On 8 April 2022, the Federal Court of Australia ordered a foreign property investor to pay $250,000 fine resulting from breaches of the Foreign Acquisitions and Takeovers Act 1975 (Cth)(FATA).  The offender, Mr Vijay Balasubramaniyan, a temporary resident, purchased four properties without authority and simultaneously owned two established properties at once, in contravention of the FATA.

While Australia is not averse to foreign investors purchasing property in Australia, this fine, the first of its kind for FATA breaches, highlights the importance of those investors obtaining approval from the Foreign Investment Review Board (FIRB) when contemplating property investment in Australia. 

What is FIRB?

FIRB is a non-statutory body established to advise the Treasurer and the Commonwealth on Australia’s foreign investment policy.  While FIRB examines proposals by foreign persons to invest in Australia and makes recommendations on those applications, ultimately, the final decision rests with the Treasurer.

In general, if you are a foreign person who wishes to invest in Australia, you are limited in the purchases you can make without FIRB approval.

Who is a foreign persons?

In broad terms, FATA defines a foreign person to be:

(a) an individual not ordinarily resident in Australia;

(b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

(c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

(d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

(e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

(f) a foreign government; or

(g) any other person, or any other person that meets the conditions, prescribed by the regulations.

Specifically, an individual will also be captured by the definition of foreign persons in circumstances where:

(a) the person has not been in Australia for more than 200 days of the preceding 12-month period; and

(b) at the time the person invests in Australia:

i) the person is in Australia and the person’s staying in Australia is subject to limitation imposed by law; or

ii) the person is not in Australia, but, immediately before the person’s most recent departure from Australia, the person’s continued presence in Australia was subject to limitation imposed by law.

Additionally, individuals who are a ‘temporary resident’ or ‘foreign non-resident’ will also require FIRB approval prior to investing in property in Australia.

What purchase limitations are there for foreign person purchasers?

While approved foreign persons are permitted to purchase and invest in Australian properties, those properties must be new or near-new.  Generally, this means that foreign persons are prohibited from purchasing established dwellings, except where:

· the purchaser is a temporary resident who purchases an established dwelling to use as their primary place of residence while living in Australia; or

· the purchase is to effect redevelopment of the land on which the established dwelling is located and that redevelopment will genuinely increase Australia’s house stock.

Lastly, a foreign person may purchase vacant land in circumstances where that land is purchased for the purpose of constructing a new residence.

As Mr Balsubramaniyan recently found out, should you risk running the gauntlet and attempt to circumvent the FIRB process, you should be prepared to face the Australian Taxation Office and the consequences flowing from that avoidance.

If you do not hold Australian citizenship or permanent residency and would like to purchase properties in Australia, our experienced commercial and property lawyers at Longton Legal can assist you.

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*