Insights

In brief - Conditions apply to the purchase of property by foreign persons

The conditions which apply to the purchase of Australian real estate by foreign persons vary depending on the type of property and on whether or not the foreign person is a temporary resident.

Foreign persons buying property need foreign investment approval

If you are a foreign person intending to buy real estate in Australia, you should make your purchase contracts conditional on foreign investment approval, unless you already have approval or you are exempt. Significant penalties may apply to ineligible owners of real estate.

This article is the second part of our earlier article, Foreign investment laws and Australian real estate.

Assessing the national interest in property purchases

The government reviews foreign investment proposals against the national interest case by case. It can block proposals that are contrary to the national interest or apply conditions to the way proposals are implemented to ensure they are not contrary to the national interest.

In assessing the national interest, the government typically considers national security, competition, other policies (including tax), the character of the investor and the impact on the economy and the community.

For a foreign government or a related entity, the government will consider whether the investment is commercial in nature or if the investor may be pursuing broader political or strategic objectives that may be contrary to Australia’s national interest.

If an investment is contrary to the national interest, the government will intervene. This occurs infrequently.

What types of real estate are covered by foreign investment laws?

The types of real estate covered are:

  • residential real estate (including property that is zoned other than residential real estate but including a component of residential)
  • commercial real estate
  • rural land
  • accommodation facilities
  • urban land corporations/trusts, ie the trust or corporation holds more than 50 per cent of its assets in urban land (vacant or developed)

Residential property purchases by foreign persons

It is the government's overarching policy that investment in residential real estate should increase Australia’s housing stock (at least two dwellings built for the one demolished, unless derelict or uninhabitable). Most proposals that further this policy will be approved.

The table below summarises the types of interest in residential real estate that will normally be approved with the stated conditions.

A second-hand (established) dwelling is a dwelling previously owned by a party other then the original developer or occupied for a period of more than 12 months.

A new dwelling is a dwelling not previously sold or occupied, including off the plan.

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Commercial property purchases by foreign persons

Commercial property includes offices, factories, warehouses, hotels, motels, guesthouses, restaurants, shops and rural property which is not used for primary production.

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Rural land purchases by foreign persons

Rural land is land used wholly and exclusively for carrying on a business of primary production. The business must be substantial and have a commercial purpose or character.

A foreign person needs approval to buy an interest in a primary production business where the total assets of the business exceed $244 million (or $1062 million for US investors).

All foreign governments and their related entities should notify the government and get prior approval before acquiring any interest in rural land.

Purchase of mining tenements by foreign persons

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Forestry

Established forestry businesses are treated as rural land.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​