At the end of 2017, an annual fee was introduced for dwellings owned by non-residents of Australia. The measure is part of the government’s housing affordability plan, and is also a financial incentive for foreign owners to make their dwelling available for rent and increase available housing in Australia.
Under the legislation, the Treasury Laws Amendment (Housing Tax Integrity) Act 2017, foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee if their dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year.
The “vacancy year” is not a calendar or financial year, but starts from when the owner first held their interest in the dwelling. The fee is paid by lodging a “vacancy fee return”, which is required within 30 days after the end of the vacancy year.
Foreign owners of vacant land do not have to lodge a vacancy fee return until a dwelling has been constructed on the land. If the dwelling is owned by two or more people as joint tenants, only one return is required, but if ownership is shared as tenants in common, each should lodge a vacancy fee return.
If during the year the dwelling is sold or otherwise legally transferred (including in the event of the death of the owner), or the owner ceases to be a foreign person, a vacancy fee return will not be required to be lodged.
If an owner can show that for at least 183 days in a vacancy year, the dwelling was incapable of being occupied as a residence, they will not be liable to pay the vacancy fee. However to claim this exemption, a vacancy fee return will need to be lodged with the ATO.
There are other exemptions, which are listed in the following table from the Foreign Investment Review Board (FIRB).
|Exemption||Examples of acceptable evidence|
|Legal ownership of the property changed during the year.||
|Your property is undergoing substantial repair due to fire, malicious damage or natural disaster.||
|Your property is undergoing substantial renovations or is deemed to be too unsafe to occupy.||
|You or your tenant is receiving long-term, in-patient, medical or residential care.||
|Legal restrictions by an order of a court or tribunal, or a law of the Commonwealth, a State or a Territory.||
|The registered owner is deceased and administration of the estate is pending.||
The amount of the fee is generally the same as the foreign owner will have paid when making a foreign investment application for residential property with the FIRB.
The ATO is able to issue an infringement notice if a person fails to keep the required records for the timeframe specified (five years) or fails to lodge a vacancy fee return by the due date. If a foreign person fails to submit a vacancy fee return or retain required records then they may be liable to a civil penalty of 250 units.
Further, a failure to submit the vacancy fee return will result in a deemed vacancy for that dwelling in the 12 month period (vacancy year). These measures are designed to encourage compliance with the vacancy fee regime. Any unpaid vacancy fees for a property may be recovered as a debt or by the creation of a charge over Australian land owned by the foreign person.
Further information is available by contacting the ATO’s foreign investment inquiry line on 1800 050 377 (within Australia) or +61 2 6216 1111 (from overseas).
The ATO held a webinar last month on the annual vacancy fee. See a recording of this free webinar here.