition:
- Experience has demonstrated that the scope of non-vacant commercial land treated as sensitive and subject to the lower $55 million screening threshold is too broad and captures developed commercial land that is not sensitive in practice.
- This will be addressed by narrowing what is treated as sensitive land by, for example, removing 'prescribed airspace' which covers most commercial properties in the CBDs of Australia's major cities. Guidance material will be provided prior to 1 July 2017.
- Other minor amendments
- Amendments will also clarify the treatment of developed solar and wind farms as commercial non-vacant land rather than vacant land and agricultural land, reducing unnecessary red-tape.
- Restoring the previous arrangement whereby companies with significant foreign custodian holdings (i.e. legal rather than equitable interest holders) are not subject to notification requirements.
Summary of proposed commercial fees from 1 July 2017
The below fees will apply to all foreign persons, including foreign government investors, unless otherwise specified.
Category$10 million or lessAbove $10 millionAbove $1 billion
Commercial land (vacant and developed)3$2,000$25,300$101,500
Actions relating to entities and businesses$2,000$25,300$101,500
Category$2 million or lessAbove $2 millionAbove $10 million
Mining and production tenements$25,300
Legal or equitable interest in mining, production or exploration tenement4$10,100
An interest of at least 10 per cent in securities in a mining, production or exploration entity4$10,100
Starting an Australian business4$10,100
1 - Lower fee rules: these replace the existing de minimis rule. Other legislated lower fee rules will not be changed.
2 - Discretionary fee waivers for entities carrying on business acquiring multiple land titles under one agreement or acquiring securities in an entity that primarily holds residential land will be legislated.
3 - A $2,000 fee will also apply for foreign government investors for developed commercial land acquisitions under $55 million.
4 - Only applicable to foreign government investors. A $2,000 fee will apply where the fee would otherwise be more than 25 per cent of the consideration.
5 - The variation fee payable will not exceed the initial application fee.