property

International Tax Alert

Vacancy Fee Introduced in Australia for Foreign Investors in Residential Property

New rules in Australia have imposed an annual vacancy fee on foreign owners of residential real estate in situations where a property is not occupied or not genuinely available for rent for at least six months in a 12 month period.

Australia’s Federal Government recently passed the law to increase the amount of housing stock available for occupation.

30-day minimum lease duration

Brisbane Alliott Group Tax Partner Jamie Towers comments:

“As the minimum duration of a lease or license of 30 days applies, owners of holiday apartments and ‘Airbnb’ properties are likely to become subject to the vacancy fee, even if their property is rented for holiday bookings for over half the year.”

The rules

The new rules apply to foreign investors who acquire residential Australian land (that has a dwelling on it) after 9 May 2017. Existing holdings should not be subject to the vacancy fee.

Vacancy fee: Situations where it will not apply

  • 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.

The 12 month period begins on the day of property acquisition by the owner and continues for every subsequent 12 month period.

The foreign owner then has 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 could apply for failure to submit a vacancy fee return.

Example

Mr Chang acquires a residential apartment on 15 August 2017. Therefore, he must lodge a vacancy fee return for the period 15 August 2017–14 August 2018 by 13 September 2018 to avoid a penalty.

How much is the vacancy fee?

The vacancy fee is the equivalent of the amount of foreign investment application fee for the property. This will vary depending on the value of the property, but starts at AUD$5,500 for property with a price tag of less than AUD$1 million.

The Australian Taxation Office will administer the vacancy fees and they will apply in addition to any State Government imposed fees. However, no information is available yet about what will need to be included in the vacancy fee return, but this will be available before the first returns are due on or after 9 May 2018.

Get help with the Australian vacancy fee

If you need help understanding the new Vacancy Fee and if it applies to you, contact our Alliott Group Brisbane associate Jamie Towers, Tax Partner at Hanrick Curran.

If you’re an Australian business looking to operate in the New Zealand market, Alliott NZ in Auckland provides strategic business guidance and practical financial advice on how to structure your business in NZ.