When does a foreign person need to seek approval from the Foreign Investment Review Board (FIRB) for a proposed purchase?
Foreign persons must have received foreign investment approval before they acquire an interest in residential real estate. An interest in residential real estate can include:
- signing an unconditional contract agreeing to purchase a dwelling (or a share of a dwelling);
- a security interest under a real property mortgage;
- an option that provides the right to purchase a property at an agreed price at some time in the future (such as a put and call option);
- a leasehold agreement that is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years;
- increasing the share of ownership of a dwelling that the foreign person already has an interest in;
- acquiring shares in a corporation or units in a unit trust where interests in residential real estate exceeds 50 per cent of the entity’s assets; or
- any other acquisition that meets the definition of an interest in Australian land under the Foreign Acquisitions and Takeovers Act 1975.
Australian citizens are obviously not foreigners and do not require approval to purchase residential real estate, regardless of whether they are resident in Australia or not. New Zealand citizens and holders of Australian permanent residency visas are also exempt in respect of a residential real estate purchase. Spouses of Australian citizens, New Zealand citizens and holders of Australian permanent visas do not require FIRB approval when purchasing residential real estate as joint tenants.
The interest of the foreign spouse may however attract additional transfer duty (imposed by the State) on the half share they acquire which can be significant. One should consider whether the purchase could proceed in only the one name or whether an application for approval is desirable to allow a purchase of unequal shares.
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