Tax Exemptions For Foreign Property Investors

The lucrative Australian property market attracts foreign nationals from a number of countries.

Tax rules related to the acquisition of residential property by foreigners are often more stringent than those spelt out for Australian citizens. For example, foreign nationals are required have foreign investment approval from the relevant authorities before they can acquire residential property.

This article discusses three scenarios in which a foreign investor would be exempted from seeking such approval.

Joint Acquisition Of Property

A foreign property investor would be exempt from seeking approval before investing in residential property if he or she is to acquire such property as a joint tenant with their spouse. However, the spouse must be recognized as an Australian citizen, a citizen of New Zealand or a permanent resident of Australia.

It is important to point out that this exemption ceases to apply if the foreign investor and his or her spouse choose to acquire residential property as tenants in common instead of acquiring it as joint tenants.

The main difference between a joint tenancy and a tenancy in common is seen in the conditions that must be satisfied for the validity of each. In a joint tenancy:

  • The two parties hold the same document as proof of property ownership (unity of title)
  • Joint tenancy begins and ends at the same time for both parties (unity of time)
  • Joint tenants have an equal right to possession of the whole property (unity of possession)
  • Joint tenants have an equal interest in the entire property and their interests are not competing (unity of interest)

On the other hand, a tenancy in common is deemed valid so long as the parties concerned have the "unity of possession" discussed above.

Charity-Based Organizations

Foreign investors who intend to establish and operate a charity-based organization may also be exempted from the requirement to obtain foreign investment approval.

In order to qualify for this exemption, a foreign investor is required to prove that they intend to establish the charity organization on Australian soil and that the day-to-day operations of the organization are primarily meant to benefit residents of Australia.

Foreign investors might be able to prove their intention to establish a charity organization on Australian soil by providing feasibility reports for the property prepared by a local-based quantity surveyor.

Heirs To Residential Property In Australia

In conclusion, a foreign investor will be exempted from seeking investment approval if he or she is the legal heir to a piece of residential property on Australian soil.

This exemption applies regardless of the heir's state of citizenship or their residency status in Australia.

For more information on this topic, make a date with a quantity surveyor who specialized in issues related to residential property taxation.