Hickey Lawyers is well experienced assisting foreign investors in investing in Australia. Here are a few guide points for a foreign person looking to make an investment in Australian real estate.

Important Legal Information for Foreign Investors

Friday, 11 January 2013

Hickey Lawyers is a specialist property law firm whose ability to offer total project management sets us apart from traditional law firms.

Our team is equipped to think beyond the role of the conventional lawyer, a quality that delivers value to both our Australian and international clients. We are more than just their legal advisors – we are their trusted local representative.

We have extensive experience in advising and guiding clients from China, Hong Kong, Singapore, Taiwan and the broader Asian area in making significant property investments in Australia.  

Below are a few guide points that may be of interest to you as a foreign person looking to make an investment in Australian real estate.  This information is meant as a guide only and we ask that you contact us should you require specific legal advice.  The information below is correct as at the date of printing.

System of Land Ownership in Australia

1.               The majority of land in urban areas available for private ownership is “freehold title” property that grants an estate in fee simple in the land to the person who is the registered owner of the freehold title.  In essence, an estate in fee simple confers upon the registered owner absolute ownership of the land subject only to rights that the State reserves for itself to minerals and natural resources under the land and any other registered encumbrances on the land. A title search will show registered encumbrances on the land.

2.               All States in Australia keep a Land Titles Registry.  Upon the completion of your purchase of freehold title real estate in Australia, the transfer of ownership of that property to you must be registered with the Land Titles Registry to record your ownership of that property.  Unless you mortgage your property (for example to a bank to obtain finance to assist with the purchase) you are entitled to obtain and hold the title deed to your property.

3.               Another method by which an interest in land can be granted in Australia is via Crown lease. However, in urban areas, these are not common except where the property is located in an environmentally sensitive or strategic area where the Government wishes to retain control over the possible uses of the land.

Foreign Investment Regulations

1.               The Australian Government’s foreign investment policy is regulated by the Australian Government’s Foreign Investment Review Board (“FIRB”). 

2.               The Australian Government’s foreign investment policy encourages acquisition by foreign persons (i.e. a person who does not hold Australian permanent residency or Australian citizenship) of new residential real estate (for example a new house or apartment). 

3.               Except where the property developer has pre-approval to sell newly developed real estate to foreign persons, the Sale and Purchase Agreement in relation to the property must be conditional upon FIRB granting approval for you to buy the property.  The foreign person must make application to FIRB for such approval, which is normally granted without much difficulty unless FIRB forms the opinion that it is not in Australia’s interest to allow the foreign person to buy real estate in Australia.  Officially, FIRB can take up to 40 days to consider and advise of its decision but practically, most decisions are given within 1 to 2 weeks of the application (sometimes much sooner depending on FIRB’s workload).

4.               In relation to developed commercial property (such as office buildings, shopping centres and hotels), a foreign person does not need to obtain FIRB approval if the purchase price of the commercial property is less than AUD$53,000,000.00 (less than AUD$5,000,000.00 where the developed commercial property is heritage listed).

5.               If the purchase price of the developed commercial property is AUD53,000,000.00 or more (or where the property is heritage listed AUD$5,000,000.00 or more), then FIRB approval must be sought for that acquisition. Again, unless FIRB forms the view it is against the national interest to allow the acquisition to proceed, approvals are generally processed without much difficulty or delay.

6.               Acquisitions of single blocks of vacant land for residential development for the purpose of building a single residential dwelling are normally approved subject to continuous substantial construction commencing within 24 months of FIRB approval.

7.               Acquisition of other vacant land (i.e. not single blocks) for the purpose of building multiple residential dwellings are normally approved subject to the following conditions:-

  •         continuous substantial construction must commence within 24 months of FIRB approval; and
  •         at least 50% of the acquisition cost or the current market value of the land (whichever is the higher) must be spent on the development.

8.               Acquisition of vacant land for commercial development (i.e. not to be used for residential purposes) are normally approved subject to the following conditions:-

  •         continuous construction commencing within 5 years of FIRB approval; and
  •         a minimum amount equivalent to 50% of the acquisition cost or current market value of the land (whichever is the higher) being spent on the development.

9.               There is some scope for a foreign person to buy second hand (established) residential property. Very broadly this includes temporary residents who can apply to purchase one established dwelling to use as their place of residence in Australia. Approval is usually granted subject to a condition that the temporary resident sells the dwelling when it ceases to be their residence and that during the period of ownership, the temporary resident cannot use the property as a rental or holiday property.

Migrating to Australia

Migration is a broad and complex area of law.  There are many pathways that can lead to Australian permanent residency and ultimately Australian citizenship.  It is not possible within a general guide to outline all the pathways and criteria of each visa.  However, we do wish to note that the Australian Government has a substantive Business Innovation and Investment Program that welcomes business migrants to Australia. 

Significant Investor Visa

1.               To further attract high net worth and skilled business people to Australia, the Australian Government introduced on 24 November 2012 a further pathway to Australian temporary residency and ultimately permanent residency through the Business Skills Stream.  The new visa is known as the Significant Investor Visa. 

2.               The Significant Investor Visa creates a new streamlined path to Australian permanent residency for migrant investors who are able to invest at least AUD$5,000,000.00 into a “complying investment” (see paragraph 4 below) and have complied with the investment criteria for 4 years under the Provisional Visa (Sub-Class 188) that will be granted to approved migrants as part of the two stage pathway to permanent residency (Sub-Class 888).  The funds/assets proposed to be used to make the complying investment must be unencumbered and lawfully acquired.

3.               Each migrant investor must be nominated by a State Government before the grant of the Significant Investor (Provisional Sub-Class 188) Visa.  The “complying investment” which the migrant investor proposes to invest in must be acceptable to the nominating State Government.  At this time, the only authorised “complying investment” of the Queensland State Government is Queensland Treasury bonds.  The Queensland Government has not yet formulated its policy on what other “complying investments” it will accept such as direct investment into non-listed Australian companies or ASIC regulated managed funds.  We understand that the Cabinet of the Queensland Government will soon meet to formulate its policy on these matters.

4.               The migrant investors investment of at least AUD$5,000,000.00 must go into a “complying investment”.  The complying investments are:-

(a)             direct investment into a non-listed Australian company that meets the following criteria:-

(i)               the company must operate a qualifying business in Australia.  A “qualifying business” means an enterprise that is operated for the purpose of making profit through the provision of goods and services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment;

(ii)              the applicant must obtain an ownership interest in the company;

(iii)             the company must be registered with the Australian Securities and Investments Commission (“ASIC”) and the company must have an Australian Business Number (“ABN”);

(b)             State or Territory Government Bonds; and

(i)               ASIC regulated managed funds with a mandate for investing in Australia.  The managed funds must be in Australian assets only and limited to the following:-

(ii)              infrastructure projects in Australia;

(iii)             cash held by Australian deposit taking institutions;

(iv)            bonds issued by a State or Territory Government;

(v)             bonds or equity in Australian companies listed on the Australian Stock Exchange;

(vi)            bonds or term deposits issued by Australian financial institutions;

(vii)           real estate property in Australia;

(viii)          other ASIC regulated managed funds that invest in the above lists of assets.

5.               The visa stream features a residence requirement of 160 days spent in Australia over 4 years while holding the Significant Investor (Provisional Sub-Class 188) Visa.

 

Tony Hickey

Our Managing Partner, Tony Hickey, is committed to Hickey Lawyers' constantly innovating, evolving and moving forward. Share our news articles about our latest developments.

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