If you are from overseas looking to invest in property Sydney, Australia, understanding the Foreign Investment Review Board (FIRB) and FIRB approval is very important.
The FIRB is a government department that assesses applications from overseas investors who are looking to purchase property in Australia. In a nutshell, the board is in place to ensure that any property bought by a foreign investor will in some way benefit the Australian economy.
Here are some FAQs about FIRB approval to help clarify some key points about the process:
• What is the FIRB?
The Foreign Investment Review Board (FIRB) is a non-statutory body that advises the Australian Government on foreign investment policy and its administration. The board examines applications from foreign interests looking undertake investment in Australian property and makes recommendations to the Government on whether those applications are suitable for approval under the Government’s policy.
• Why does the FIRB application process exist?
The FIRB aims to support economic growth and create new jobs within Australia. Application approval is generally influenced by the notion that the proposed investment should increase Australia’s housing stock by creating at least one new additional dwelling.
• Who needs FIRB approval?
If you are a foreign investor looking to purchase property in Australia then you will need to submit an application to the Foreign Investment Review Board.
• What do I need to do as a temporary resident?
If you are a resident on a temporary visa, including a spouse visa, a 457 visa or a student visa, then you will still need to get approval from the FIRB before purchasing property in Australia. However, you don’t need FIRB approval if you are purchasing property as a joint tenant with an Australian citizen that is your spouse.
• Are any foreign investors exempt from FIRB approval?
There are a few circumstances that will mean foreign investors are exempt from FIRB approval; such as if the property was inherited or awarded to you by court order. If the developer of the property you are buying has obtained a special exemption certificate, you may not need to get FIRB approval.
• What fees are involved with FIRB application?
Applicants will need to pay a fee before their FIRB application is processed. The fees apply for each application. If an application falls into multiple categories, the category with the highest fee would apply.
If the property is valued at $1 million or less, the fee will be $5,000. If the property is valued over $1 million, the fee is $10,000 with an incremental fee of $10,000 for every extra million dollars that the property is worth.
If a new dwelling exemption certificate applies, the fee is $25,000 upfront, with a reconciliation of properties sold to foreign persons based on the rates above.
• How do I lodge my FIRB application?
You can lodge your application online via the Australian government website. Foreign investors will be directed to the Australian Tax Office’s Residential Real Estate Application Form.
• How long does the application process take?
Usually the FIRB will take around 30 days to review and approve a standard application. Applications submitted with incorrect information will need to resubmitted, which may result in processing delays and additional charges.
• How does the approval process work?
It is recommended that foreign investors apply for approval before taking an interest in a residential property as action cannot be taken until the application is approved (penalties apply to premature action – see below).
To ensure that a property isn’t sold to another party while the application process is still taking place, investors can still enter into a contract as long as the contract is contingent on the application being approved.
• What if I lodge my FIRB application but change my mind?
If you receive your FIRB approval, but then decide you don’t want to purchase the property anymore, you will need to get in touch with the FIRB immediately and notify them of the change.
• What property can I purchase?
Foreign investors are usually limited to purchasing new property. This way the government can control the housing stock and ensure economic growth. However, in some circumstances temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia, but not as an investment.
Other conditions that may allow foreign investors to purchase and established property is if the land is to be developed, and two or more dwellings are to replace the original one. You can read more about the guidelines here (for temporary residents) and here (for non-residents).
• What is a “new” dwelling?
A new dwelling is classified as a dwelling that will be, is being, or has been built on residential land, has not been previously sold as a dwelling. It will have not been previously occupied, or if the dwelling is part of a development (50 or more dwellings), was sold by the developer of that development, has not been previously occupied for more than 12 months in total it is classified as new.
Foreign non-residents will generally be allowed to purchase vacant land for development subject to conditions.
• Are there penalties if I purchase property with our foreign investor approval?
Penalties apply for breaches of the Foreign Acquisitions and Takeovers Act 1975. However, non-compliance is very easy to avoid if the rules and correct processes are followed.
For a full rundown on the penalties that may apply in different circumstances, head to the FIRB resource website.
• When do I need to seek FIRB approval for a proposed purchase?
Foreign investors must receive foreign investment approval before they acquire an interest in residential real estate. This means before signing a contract agreeing to purchase a property or a share of a property (unless the contract is conditional on FIRB approval). See here for more information on when you will need to seek approval.
• Where can I find more information on FIRB?
There is a wealth of information on FIRB approval, including guidance sheets on a range of topics, on the FIRB website.