Changes to the Foreign Investment framework
The Federal Governments approach to Australia’s Foreign Investment system is changing and property developers need to be aware of these changes. To this effect, the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 and the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 are proposed to take effect on 1 December 2015.
These Bills have been introduced as part of the Australian Governments reforms of the foreign investment sector. They include changes such as transferring responsibility of the regulation of foreign investors to the Australian Tax Office, and creating a register of foreign investors.
These amendments will significantly impact the Australia Foreign Investment Framework. These changes will particularly affect foreign investors and local developers, who should ensure that they are aware of the new requirements.
Advanced Off-the-Plan Approval
While developers will still be able to apply for advanced off- the- plan approval for developments this form of pre-approval will be restricted. The amendments will provide that a single foreign investor may only purchase $3 million worth of property in single development under an off- the-plan pre approval. Where they wish to purchase above this threshold the foreign investors will be required to apply for individual approval and pay the relevant fees to the Foreign Investment Review Board (FIRB).
The introduction of fees is a significant change to the foreign investment process.
The application fees will apply for residential, commercial and agricultural investments and will vary depending on the type of property and the value of the property. As such, property developers and foreign purchasers should be aware of these fees and take them into account when considering seeking approval from the Foreign Investment Review Board (FIRB).
These fees will commence at $5,000.00 for residential properties valued under $1,000,000.00 and will increase by $10,000.00 for properties valued over $1,000,000.00 and will continue to increase for each million in property value.
Developers seeking advanced off-the-plan certificates will also be required to pay an initial $25,000.00 fee with additional reviews of the fees based upon the development and value of the properties.
Foreign Investors seeking to apply for FIRB approval for commercial properties will be required to $10,000.00 for vacant commercial land and $25,000.00 for commercial real estate.
These fees are intended to be used to prevent the Australian tax payers being responsible for the administration duties requirement for foreign investor approvals.
Under the proposed Bill new criminal and civil penalties will be introduced. These will apply for a range of infringement matters and may be enforced against numerous parties, including investors, developers or third parties (including solicitors) who assist investors to evade the requirements under the Foreign Acquisitions and Takeovers Act 1975 (Cth).
These proposed changes are likely to impact on developers and foreign investor’s decision to purchase property in Australia.
If you are considering seeking FIRB approval this year you should consider the potential benefits of applying before these changes come into force.
If you have any questions regarding the proposed changes or how these will impact your business, investments opportunities or investors, please contact us here at Streten Masons Lawyers on 07 3667 8966 to arrange an appointment to discuss your concerns. We will continue to keep our readers updated on these changes and will announce when the changes come into effect or if they are amended.
Charlotte Streten – Law Graduate