Yesterday’s Federal Election Budget announced, among other things, a ban on foreign persons buying established dwellings effective for two years from 1 April 2025 . This means that lenders should immediately assess the level of due diligence undertaken when making a loan and identify instances where it will be illegal for the Borrower to use the loan for its intended purpose.
Foreign persons are:
- people who are not citizens or permanent residents; and
- if the relevant law follows the Foreign Acquisition and Takeovers Act 1975 (FATA) definition, companies and trusts in which a foreign person has at least a 20% interest.
Once the relevant laws are passed, lenders should check whether the anti avoidance arrangements capture citizens or permanent residents with a connection to a foreign person. For example, section 233(2)(ii) of the Duties Act (Qld) also applies additional foreign acquirer duty (8%) to a citizen or permanent resident who is a spouse of a foreign person.
If the ban is implemented, it means that:
- you will need to enquire into the residency status of each foreign person (including the ownership of companies and beneficiaries of trusts) before approving any loan relating to the purchase of an established dwelling; and
- if any of the borrowers or beneficiaries of the loan are foreign persons, you will then need to determine if an exception allows the borrower to use the loan proceeds for the intended loan purpose and condition the loan accordingly
Budget Paper No 2, p 6.
Restricting Foreign Ownership of Housing
The Government will take action to ensure foreign investment in housing supports the Government’s broader agenda to boost Australia’s housing supply by [doing the following.]
- Banning foreign persons (including temporary residents and foreign‑owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign‑owned companies to provide housing for workers in certain circumstances.
- Providing the Australian Taxation Office (ATO) $5.7 million over four years from 2025–26 to enforce the ban.
- Providing the ATO and Treasury $8.9 million over four years from 2025–26 and $1.9 million per year ongoing from 2029–30 to implement an audit program and enhance their compliance approach to target land banking by foreign investors.
…The enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.
