Buying Australian Property on a 457 Visa

 New Laws for Temporary Residents

457 visa
On 1 July 2016 the laws were tightened by the Federal Government. It is now more difficult and very expensive for temporary residents to purchase both new & established real estate in Australia, even if intended as their principal place of residence.

These laws were no doubt in response to Australian citizens complaining about the difficulties in competing with wealthy foreigners when trying to buy residential property.

If a temporary resident wants to purchase an Australian property they are now required to submit the application to the Foreign Investment Review Board (FIRB) and pay the substantial fees before exchanging contracts on a purchase. See below for fees.

Temporary residents are individuals who:

  1. hold a temporary visa (eg 457 visa) that permits them to remain in Australia for a continuous period of more than 12 months (regardless of how long remains on the visa); or
  2. 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 that application has been finalised.

If the temporary resident has an offer accepted on a specific property and pays the FIRB fees, but is then gazumped or the vendor decides not to sell, the FIRB is under no obligation (and is unlikely) to refund the fees paid.

There are only 2 ways to lessen this risk :

  1. Exchange contracts with a special condition to the contract stating “subject to FIRB approval”. In the current strong & competitive Sydney property market, it is very difficult to get this clause inserted into a contract for a private treaty sale as many competing buyers will be able to exchange contracts without any conditions. For an auction campaign it would be even less likely. Most vendors do not want complications and uncertainty in their property sale.
  2. Obtain an Established Dwelling Exemption Certificate from the FIRB which allows you to purchase an unspecified property over a 6 month period. The fees are the same in the table below. If at the end of the 6 month period you have not purchased a property, you will then have to re-apply and pay a new full fee to the FIRB.

FIRB Application Fees

 

Residential land
Acquiring an interest in residential land where the price of the acquisition is $1 million or less

($0 – $1,000,000)

$5,000
Acquiring an interest in residential land where the price of the acquisition is more than $1 million and less than $2 million

($1,000,001 – $1,999,999)

$10,100
Acquiring an interest in residential land where the price of the acquisition is between $2 million and less than $3 million

($2,000,000 – $2,999,999)

$20,300
Acquiring an interest in residential land where the price of the acquisition is between $3 million and less than $4 million

($3,000,000 -$3,999,000)

$30,400
Acquiring an interest in residential land where the price of the acquisition is between $4 million and less than $5 million

($4,000,000 – $4,999,999)

$40,600
Acquiring an interest in residential land where the price of the acquisition is between $5 million and less than $6 million

($5,000,000 – $5,999,999)

$50,700
Acquiring an interest in residential land where the price of the acquisition is between $6 million and less than $7 million

($6,000,000 – $6,999,999)

$60,900
Acquiring an interest in residential land where the price of the acquisition is between $7 million and less than $8 million

($7,000,000 – $7,999,999)

$71,000
Acquiring an interest in residential land where the price of the acquisition is between $8 million and less than $9 million

($8,000,000 – $8,999,999)

$81,200
Acquiring an interest in residential land where the price of the acquisition is between $9 million and less than $10 million

($9,000,000 – $9,999,999)

$91,300
Acquiring an interest in residential land where the price of the acquisition is $10 million or more

($10,000,000 or more)

Please contact the Australian Taxation Office for a fee estimate (fees are tiered per million)

 

The following enforcement measures are available for non-compliance with residential real estate obligations:

  • criminal prosecution;
  • civil penalty orders;
  • infringement notices.

In addition, the Treasurer may be able to require the interest in residential real estate to be sold.

In addition to the FIRB purchase fees, in NSW foreign buyers will also have to pay a Surcharge Purchase Duty of 8% of the property purchase price. This is in addition to the standard NSW stamp duty charges.

Therefore unless the temporary resident is intending on staying in Australia for a long time, it is probably a cheaper and easier option to continue renting during their stay.

For more information please contact Henry Wilkinson

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