The Federal Government has recently passed legislation enacting a Federal Budget integrity measure designed to increase the amount of housing stock available for occupation.
The new rules impose an annual ‘Vacancy Fee’ on foreign owners of residential real estate where property is not occupied or is not genuinely available for rent for at least 6 months in a 12 month period.
These measures apply to foreign investors who acquire residential Australian land (with a dwelling) after 9 May 2017. Existing land holdings should not be subject to the vacancy fee.
The vacancy fee will not apply where:
- The owner of a relative occupies the dwelling for at least 183 days in a 12 month period; or
- The dwelling is the subject of a lease or license (with a minimum duration of 30 days) for at least 183 days in a 12 month period; or
- The dwelling is genuinely made available for rent (for minimum durations of 30 days) for at least 183 days in a 12 month period.
As the minimum duration of a lease or license of 30 days applies, owners of holiday apartments and ‘airbnb’ properties will likely become subject to the vacancy fee, even if their apartment is rented for holiday bookings for more than half the year.
The 12 month period commences on the owner’s initial right to occupy the dwelling (ie settlement date of the property acquisition) and continues for every subsequent 12 month period.
The foreign owner is required to file a ‘vacancy fee return’ within 30 days after the end of the ‘vacancy’ year in which they may be liable for a vacancy fee.
A civil penalty may apply for failure to submit a vacancy fee return.
Eg, Mr Chang acquires a residential apartment on 15 August 2017. He must lodge a vacancy fee return for the period 15 August 2017 – 14 August 2018. The return must be lodged by 13 September 2018 to avoid a penalty.
The vacancy fee is the equivalent of the amount of foreign investment application fee for the property. This amount varies depending on the value of the property, but commences at $5,500 for property costing less than $1 Million.
The Australian Taxation Office (ATO) will administer the Vacancy Fees. No information is available yet about the requirements of the ‘Vacancy Fee return’, but this should be available before the first returns will be due, on or after 9 May 2018.
These fees will apply in addition to any State Government imposed fees that may apply.
For further information, please do not hesitate to contact your usual Hanrick Curran advisor or alternatively, Jamie Towers on 07 3218 3900.