FIRB approval for new dwellings: Luxury Off-the-Plan Guide

Understanding FIRB Approval for New Dwellings

Foreign investors looking to purchase luxury off-the-plan apartments in Australia must comply with strict regulations managed by the Foreign Investment Review Board (FIRB). These rules apply to anyone who is not an Australian citizen, a New Zealand citizen, or a permanent resident. The primary legislation governing these transactions is the Foreign Acquisitions and Takeovers Act 1975. This act ensures that foreign investment is consistent with the national interest while encouraging the supply of new housing across the country.

A new dwelling is defined as a property built on residential land that has not been previously sold as a dwelling and has not been occupied for more than 12 months. Off-the-plan acquisitions fall into this category. Because these purchases add to the total housing stock, the Australian government generally allows foreign persons to buy them without the restrictive conditions applied to established homes. However, obtaining FIRB approval for new dwellings is mandatory before any contracts become unconditional.

Classifying the Foreign Person

The law distinguishes between different types of buyers. Temporary residents, such as those on a 482 Skilled Employer Sponsored Regional visa or a 500 Student visa, are treated differently from foreign non-residents who have no legal right to live in Australia. A temporary resident can usually buy one established dwelling to use as their primary place of residence, but they must sell it when their visa expires. In contrast, foreign non-residents are generally prohibited from buying established dwellings entirely.

Both groups are permitted to purchase new apartments off-the-plan. This includes high-end developments in major cities like Sydney, Melbourne, and Brisbane. For those purchasing through a company or trust, the rules change if the entity is considered a foreign corporation or a foreign trust. We often assist clients with a foreign corporation property purchase where the ownership structure involves overseas shareholders. Identifying the correct status of the buyer is the first step in any application.

The Application Process and Fees

The application process involves submitting a formal notification to the Australian Taxation Office (ATO), which acts as the administrative arm for residential FIRB matters. This must occur before the buyer signs a contract, or the contract must include a clause making the purchase subject to FIRB approval. If a buyer signs an unconditional contract without approval, they face heavy penalties and may be forced to divest the property at a loss.

Fees for these applications are high and increase based on the value of the property. For a luxury apartment valued at $2 million or less, the fee is approximately $31,500. While fees increase according to property value, it is important to note that the tripling of fees under 2024 legislative amendments applies to established dwellings rather than new developments. These fees are indexed on 1 July every year. Recent research into Australian property costs shows that these administrative expenses are a major consideration for overseas buyers. The government uses these fees to fund the compliance and enforcement of foreign investment property law.

Advance Off-the-Plan Certificate for Developers

Many large-scale luxury developments have an advance off-the-plan certificate. This is a special exemption granted to the property developer rather than the individual buyer. When a developer holds this certificate, they can sell apartments in that specific building to foreign persons without each buyer needing to apply for individual FIRB approval. This simplifies the process for the investor, as the developer has already paid a substantial upfront fee to cover a percentage of the total sales.

Buyers should ask the real estate agent if the development has a New Dwelling Exemption Certificate. If it does, the buyer simply receives a copy of the certificate and does not need to pay the individual application fee to the ATO. However, these certificates often have limits, such as only allowing 50 per cent of the total dwellings to be sold to foreign persons. If the quota is full, the buyer must revert to a standard individual application.

National Security and the 2020 Reforms

The Foreign Investment Reform (Protecting Australia's National Security) Act 2020 introduced tighter controls on land deemed sensitive. While most residential apartment sites are not affected, some luxury developments located near military bases, government communication centres, or other protected sites may trigger national security reviews. This adds a layer of scrutiny to the approval process. We help clients by assessing investment risk early in the transaction to determine if the location of the apartment might cause delays or complications with the Treasury.

New Dwelling Supply and Market Trends

The government encourages foreign investment in off-the-plan properties because it helps developers sell and build new housing stock. According to building approvals data, the volume of new apartment starts fluctuates based on interest rates and global economic conditions. Foreign buyers play a role in meeting the pre-sale targets required for construction financing. This is why the rules for new dwellings are more relaxed than those for existing houses.

However, compliance remains mandatory. Foreign buyers must still prove their identity and the source of their funds. The ATO uses data-matching technology to track property transfers and ensure that foreigners who buy off-the-plan actually complete the purchase and do not flip the contract to another foreign person without a new approval.

Compliance and Post-Purchase Obligations

Once approval is granted and the purchase is completed, the buyer has ongoing obligations. The property must be registered on the Register of Foreign Ownership of Residential Land within 30 days of settlement. If the buyer is a temporary resident and the property is their home, they must live in it. If they move out or their visa expires, they must sell the property within six months. For foreign non-residents buying off-the-plan as an investment, they can rent the property out to tenants, but they cannot live in it themselves if they do not have a valid visa.

Failure to comply with these conditions can result in civil or criminal penalties. The government has increased its focus on ensuring that foreign-owned properties are not left vacant in major cities. Some states, like Victoria and New South Wales, also impose additional land tax surcharges and vacancy taxes on foreign owners. These state-based taxes are separate from the federal FIRB process and should be reviewed by a tax specialist.

The Role of Legal Advice

Buying property in a foreign country involves more than just selecting a unit and paying the deposit. The legal framework in Australia is transparent but rigid. We provide fixed-fee FIRB application services to ensure that the paperwork is filed correctly and the conditions are understood. We work with migration agents to coordinate property purchases with visa timelines, ensuring that a student or a skilled worker has a home ready for them when they arrive.

For developers, we assist in applying for exemption certificates so that their project is more attractive to international markets. This involves detailed reporting to the ATO on the number of units sold and the residency status of each purchaser. Managing these requirements correctly prevents delays in the settlement of the entire building.

This information is general in nature and FIRB rules change frequently. Contact us for advice specific to your situation.