The Australian Government’s General Approach

The Government’s approach to foreign investment policy is to encourage foreign investment consistent with community interests. Generally therefore, foreign investment is welcomed in Australia.

In some circumstances the Government may consider such a purpose “contrary to the national interest”. This is determined having regard to widely held community concerns. More sensitive sectors such as media ownership and developed residential real estate are particularly scrutinised.

The largest percentage of foreign investment proposals, involve the purchase of real estate. The Government seeks to ensure that foreign investment in this area increases the supply of residences and is not speculative in nature.

What then is regarded as a “Foreign Interest”?
A foreign interest includes:

• A natural person not ordinarily resident in Australia;
• A corporation in which a natural person not ordinarily resident in Australia or a foreign corporation, holds a controlling interest;
• A corporation in which two or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, holds an aggregate controlling interest.

Who is Exempt from FIRB Review?
These include:

• Acquisitions by Australian citizens resident abroad,
• Foreign nationals who hold Permanent Resident Visas or who hold or are entitled to hold, a Special Category Visa (for instance, New Zealand citizens).
• Foreign nationals purchasing as joint tenants, with an Australian citizen spouse, property zoned as residential.

What Types of Proposals Require Approval?
These include:

• Proposed acquisition of vacant urban real estate irrespective of value;
• Proposed acquisition of residential real estate irrespective of value;
• Proposed acquisition of accommodation facilities irrespective of value;
• Proposed acquisition of developed non-residential commercial real estate, where the property is subject to heritage listing, valued at AUD$5 million or more;
• Proposed acquisition of developed non-residential commercial real estate, where the property is not subject to heritage listing, valued at AUD$50 million or more.

Residential Real Estate
This means all Australian urban land other than commercial properties.

Developed Residential Real Estate
Proposed acquisitions of developed residential real estate by foreign interests are not normally approved, except where:

(1) Foreign Nationals temporarily resident in Australia holding a Temporary Resident Visa permitting continuous residence in Australia for a minimum further period of more than twelve (12) months from time of application. They must be purchasing the dwelling for use as a principal place of residence and not for rental purposes. The property must be immediately sold if the visa expires or the visa holder no longer occupies the property. Note that this includes long stay retirees and students 18 years of age and over studying courses of more than 12 months duration at recognised tertiary institutions. A general limit of AUD$300,000 applies to the value of properties acquired by such students. Note that persons holding Visitor or Bridging Visas are not eligible for approval under this category.

(2) Foreign companies with an established, substantial business in Australia, seek to buy for the use of named senior executives continuously resident in Australia for periods longer than twelve (12) months. The dwelling must be sold when no longer required for the purpose. Whether or not a company is eligible will depend upon the scope of the foreign company’s operations and assets in Australia. In any event the Company will not normally be allowed to purchase more than two (2) dwellings under this category;

Residential Real Estate for Development
Acquisitions of residential real estate for development by foreign interests are usually approved subject to a specific condition requiring continuous construction to commence within twelve (12) months of purchase. Once the construction is completed, the applicant will be required to provide the completion date and actual development expenditure. Note that to be eligible under this category, it is expected that a minimum of 50% of the acquisition cost or current market value (whichever higher) is spent on development.

Once the development conditions have been satisfied, properties acquired under this category may be rented out, sold to Australian interests or other eligible purchasers or retained for the foreign investor’s own use.

Residential Real Estate for Re-development
Applications to acquire existing residences for re-development are considered according to individual circumstances. They may be approved if the property is at the end of its economic life. This usually means it is generally uninhabitable. Alternatively, they may be approved if the proposal provides for a significant increase in the numbers of dwellings on the property. Once again, it is expected that a minimum of 50% of the acquisition cost or market value, whichever greater, should be expended on re-development. Note that a valuation of existing structures by a licensed Valuer may be required and that existing residences may not be occupied prior to re-development.

Once the development conditions have been satisfied, properties under this category may be rented out, sold to Australian interests or other eligible purchasers or retained for the foreign investor’s own use.

“Off-the-Plan” Purchasers
A foreign interest may apply to acquire home units, town houses, house and land packages (where construction has commenced) and strata titled hotel/motel units in a new development, either "off-the-plan" during the construction phase, or when the dwelling is newly completed, provided that the dwelling has never been occupied or sold and provided no more than 50% of the dwellings in any one development are sold to foreign interests. Note that this category does not include developed residential real estate that has been refurbished or re-developed.

Integrated Tourism Resorts
Purchasers of residential real estate within a resort designated by the Government as an Integrated Tourism Resort may be exempt from the normal foreign investment restrictions applying to foreign acquisitions. This will depend on when the resort was designated as an Integrated Tourism Resort. You should seek specific guidance in relation to such proposed acquisitions.

Designated Strata Titled Hotels
Foreign acquisitions of strata-titled hotel rooms in designated hotels are permitted where each room is subject to a long-term (10 years or greater) hotel management agreement. Note that the hotel must provide a full range of in house facilities, with all rooms within the hotel subject to the management agreement. Furthermore, the hotel management agreement must provide that the owners’ rights are restricted to receipt of an income stream and not occupancy. Ownership rights to the common property within the hotel must be held by the hotel manager.

Accommodation Facilities
Proposed acquisitions of hotels and motels are subject to case by case analysis, but where the businesses are operating under one title, they are normally approved unless contrary to the national interest. Other types of accommodation facilities, including guest houses, holiday units and undesignated strata titled hotels/motels are examined by the FIRB pursuant to the policy applying to residential real estate.

Time Share Resorts
Proposed acquisition of an interest in a time-share development is generally regarded as an acquisition of an interest in residential property and subject to similar restrictions.

Commercial Real Estate
This means developed property including offices, retail space and industrial complexes, but not vacant land, accommodation facilities, residential properties and land integral to a farming business.

Who is Exempt?
Australian citizens resident abroad or Australian incorporated companies or Australian based trusts owned by Australian citizens resident abroad do not require approval. Acquisitions of commercial real estate where the total value of the property being acquired is less than AUD$50 million do not require notification or approval unless:

• The land is vacant;
• The whole or part of the land comprises an accommodation facility;
• The property is being acquired by a foreign government or its agent;
• The property is valued at more than AUD$5 million and is heritage listed.

Proposed acquisitions of commercial real estate to be used immediately for industrial or commercial purposes incidental to an existing or proposed business, do not require notification or approval.

Developed Commercial Real Estate
Proposed acquisitions of developed commercial real estate valued at AUD$50 million or more are normally approved unless considered contrary to the national interest.

Commercial Real Estate for Development
Proposed acquisitions of real estate for development or substantial re-development are normally approved unless considered contrary to the national interest, subject to the condition that construction must commence within a specified period of time (this is normally 12 months). Note that it is expected that a minimum of 50% of the acquisition cost or current market value (whichever higher) will be spent on development.

Approval Period
Approvals under the Government’s foreign investment policy are normally given for a specific transaction and it is expected by the Government that such transactions be completed in an appropriate timeframe. If the transaction does not proceed within such a timeframe or the parties enter into new agreements at a later date, or if a transaction is not completed within 12 months, further approval must be sought for the transaction.

You should always seek specific advice before acting. The information provided is as a guide only. Regulations may change. Where hotlinks are made to external sites we cannot guarantee the accuracy thereof.

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