Who is considered a ‘foreign person’?
A foreign person is defined as an individual who is not ordinarily resident in Australia. If the individual is not an Australian citizen, they will only be taken to be ‘ordinarily resident’ in Australia if they have been in Australia during 200 or more days of the preceding 12 month period and, either their continued presence in Australia is not, or was not subject to any limitation as to time imposed by law.
The circumstances in which an Australian citizen can be considered a foreign person are not defined, however, should be determined by looking at circumstances such as connection with Australia and how they fit within the meaning of ‘ordinarily resident’ in Australia.
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Purchasing property in Australia as a foreign resident
If you fall or think you may fall within the definition of ‘foreign person’ above you will have to apply to the Foreign Investment Review Board (FIRB) for approval before you can purchase new dwellings or vacant residential land for development. These applications, according to the FIRB, are considered in light of the overarching principle that the proposed investment should increase Australia’s housing supply.
The FIRB state that applications for the purchase of new dwellings are usually approved without conditions. However, applications to purchase vacant land are normally approved subject to a number of conditions, such as the approval being subject to construction being completed within four years.
Temporary residents also require foreign investment approval before purchasing any residential real estate in Australia. A temporary resident according to the Australian Government FIRB is an individual who holds a temporary visa that permits them to remain in Australia for a continuous period of more than 12 months or is residing in Australia, has submitted an application for a permanent visa and holds a bridging visa which permits them to stay in Australia until the application has been finalised.
You can apply for FIRB approvalhere.If you would like more information you can contact one of our property lawyers.
Selling property in Australia as a foreign resident
Even if you are given approval to purchase property, you may face further implications when the time comes for you to sell your property.
One of these is the withholding of 12.5% of the purchase price by the purchaser if you do not provide them with an Australian Taxation Office clearance certificate. This is an obligation on a purchaser of an asset with a market value of $750,000 or more. This was implemented to assist in the collection of foreign resident’s capital gains tax liabilities.
The ATO states that they will issue the certificate when they have no reason to believe that you are or will be a foreign resident during the period specified in the certificate for your sale.
You can apply for a capital gains withholding clearance certificate here.If you would like more information you can contact one of our property lawyers.
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