In a significant move to address Australia's housing supply crisis, the federal government has announced a two-year ban on foreign investors purchasing existing residential properties.
These new rules will be in place from 1 April 2025 until 31 March 2027.
Definition of "Foreign Purchasers”
Under this new policy, "foreign purchasers" encompass:
- Foreign Individuals: Non-citizens who do not hold Australian permanent residency or a Special Category Visa (Subclass 444) for New Zealand citizens.
- Foreign Corporations: Companies incorporated outside Australia or those incorporated within Australia but controlled by foreign entities or individuals.
- Trustees of Foreign Trusts: Trusts where foreign persons or entities have a substantial beneficial interest under the terms of the trust instrument.
Notably, temporary residents, including international students and short-term workers, are classified as foreign purchasers under this policy.
Exemptions and Exclusions
While the ban is comprehensive, certain exemptions apply:
- New Developments: Foreign investors are permitted to invest in new housing projects, specifically developments comprising 20 or more properties. This aims to encourage the addition of new housing stock rather than competing for existing homes.
- Significant Housing Supply Contributions: Investments that demonstrably increase housing supply may be considered for exemption, subject to government assessment.
- Pacific Australia Labour Mobility (PALM) Scheme: Participants in this scheme may have specific provisions under the policy.
The ATO will receive an additional $5.7 million over four years to enforce the ban, ensuring compliance and addressing any breaches effectively.
While specific penalties for breaching this ban have not been detailed in the announcement, existing regulations impose significant fines on foreign investors who violate property ownership laws. For instance, foreign investors leaving properties vacant for more than six months in a year can face charges exceeding $169,000.
Given this precedent, it is anticipated that substantial penalties will be enforced for breaches of the new ban.
The government plans to release updated policy guidance before the ban's commencement, which will provide detailed information on enforcement measures and penalties. This initiative is part of a broader strategy to address housing affordability and availability in Australia.
This initiative is part of the government's broader strategy to tackle housing affordability and availability, aiming to make homeownership more attainable for Australians.
That said, there have been significant foreign surcharges levied against foreign purchasers by most State governments for many years now which have dissuaded foreign buyers from purchasing. So, it is unclear whether this new policy will have a meaningful impact.
