Key Takeaway Points
- Foreign purchases of established homes in Australia have been banned for a two-year period from 1 April 2025 to 31 March 2027.
- The ban applies to all foreign investors, including temporary residents and foreign-owned companies, subject to specific exceptions.
- It has been warned that enforcement action will be undertaken for any non-compliance.
- The Australian government has further implemented measures to tackle land banking by foreign investors.
Introduction
The federal government has implemented a two-year ban on foreign purchases of established homes in Australia. Effective from 1 April 2025 to 31 March 2027, this new initiative aims to improve housing affordability and the availability of existing homes for local Australian buyers. The government’s goal is to direct foreign investment towards new dwellings, so that housing stock may be increased by proposed investment, consequently supporting economic growth. A review of the ban will be undertaken before its expiry date to determine whether it should be extended beyond the two-year period.
Who does the ban apply to?
Prior to 1 April 2025, foreign purchasers were generally restricted from buying existing property apart from limited circumstances, such as where they intended to live in Australia for work or study. The new government policy extends the restrictions to include temporary residents and foreign-owned companies, and applies to all foreign investors.
However, the ban is subject to specific exceptions, these being:
• foreign purchases of established dwellings for redevelopment – if the redevelopment of the existing property will significantly increase Australia’s housing stock by at least 20 additional dwellings on the land;
• foreign purchases of established dwellings that support housing availability on a commercial scale – including, for example, proposals to acquire an interest in one or more established dwellings in multi-unit developments (such as retirement villages, assisted living or aged care facilities, and student accommodation);
• proposed foreign purchases of existing Build to Rent (BTR) developments – if the development will continue to remain a BTR development; and
• foreign-controlled companies purchasing established dwellings for certain Australian-based employees – if;
– the employees are from Pacific Island countries and Timor-Leste, including those participating in the Pacific Australia Labour Mobility scheme;
– the company is classified as a substantial Australian business, based on the company’s turnover, profit, business asset base, and number of employees; and
– the company is obligated to provide or arrange accommodation for such employees.
The ban does not apply to permanent residents, New Zealand citizens, as well as spouses of Australian citizens, permanent residents or New Zealand citizens (when purchased as joint tenants). However, these specified persons cannot circumvent the ban by acquiring and holding a property on trust for a foreign person.
Applications to purchase an established dwelling
Foreign investors may apply using Online services for foreign investors for assessment regarding whether their proposed purchase of an established dwelling fits an exemption. Applications are considered on a case-by-case basis, and if successful, the dwelling may be acquired under either an exemption certificate or no objection notification.
For more information in relation to conditions for obtaining approval, the Treasury have released the following linked Guidance Note: Guidance Note 6: Residential Land. Applicants may also contact the Treasury at ForeignInvestmentEnquiries@treasury.gov.au regarding the submission process.
It is noted that the ban does not affect foreign investors who have obtained approval and entered into a purchase contract for an established dwelling prior to 1 April 2025.
Enforcement of the ban
The Australian Taxation Office (ATO) has contributed $5.7 million over four years from 2025-26 towards enforcing the ban. These funds will be used to enhance screening of foreign investment proposals relating to residential property and strengthen compliance activity with the new policy. It has been warned that ‘tough enforcement action’ will be taken for any non-compliance.
Land banking increased compliance measures
To further the objective of ensuring foreign investment in housing is in Australia’s national interest, the federal government has also announced its intention to address and eliminate the practice of land banking by foreign investors. There will be a focus on ensuring foreign purchasers comply with development conditions when acquiring vacant residential or non-residential land in Australia and are complying with any approvals received in the past to acquire an established dwelling. The ATO and Treasury have been provided with $8.9 million over four years from 2025-26 and $1.9 million ongoing from 2029-30 towards the implementation of an audit program targeting land banking and monitoring any non-compliance by foreign investors.
Continued requirements for foreign purchasers
The following requirements applying to foreign purchasers remain unchanged:
• foreign investment approval must be obtained before a foreign person acquires an interest in residential land, regardless of the value of investment;
• an exemption exists for the need to receive foreign investment approval where the vacant residential land, new dwelling or established dwelling that foreign person proposes to purchase is within a resort designated as an Integrated Tourism Resort;
• foreign owners of residential property are required to pay an annual vacancy fee if their property is not residentially occupied or rented for at least 183 days in a 12-month period;
• the acquisition of vacant residential land being subject to approval conditions, such as that the construction of dwelling(s) on the land must be completed within four years from the date of approval, evidence of completion must be submitted to the government, and a foreign person cannot dispose of their interest in the land before completion of construction; and
• new or near-new residential dwellings may be acquired by foreign purchasers, if:
– the foreign person applies for approval, which is granted through either a no objection notification or an exemption certificate; or
– the relevant property developer holds a New (or Near-New) Dwelling Exemption Certificate, enabling a foreign person to purchase the property without having to apply for individual approval.
Next steps
Our Property team is happy to assist if you have any queries about how the federal ban may affect you / your clients.
