Foreign investor regulations for purchasing property – what you need to know
With the current state of the Tasmanian property market, purchasing a residential property is an appealing proposition for both local and foreign buyers. If you are a foreign investor, it is important to be aware of the rules surrounding residential property acquisition for foreign persons.
As a foreign investor you will need to obtain Foreign Investment Review Board (FIRB) approval before acquiring an interest in certain types of property investments. This list is not exhaustive, but two situations where the rules can apply that are relevant for the Hobart market are the acquisition of residential land and vacant commercial land.
Another factor to consider is the foreign investor duty. There is a charge of an additional 3% duty on residential and primary production properties for foreign persons.
Any property contract entered into needs to address these criteria and will likely form part of the terms of the property purchase contract, for example ‘This offer is subject to FIRB approval.’
When the property is being purchased in a trust structure it is important to know whether a potential beneficiary of the trust is a foreign person. Even if the trustees aren’t foreign persons, if there is a beneficiary which could be deemed a foreign person then the purchasers could be liable for the additional duty. This applies even if there is no intention to ever distribute income or capital to this foreign beneficiary. Therefore, knowledge of your trust deed and its provisions are essential steps before making any property purchase.
Not only may the trust be liable for the additional duty, the trust may also be deemed a foreign trust and they will need to seek FIRB approval before making a residential property purchase.
Residential property purchases involving foreign persons either directly or indirectly is a very complex area and requires thorough research before entering into any purchase agreement. You need to know what effect these rules could have on a property purchase and you also need to know how to abide by them if they do apply to you.
If you require any assistance on this, please contact a member of our Business and Personal Advisory division or Specialist Tax division who will be able to advise on, and guide you through, the process.