How to get FIRB approval when purchasing property in Australia

The FIRB has recently introduced new laws surrounding foreign investment along with new application fees and compliance policies.

If you’re thinking of purchasing residential or commercial property for investment purposes, make sure you understand how to apply for FIRB approval and the type of property or land that you can purchase.

What is the Foreign Investment Review Board (FIRB)?

The FIRB is an Australian government advisory board that reviews the purchase of residential or commercial real estate by someone who is not an Australian citizen, a permanent resident of Australia or an approved migrant.

The government body reviews foreign investment to ensure that the investment will benefit the Australian economy and to control stock within the property market. Foreign investors are often limited to investing in new properties. This helps prevent speculation, which can inflate local property values.

Do I need FIRB approval?

If you’re thinking of purchasing property in Australia, you may need FIRB approval if you are a temporary resident or a foreign investor.

Temporary residents

If you’re on a temporary visa, including a spouse visa, 457 visa or a student visa, then it’s likely that you’ll need FIRB approval. If this describes you, make sure you notify the FIRB of your intention to purchase a property.

You are a temporary resident if you hold a temporary visa that allows you to stay in Australia for 12 months or if you hold a bridging visa and have completed a permanent residency application.

If you’re buying a live-in residential property, you can only purchase one property and you must sell it when you longer reside in it. However, if you obtain Australian citizenship or permanent residency, you won’t have to sell your property.

You can also purchase an investment property, but it must be a new property or it must be for the purchase of vacant land (from a developer).

As a temporary resident, you do not need FIRB approval if you’re purchasing property with an Australian resident as joint tenants.

How to get a home loan as a temporary residents

Foreign investors

As a foreign investor, you may also need FIRB approval to buy property in Australia. The investment property must be a new property or vacant land to build a new property.

If you’re a foreign citizen living overseas, it’s unlikely that you’ll be able to buy a property in Australia without a valid visa.

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What types of property can I buy?

Typically, temporary residents and foreign investors can purchase the following property types:

• Investment property. You can generally buy an investment property as long as it is a new property (a dwelling that has not been previously sold or occupied for more than 12 months).
• Residential property. If you’re purchasing a property for residential purposes, you may be able to buy an established dwelling.
• Vacant land. Depending on your visa status, you may be able to buy vacant land if you start building a property within one year of acquiring the land.

How much does it cost to get FIRB approval?

The FIRB charges an application fee to all foreign investors who want to buy property in Australia, unless you’re buying property with an Australian citizen or permanent resident or a New Zealand citizen.

You can expect to pay around $5,000-$100,000 depending on your situation, the property value and property type. As a rule of thumb, residential property or land will cost less than investment property.

For instance, if you're acquiring residential property where the price of the acquisition is between $1 million to $2 million, the application fee is $10,000. On the other hand, if you were acquiring an interest in agricultural land where the acquisition price is between $2 million and $3 million, you would pay a $20,000 application fee.

How can I apply?

You can apply for FIRB approval by visiting the FIRB website and following the online application process.

Generally, the FIRB takes 30 days to grant approval. However, it could take longer depending on your circumstances.

When should I apply for FIRB approval?

You can only apply for FIRB approval once you have selected a property to buy. In the contract of sale, you should include a clause that allows you to withdraw from the purchase in the event that the FIRB approval is not granted.

How is tax treated for an investment property?

If you acquire an investment property in Australia, you will need to declare the income on your Australian tax return. You can generally claim a deduction for expenses associated with the maintenance of the property, including the interest on finance.

The treatment of tax for your investment will depend on whether or not your property is positively or negatively geared. You may also need to pay capital gains tax (CGT) when you sell the asset. As at 2012, the Australian government announced that non-residents would no longer qualify for the CGT discount on any capital gain earned after 8 May 2012.

For more information, visit the Australian Taxation Office (ATO) website or speak to an accountant.

Getting finance for a foreign purchase

You can choose to take out a foreign currency loan in the currency in which you earn your income or you can organise to take out an Australian mortgage.

The primary benefit of taking out a foreign home loan is that you may be able to secure a lower interest rate compared to what would be available in the Australian market. On the other hand, the advantage of applying for an Australian home loan is that you can generally borrow up to 70% of the value of the property, which means it’s relatively easy to access a home loan.

What happens if I receive FIRB approval but then change my mind?

If you receive FIRB approval for a property purchase but you then decide to not go ahead with the purchase, you need to notify FIRB of the change.

For more information about FIRB approval and whether you need it, visit the Australian government website and speak to a migration agent to explore your options.

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