FOREIGN BUYERS OF AUSTRALIAN RESIDENTIAL PROPERTY
Foreign purchasers are required under Australian law to apply for Foreign Investment Approval before purchasing residential real estate in Australia.
The Government’s policy is to channel foreign investment into new dwellings as this creates additional jobs in the construction industry and helps support economic growth.
Foreign investment applications are therefore generally considered in light of the overarching principle that the proposed investment should increase Australia’s housing stock (be creating at least one new additional dwelling).
Consistent with this purpose, different factors apply depending on whether the type of property being acquired will increase the housing stock or whether it is an established dwelling.
Foreign Investment Review Board (FIRB)
All Applications to FIRB must include a cover letter which:
- Identifies the significant actions and/or actions under the Foreign Acquisitions and Takeovers Act 1975 with specific references to relevant sections of the legislation and why the transaction is captured under the Act
- Confirm how the transaction meets the relevant threshold set out in the Act;
Provides the following details of the acquirer, parent entity and the target, including:
- Name, major activities and locations, incorporation details, major subsidiaries and associated entities, and details of any Australian operations;
- Existing investments or assets of the acquirer, the parent entity and associated entities in Australia (including the value of the investments or assets);
- Total global assets or assets under management for the acquirer and the target (including market capitalisation if applicable);
- Any information of relevance to the national interest pertaining to domestic or international investigations; rulings or ineligibilities, or conditions imposed as part of previous foreign investment approvals; or exclusions relating to the acquirer, the parent entity, associated entities or the target;
- Details of any existing relationship or economic interest between the parties.
Provides the follow details about the proposed transaction:
- Reasons why the proposed transaction is not contrary to the national interest;
- Commercial rationale behind the proposed transaction; – description of the acquirer’s intentions for the business or land, including any changes to the board composition, management structure or strategic direction of the target;
- Information about any sales process, including details of the vendor; – the consideration and calculation basis;
- Description of the type of proposed interest and any associated rights and obligations (e.g. assets, shares, land);
- Any engagement with other Australian regulatory agencies (e.g. ATO) including details of the engagement and contacts at those agencies; and
- Implementation steps diagram or explanation that describes the source of funds and flow of funds to the acquirer to implement the proposed transaction.
Ownership and control details of the acquirer, including:
- Identities and country of origin of all investors who hold an interest of greater than 5% and details of any beneficial owners, including:
- Identities of all foreign government investors where the aggregate interest of foreign government investors from one country is 5 per cent or more (directly or via a fund); and
- for fund managers, details of investors in both the fund manager and the fund;
- Level of control of all investors identified, including the types of rights that the investors have (e.g. voting rights, veto rights, member of investment committee); and
- Aggregate percentage of any beneficial ownership by foreign government investors (by country).
ALL cover letters must also include the following additional information:
ENTITIES AND BUSINESSES
If the proposed transaction is related to interests in entities or businesses, the following additional information need to be included:
- Structure diagrams including holding entities (both direct and indirect) of the target and target group both (1) pre-implementation and (2) post-implementation.
- Copies of last financial year’s audited financial statements or, if unavailable, latest financial records or unaudited financial statements of the target and the acquirer
If the proposal relates to interest in Australian land, include the following additional information:
- The value of interests in Australian land and the value as a proportion of the target’s total assets
- Consideration for the highest value land title
- Size of the Australian land (hectares)
- For agricultural land/mining/production tenements, a map showing the land being acquired and the surrounding area
- For agricultural land, evidence of an open and transparent sales process
- An explanation of the current use of the land in accordance with definitions in the FATA (agricultural land, mining or production tenements, residential land and/or commercial land)
If you are looking to buy Australian residential property then apply for an please contact us for a free first consultation.