The Foreign Acquisitions and Takeovers Act 1975 (Cth) and Australia’s foreign investment policy regulate the framework of foreign investment in the Australian market. Before a foreign person or company commits to purchasing property whether residential or commercial in Australia they will need to seek Foreign Investment Review Board (FIRB) approval. However, the requirements for applying for FIRB approval may soon be changing.

The government is currently seeking feedback to their options paper: Strengthening Australia’s Foreign Investment Framework which was made available on the 25th February 2015. The proposed changes are based upon the recommendations made in the Report on Foreign Investment in Residential Real Estate released in November 2014 by the House of Representatives Standing Committee on Economics.

The current framework allows for foreign purchasers to purchase news dwellings and vacant land in a relatively barrier-free manner. Existing dwellings or pre-owned housing is a more complicated process based upon policy considerations. Australian foreign investment policy is designed to increase the construction of new housing and allowing foreign investment in pre occupied housing defeats this purpose. However there are certain exceptions to the rule.

The main proposed changes to the application process include:

• A fee of $5,000 for foreign buyers applying to purchase properties under $1 million. For properties over $1 million, a fee of $10,000 with this figure increasing in increments of $10,000 for every extra million.
• Civil penalties for a range of matters including where a foreign buyer acquires property without prior approval, or where a condition of purchase is breached.

There are concerns that these extra fees and penalties may stifle foreign investment in the Australian market.