HG Alert: Changes to Foreign Investment Review Process - Jan 2009

On 18 December 2008, the Assistant Treasurer released broad details of changes to the Government’s foreign investment screening arrangements for acquisitions of residential real estate by foreign persons.

Where any of the changes require variations to policy, these changes came into effect immediately. However, certain changes will require amendments to the Foreign Acquisitions and Takeovers Regulations 1989 and it is anticipated that these amendments will take effect in February 2009.

These changes to the foreign investment review process will have implications for developers, the sales of resorts and hotels (including individual units within them), acquisitions by foreign companies for staff accommodation and acquisitions by temporary residents.

Changes from 18 December 2008

50% Limit Removed

  • The existing requirement that only 50% of new dwellings be sold to foreign persons on an “off-the-plan” basis has been removed, subject to developers continuing to market locally as well as overseas in each development. Developers will no longer be restricted to selling only 50% of a development to foreign persons.

New Dwelling Definition

  • The definition of “new dwelling” has been amended. Previously it was defined as being a unit never having been sold or occupied. This definition now includes dwellings that have not been sold but have been rented out for no more than 12 months.

Student Acquisitions

  • Acquisitions by foreign students resident in Australia of an established dwelling as their principal place of residence is no longer subject to the cap of $300,000.00 on the value of the residence.

Vacant Land

  • Foreign persons acquiring single blocks of vacant residential land will now have a period of 24 months to construct a dwelling (previously 12 months).

Staff Accommodation

  • Foreign-owned companies are now able to acquire established residences for the use of their Australian-based staff provided that they sell or rent the residence if it is expected to remain vacant for a period greater than 6 months.

Changes from February 2009

Subject to amendments to the Regulations, the following changes will take affect in February.

Streamlined Procedures

  • Streamlined administrative procedures will be established for foreign-owned companies, trust estates and non-resident foreign persons to notify and receive approval for proposed acquisitions of vacant residential land and newly constructed dwellings. New forms and statutory notices will be introduced.

Advanced Approvals

  • Developers will no longer be issued advanced approval for sale of new dwellings to foreign persons. (That is, the 50% off-the-plan approval will no longer exist). All non-resident foreign purchasers will be required to submit individual applications (although developers may submit these on behalf of buyers).

Resort and Hotels

  • Resorts and hotels will be treated as commercial real estate rather than residential real estate. It will no longer be necessary to make application under the Foreign Acquisitions and Takeovers Act 1975 nor will there be any requirement to notify and seek approval for acquisitions of such facilities (or individual units within them), where these acquisitions are valued below the relevant threshold ($5 million for heritage listed property, $50 million for non-heritage listed property or $953 million for US investors).

Temporary Residents

  • Temporary residents will not be required to notify of proposed acquisitions of, established dwellings for their own residences, any new dwellings and single blocks of vacant residential land.

For further information regarding these important FIRB developments please contact HopgoodGanim's Commercial Property team.