[av_heading heading=’Foreign property owners slapped with fee for vacant property’ tag=’h3′ style=” size=” subheading_active=” subheading_size=’15’ padding=’10’ color=” custom_font=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”][/av_heading]
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Australia has followed the international trend of penalising foreign owners of residential property who keep their property vacant for extended periods of time.
Last month Parliament approved legislation that imposes an annual vacancy fee on foreign owners of residential real estate if the property is not occupied or genuinely available on the rental market for at least 183 days in a particular 12-month period.
The rules at a glance are:
- Fee charged if not occupied for at least 183 days in a 12-month period
- Fee avoided if family member living in property; or genuinely available for rent (ie available on rental market; advertised publicly; and available at a market rent)
- Must be let for minimum of 30 days – short-term rentals arranged through platforms such as AirBNB won’t satisfy this requirement, unless rental period 30 days or more.
- Foreign person to lodge vacancy fee return with ATO within 30 days of the end of the relevant 12 month period.
If owners fail to comply with the new law the Government has the capacity to recover any outstanding fee as a debt and/or by the creation of a charge over Australian land owned by the foreign person.
The vacancy fee is equal to the initial foreign investment application fee (currently $5,500 for properties acquired for $1m or less). The vacancy fee can also apply even if the initial application fee was waived. A vacancy year generally starts at settlement when the property was acquired or in some cases when the occupancy certificate is issued for newly built dwellings. The new vacancy fee system only applies if the notice or application to acquire the property was submitted with the Foreign Investment Review Board on or after 7.30pm on 9 May 2017.
Importantly, a foreign person who falls within the scope of the rules will need to lodge a vacancy fee return with the ATO within 30 days of the end of the relevant 12-month period. If this obligation is not met then the owner is deemed to be liable to the vacancy fee, even if the 183 day occupation requirement was actually satisfied. The main exception to this is where the owner has disposed of their interest in the property before the end of a particular vacancy year.