A lot of people may ask themselves 'when is FIRB approval required?'. FIRB stands for Foreign Investment Review Board which is an Australian government division that examines applications from foreigners who want to invest or buy a home in Australia. A foreign person typically need to obtain approval from the FIRB before:
- Purchasing interests in securities or assets (for instance, an agricultural land); or
- Acquiring a substantial interest in an Australian entity that is valued above the relevant monetary threshold
- Engaging in other transactions involving corporations, unit trusts, or businesses with ties to Australia.
The Foreign Acquisitions & Takeovers Act (FATA) 1975 and the Australian Federal Treasurer govern foreign investment proposals. The Foreign Acquisitions and Takeovers Act deals with the acquisition of interests in securities, assets or Australian land by a foreign person. But what is the role of a Treasurer?
The Treasurer has the authority to issue orders and for disposal of orders after approval from the FIRB has been granted. The Treasurer may only issue such orders as a last resort and on national security grounds. This article will discuss 'when is FIRB approval required?'.
Effect of COVID-19 on the Foreign Investment Review Board
Due to COVID-19, the Australian Treasurer proposed interim adjustments to Australia's foreign investment review board in March 2020. According to the Treasurer, monetary screening thresholds are lowered to $0 for all foreign investments under the Act. A threshold is the highest monetary amount that a person can spend at a point of sale. Transactions are refused if they exceed the defined amount.
The new measures lowered the monetary screening thresholds for transactions that must be notified to the Foreign Investment Review Board. These measures were designed to prevent the firesale (sale of goods or assets at a very low price due to the seller's bankruptcy) of Australian assets to foreign investors, which could endanger economic security and the viability of crucial sectors.
Who Can Apply for Foreign Investment Approval?
Temporary Resident
People who are on a temporary visa such as a partner VISA, 457 work visa, a temporary skill shortage visa, or student visa:
- Need approval from the FIRB
- Can only purchase one established dwelling and used as a residence. However, temporary residents are required to sell the established home once they do not live there anymore.
When is FIRB approval not required for temporary residents? They won't need approval from the FIRB if they are buying an Australian property with an Australian Citizen as a joint tenant and are married.
Foreign Resident
Secondly, a foreign investor:
- Will need approval from the FIRB
- Will need a new property or vacant land in order to invest
- Can't buy established homes for their proposed investment property
- Are able to purchase a brand-new home in their name and rent it to their child who is on a temporary visa.
Foreign Citizens Exceptions
Foreign citizens have exceptions if they:
- Are buying a new property where the property developer has obtained an exemption certificate. An exemption certificate is available to foreign persons for up-front approval for land acquisitions without the need to seek separate approvals.
- Inherited the property
- Were awarded the property due to court order or property settlement.
- Are a foreign government investor. Additional rules apply for foreign government investors.
- Are not ordinarily resident in Australia
Is There Are A Foreign Person That Won't Require FIRB Approval?
We have discussed when is FIRB approval required for eligible people, but who are the people that won't require one? Below are some people who won't require approval from the FIRB.
Australian citizens, Australian expats (people and/or working in another country other than Australia) living overseas, Citizens of Australia living in Australia, and Australian Permanent Residents.
- Won't need approval from the FIRB
- Can buy a new residential property, existing property, or vacant land
- Can use the home as a property or investment
New Zealand citizen
- Won't need approval from the FIRB
- Can buy a new property, existing property, or vacant land
- Can use the home as property or investment
- Are not required to reside in Australia at the time of the contract exchange or settlement. However, this may subject a New Zealand citizen to a foreigner stamp duty charge.
Temporary Citizen buying with an Australian Citizen Spouse. This includes temporary citizens on a temporary visa such as a spouse VISA, 457 work visa, or student visa and buying a property with their Australian citizen spouse.
Note: De facto partners (either same-sex or different-sex) are eligible under this category.
- Won't need approval from the FIRB if they are buying property as joint tenants and are married. Hence, this does not apply to other relationships such as Australian business partners, mother/father and child, siblings, friends, and relatives.
- Will need approval from the FIRB if they are buying property together as tenants in common
- Can buy a new property, existing property, or vacant land
- Can use the home as property or investment
Foreigners buying a home with an Australian Citizen or an Australian permanent resident
- Won't need approval from the FIRB if buying a home together as joint tenants and are married
- Foreign citizens exemption does not apply to investment properties
- Can't purchase if they are tenants in common
Lodging an Application
When tackling the topic 'when is FIRB approval required', it's also important to know how a person can lodge a FIRB application. People can lodge their application on the Australian Tax Office's (ATO) Residential Real Estate Application form. Additionally, people lodging this application must submit their:
- Contact information;
- Full legal name;
- Property address (People may leave this blank if they don't know the details of the property. However, new properties often have title details until a few weeks before they are finished)
- Passport information and;
- Payment of the applicable FIRB approval cost. Visit the official FIRB application fees website for additional details about these costs.
According to the FATA, foreigners must apply for approval from the FIRB before purchasing a land interest in Australia. It's important to note that all purchases of residential land require FIRB permission, whereas "non-residential land" has a minimum value requirement. As a result, foreign investors must seek FIRB approval before formally exchanging contracts for the purchase of residential land.
Why Is It Important For Foreign Persons To Seek Legal Advice?
When discussing 'when is FIRB approval required', it's important to note that there are no 'pre-approval' procedures. It's important that people seek legal advice from a solicitor so they can understand FIRB guidelines before they start their search for Australian real estate.
Only when people have decided on a specific property to purchase can they submit an application for FIRB approval. JB Solicitors has the team and knowledge to prevent breaches of FIRB obligations. Our team ensures that you can get FIRB approval and other approvals without hassle, whether you want to:
- Migrate to Australia
- Seek property investments in Australia
- Buy or sell property in Australia
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.