The property buying process in Australia is relatively straightforward and foreign investors are permitted to own real estate in Australia as long as the land or property for sale has been approved for sale to overseas buyers by the Foreign Investment Review Board (FIRB). Income and capital gains derived from property owned in Australia have to be reported to the Australian taxation authorities but there are certain incentives in place for overseas property investors to reduce or negate their taxation liability.

The FIRB examines applications from overseas citizens who are looking to invest in property in Australia.  If you are looking to purchase a home to live in or an investment property, you will be required to obtain FIRB approval.

This FIRB advisory board reports to Treasury and reviews all applications to purchase residential real estate, no matter what the value of the intended purchase is, by anyone who is not an Australian citizen, an approved migrant or a permanent resident of Australia.

Certain acquisitions do not require notification or approval under the Foreign Acquisitions and Takeovers Act 1975 (also referred to as exempt acquisitions). Foreign persons should determine whether their proposed acquisition is exempt and if in doubt, seek legal advice.

There are usually no problems when the foreign spouse of an Australian citizen applies to be allowed to purchase property with his/her spouse on a 50/50 or "Joint Tenant" basis, but there still must be an application to the FIRB.

Why Australia for Property investment?

Investing in Australian properties has become popular with overseas investors looking for returns and stability not available in their own country.  Some of the reasons for this is the country’s stability, strong growth performance and to most, Australia is a great place to live.

How long does an FIRB review take?

Approximately 30 days is needed for an application to be looked at by the FIRB. There are no "general" approvals available. An approval can only be granted on a specific property. Therefore, real estate contracts with foreign citizens must contain a clause saying that going ahead with the purchase is conditional upon getting FIRB approval and that 30 days must be allowed for that approval to be granted or denied.

What influences an FIRB decision?

If the FIRB feels that the residential real estate in question is only being purchased by a foreign citizen or company just for the purpose of renting it out, or because the purchaser wants to speculate on the property’s future value, permission to purchase will be refused.

Buying property from a developer

Apartments or townhouses in a proposed development, or in a development which has just been completed but has not yet been occupied or sold, can be sold to foreign investors as long as the developer applies in advance for this to be allowed. If a foreign citizen buys a property in this way (often called "buying off the plan"), the property, when built, can be rented out, sold or used by the purchaser. However, foreign interests cannot hold more than half the apartments or townhouses in any one development.

You should ask to see a copy of the developer’s approval letter to ensure that FIRB approval exists for sales to foreign citizens.

There are no restrictions on the number of such dwellings in a new development which may be sold to foreign persons, provided that the developer markets the dwellings locally as well as overseas (that is, the dwellings cannot be marketed exclusively overseas).

This category includes dwellings that are part of extensively refurbished buildings where the building's use has undergone a change from non-residential (for example, office or warehouse) to residential. It does not include established residential real estate that has been refurbished or renovated.

A property purchased under this category may be rented out, sold to Australian interests or other eligible purchasers, or retained for the foreign investor's own use. Once the property has been purchased, it is second-hand real estate and is subject to the restrictions applying to that category.

It is possible to buy a plot of land in order to build your own home, however you will once again be subject to certain restrictions – the biggest one of which is that you must begin building within 12 months’ of purchase. This can be a tricky thing to commit to, on account of having to gain planning permission, commissioning architects and finding a good builder

Second-hand dwelling

Purchases of second hand dwellings by foreign persons are restricted to temporary residents with visas (more than 12 months) or investors making the dwelling their principal place of residence.

Commercial real estate

FIRB approval must be sought by any foreign individual or company which wants to purchase existing commercial and non-residential real estate valued at $5 million or more. They are normally approved unless considered "contrary to national interest".

Buyers of real estate exempt from the Board’s approval

Property left to you in a will
If you are a foreigner and your Australian grandmother or uncle left you a unit on the Gold Coast or a house in Tasmania in their will, then the title to that property can be transferred to you without even notifying the Board, let alone seeking its approval.

There are no restrictions on the number of properties you are permitted to purchase, unless you are a temporary resident and want to acquire more than one established (second‑hand) dwelling as your principal place of residence.

Renting out the property
If you purchase a new dwelling – yes.

If you purchase vacant land – you can rent out the dwelling(s) that you construct on the land.

If you purchase an established dwelling for redevelopment purposes – you cannot rent out the existing dwelling, but you can rent out the new dwellings that you construct after demolishing the existing dwelling.

If a company purchases an established dwelling for their Australian-based staff – you may rent out the dwelling if it is expected to remain vacant for more than 6 months and you are unable to sell it.

Approval is not needed when reselling but you should be aware that the foreign investment policy may apply if foreign person(s) want to purchase it from you (that is, you should ensure that the contract of sale is conditional upon the foreign purchaser(s) receiving foreign investment approval).

However, you will need approval if you intend to sell the property without complying with the conditions specified in your approval – for example, if you purchased vacant land and you wish to sell the land without constructing any dwelling(s); or if you purchased property for redevelopment and you wish to sell it without demolishing the existing dwelling and building new dwellings.

Fees and taxes

As in any country, buying a property in Australia is an expensive business – on average you should budget around five per cent of the purchase price to cover the process. This is broken down into a Land Transfer Registration fee, which varies from state to state; legal fees; mortgage application; local tax, which again varies from state to state; survey; and building insurance.

Some states will also demand that you have a termite and pest inspection, and if you are buying an apartment, it is advisable to commission a strata inspection which determines whether the building as a whole has had any structural problems – or been subject to any administration concerns.

Information Source: FIRB Australia

Chan Ai Cheng is the General Manager of S. K. Brothers Realty (M) Sdn Bhd, a firm established since 1979 in the practice of Real Estate in Malaysia. She is a Registered Estate Agent with the Board of Valuers, Appraisers and Estate Agents Malaysia (LPPEH) and a Member of ISM and MIEA.