In taking steps to further regulate foreign investment in Australia the Federal Government has introduced the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 and the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 which are proposed to take effect from 1 December 2015.
These Bills will have a large impact upon Developers throughout the country due to the imposition of a new fee regime, administered by the Foreign Investment Review Board (‘FIRB’), when obtaining blanket approvals for developments.
Exemption Certificates for New Dwellings
Developers who are constructing new residential dwellings can apply to FIRB to obtain an Exemption Certificate for New Dwellings (‘Exemption Certificate’) which exempts foreign persons from first having to obtain approval from FIRB to purchase a new dwelling (currently known as ‘Advanced off-the-plan Certificates’).
Advanced off-the-plan Certificates to date have been a no cost application made by a Developer to FIRB.
Under the new fee regime Developers will be required to pay the following fees to receive, and keep current, an Exemption Certificate:
- an upfront application fee of $25,000 (‘Application Fee’); and
- for each dwelling sold to a foreign person, reconciled on a six monthly basis the following additional fee(s) will be payable (‘Additional Fees’):
- $5,000 for each residential property valued at $1 million or less; and
- $10,000 for each residential property valued at over $1 million (then $10,000 incremental fee increase per additional $1 million in property value).
Fees will be indexed by CPI on 1 July each year.
Timing for Payment of Fees
Should Developers wish to apply for an Exemption Certificate, the Application Fee is payable at the time an application is lodged with FIRB. An application for an Exemption Certificate will not have been deemed received by FIRB until payment of the Application Fee has been received.
The Additional Fees will be payable for each dwelling sold to a foreign buyer and payable at the end of each six month period following the issue of an Exemption Certificate in which the dwelling is sold to a foreign buyer.
Under the new regime, a person is taken to sell an interest in land if an agreement is entered into and it is irrelevant whether or not the agreement is subject to the satisfaction of a condition. Accordingly, a dwelling will be considered as ‘sold’ once a contract is entered into with a foreign buyer with the Additional Fees payable at the end of the next six month period.
There is no ability for a Developer to seek a refund of the Additional Fees from FIRB in the event that a Contract is terminated or does not proceed.
Waiving of Fees
FIRB has the power to waive or remit the whole or part of a fee payable under the Act if they are satisfied that it is not contrary to the national interest to waive or remit the fee.
Steps to Avoid the New Fee Regime
Developers should take steps to receive an Advanced off-the-plan Certificate before the new fee regime commences on 1 December 2015 as applications, although submitted prior to 1 December 2015, but which are approved following the commencement of the new fee regime may be subject to the Additional Fees.
As FIRB may take up to 30 days to decide any application for an Advanced off-the-plan Certificate, applications should be submitted with FIRB by 1 November 2015.
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