Budget update: foreign owners of "ghost" property

The 2017–2018 Federal Budget announced that the Government will introduce a charge on foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months per year. The charge will be levied annually and will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired by the foreign investor.  Currently, a $5,000 applies for acquiring an interest in residential land where the price of the acquisition is $1 million or less. This fee scales up to $91,300 for acquisitions up to $10 million (the ATO will supply a fee estimate for acquisitions over $10 million – fees are tiered per million).

Information from the Foreign Investment Review Board (FIRB) indicates that foreign persons who are purchasing in a development which has a New Dwelling Exemption Certificate (NDEC) will be subject to the annual charge where contracts were entered into after 7.30 pm (AEST) on 9 May 2017.

A property that is vacant for at least six months per year will be considered under-used. A property is considered to be "used" where it is rented out, used as a residence or otherwise occupied. The annual liability is assessed based on the date of the property settlement. The person who purchased the property does not have to be the person who uses or occupies the property. For example, a friend, relative or some other person can be the occupant and it is not required that a rental agreement is in place.

In the following circumstances, the FIRB says a property will also be considered used:

  • for any period where the property has genuinely been made available for rent, including by advertising the property, engaging a leasing agent and setting the rent at a market rate; and
  • during a construction period for the building of new dwellings or redeveloping existing dwellings – this is taken to be from the settlement of the property until a new dwelling has been completed.

The six-month period in which the property must be used does not need to be six consecutive months. As long as the property is not left vacant for a total of six months or more in a 12-month period, the charge will not apply.

The annual vacancy charge is not a condition of the foreign investment approval and does not impact any conditions in a foreign investment approval. The charge will no longer apply when a person ceases to be a foreign person.

Budget update: restricted foreign ownership

The 2017–2018 Federal Budget announced that a cap of 50% will be applied to foreign ownership in new developments through a condition on New Dwelling Exemption Certificates (NDECs).

The Foreign Investment Review Board notes that applications for NDECs that are received from 7.30 pm (AEST) 9 May 2017 and approved will be subject to a condition that the developer may only sell a maximum of 50% of the total dwellings in the development to foreign persons. This condition will not apply to existing approvals, or to applications received before that time that are still to be processed.

Developers (either Australian or foreign) can apply for an NDEC for a development if:

  • it will consist of 50 or more dwellings (other than townhouses);
  • they have development approval from the relevant government authority; and
  • where applicable, foreign investment approval was given to purchase the land and relevant conditions are being met.

Budget update: tougher residency rules for pensioners

In the 2017–2018 Federal Budget, the Government announced that it would revise the residency requirements for claimants of the Age Pension and the Disability Support Pension (DSP). From 1 July 2018, claimants will be required to have 15 years of continuous Australian residence before being eligible to receive the Age Pension or DSP unless they have either:

  • 10 years' continuous Australian residence, with five years of this during their working life (for ages 16 to Age Pension age); or
  • 10 years' continuous Australian residence, without having received an activity-tested income support payment for a cumulative period of five years.

Existing exemptions for DSP applicants who acquire their disability in Australia will continue to apply.