Generally, foreign persons require approval from the Foreign Investment Review Board (‘FIRB’) when entering into contracts for the purchase of Australian property. The purpose of obtaining FIRB approval is to ensure that the foreign person’s investment will benefit the Australian economy. However, foreign investors can now rely on a ‘New or Near-New Dwelling Exemption Certificate’ (‘the Exemption Certificate’) to purchase Australian property without obtaining FIRB approval.
For every new project, a property developer, or vendor, should consider whether they are able to secure the Exemption Certificate. Obtaining this certificate means that the developer’s foreign buyers do not need to seek their own individual foreign investor approvals, as long as the Australian property being purchased is covered by the Exemption Certificate. The FIRB has recently published guidelines on how a developer can obtain the Exemption Certificate, and also their obligations in applying for the certificate.
Eligibility for obtaining an Exemption Certificate
Australian and foreign developers may apply for the Exemption Certificate if the following applies to their project:
- the development consists of fifty (50) or more dwellings;
- development approval has been procured from the relevant government authority; and
- the development has foreign investment approval (if applicable) for purchase of the land subject to development, and any conditions of that approval are being met.
Applications for the Exemption Certificate will be considered on a case-by-case basis to ensure they are not contrary to Australia’s national interest.
Approvals for an Exemption Certificate are subject to the developer:
- marketing the dwellings for sale in Australia;
- selling no more than 50% of the total number of dwellings in the development to foreign persons under the certificate;
- selling no more than $3 million worth of dwellings in the development to a single foreign person under the certificate;
- providing a copy of the exemption certificate to each foreign purchaser;
- reporting to the Australian Government, every six months (until all dwellings in the development are sold), on the dwellings sold to foreign persons under the certificate, including the purchaser details and the value of the sales;
- notifying the Australian Government, within thirty (30) days, if the number of dwellings in the development is reduced to less than 50; and
- paying a fee for each dwelling sold under the certificate. Note this fee is separate to the fee for applying for an Exemption Certificate.
Developers’ obligations when applying for the Exemption Certificate
Developers who have been granted an Exemption Certificate must report their sales every six months, until all dwellings covered by the Exemption Certificate are sold. As noted above, there is a separate fee per sale that is required to be paid to the ATO for each dwelling sold under the Exemption Certificate. This fee must be outlined in the sales report, and it must be paid to the ATO within 30 days of the end of the relevant six-month reporting period.
If developers are found to be non-compliant with their eligibility and approval conditions for the Exemption Certificate, it may be subject to strict penalties, including civil and criminal penalties, and also revocation of the certificate.
Relying on the Exemption Certificates will make it easier for foreign purchasers to purchase property in Australia from developers eligible for the Exemption Certificate. Without the certificate, foreign persons purchasing property in Australia will need to consider their requirement to obtain individual FIRB approval, or exemption, before entering into contracts for such purchase.
The main benefit for property developers would appear to be the ability to expand their range of purchasers to include foreign investors, though developers would need to also consider any limitations on their ability, or any other certificates required, to sell the dwellings on their development to foreign persons.
Should you have any questions or require any further information regarding this Exemption Certificate, please do not hesitate to contact JHK Legal Brisbane.
Jemerrie Golaw, JHK Lawyer