Foreign property ownership has had an impact on the real estate market, driving up the prices and limiting supply. In response to this, the Australian Government has introduced stronger regulations to control foreign investors owning Australian property. These rules will help make accessing housing easier for Australian citizens. The new regulations introduced in 2017 limit foreign investments in new developments and reduce capital gains tax avoidance.
Regulations for Unoccupied Residential Property
Many foreign investors purchase residential property and keep it vacant for months, if not years on end. These properties are just investment pieces and keeping them vacant can increase the average rent costs. With new regulations, the government hopes to push foreign investors into the rental market. This will make more homes available to Australian renters and bring the rental costs down. The recent Federal budget stipulates that:
• The government has placed a 50% cap of new development property ownership. New Dwellings Exemption Certificate won’t be granted for sales above that cap.
• Foreign owners will have to pay an annual fee of minimum $5,500 on properties kept vacant for more than six months on any given year. The fee is equivalent to the amount the investor paid during foreign investment application.
• The regulation will encourage foreign investors to place their property on the rental market instead of keeping it empty, which can be a win-win situation. Investors gain secondary income and Australians have a larger pool of rental homes to choose from.
• The fee will be administered and monitored by the Australian Taxation Office. They will make sure no property remains vacant for more than six months without paying the fee.
These measures will also generate around $40 million in revenue for the government. That can be reinvested in projects to help Australian citizens.
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