Federal fees levied against foreign property investors will be substantially increased in an effort to stop Australian homes sitting vacant and free up housing stock for residents.
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The new foreign investor framework includes higher fees for the purchase of existing homes, increased penalties for homes that sit empty, and strengthened compliance activity to crack down on investors not playing by the rules.
At the same time, the government is cutting application fees for foreign investment in build-to-rent projects to encourage the delivery of more new homes.
Current fees for foreign investors start from $4,200 for property valued at under $75,000 to upwards of $100,000 for homes valued $5 million and over.
The government’s proposal would see these figures tripled if the home in question is an established dwelling.
It will also double the vacancy fees, which apply when a home is not occupied by the owner or a tenant for more than half the year. The vacancy fee is generally the same as the foreign investment application fee.
As the government noted in announcing the new framework, this effectively serves as a sixfold increase in vacancy fees for future purchases of established dwellings.
It’s intended that these changes will encourage foreign nationals who still wish to buy to put their money into new housing developments as opposed to existing properties, to create additional housing stock and support the construction industry.
Similarly, the increased vacancy fees are intended to push foreign investors to put their properties on the rental market, freeing up rental stock on the short- and long-term market.
To ensure that investors are adhering to the new and existing rules, the government plans to strengthen the Australian Taxation Office’s compliance regime, including ensuring that foreign home owners sell properties when required.
Foreign nationals are generally barred from buying existing property but can do so in certain circumstances, such as when they come to Australia to live or study. They are required to sell the property when they leave the country if they have not become an Australian permanent resident.
Legislation to implement the new fees is expected to be introduced to Parliament early in 2024.
The application of commercial foreign investment fees to all future build-to-rent projects will come into play sooner, with the change effective as of 14 December 2023.
Currently, build-to-rent investors can be subject to different higher fees if their projects involve particular kinds of land, like residential land. The government has now adjusted foreign investment application fees for build-to-rent projects to the lowest commercial level.
The change is meant to encourage the development of build-to-rent projects, which are seen as an important facet of increasing rental stock and alleviating Australia’s tight rental vacancy numbers.
ABOUT THE AUTHOR
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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