TOUGH MARKET
Foreign investment has suffered in recent times. Banks are now only lending to those with an Australian income and offshore funding is drying up. The 2017-18 Budget increased purchaser surcharge duty to 8 per cent and surcharge land tax to 0.75 per cent (which will increase to 2 per cent as of 1 January 2018). As foreign investment plays a major role in the sale of off-the-plan apartments, it should not be surprising that the market has slowed right down. What can you do to attract foreign buyers to your project?
FIRB APPROVAL
As you may already be aware, foreign buyers are restricted to purchasing off-the-plan or brand new dwellings directly from the developer, subject to FIRB approval. The application fee for a contract price of $1 million or less, the fee is $5,500, for a contract price between $1 million and $2 million, the fee is $11,100 and will increase by $10,200 increments for each additional million.
NEW DWELLING EXEMPTION
Developers can help potential buyers side-step the approval requirement by applying for a New Dwelling Exemption Certificate, which allows a foreign person to purchase an apartment without approval. The developer can only sell 50 per cent of the apartments to foreign persons, must not cease marketing the development in Australia and will need to provide a report to ensure compliance. To be eligible, there must be only one development approval, which needs to obtained before a certificate will be granted. The project must be a multistorey development that consists of 50 or more dwellings. Townhouses and house and land packages are excluded.
NEAR NEW DWELLING EXEMPTION
If a property already sold to a foreign person does not settle, the developer can on-sell the property to another foreign person without the need for the new buyer to obtain FIRB approval, provided the developer obtains a Near New Dwelling Exemption Certificate.
STREAMLINED APPROVAL
Instead of applying for a New (or Near New) Dwelling Exemption Certificate, a developer can apply for streamlined bulk approval, which allows an application to be finalised within 10 business days, in contrast to the general 30-day turnaround. This applies to dwellings valued less than $3 million. Importantly, the developer must not cease marketing the development in Australia.
RESULT
The effect of providing the above solutions for potential foreign buyers, you are ensuring:
1. A cost saving to the potential foreign buyer in not having to apply to the FIRB for approval;
2. Providing a convenience to the potential foreign buyer in not having to make an application for FIRB approval; and
3. Facilitate a speedy exchange of contracts.
CASE STUDY
Yuming wishes to purchase an apartment from Zetland Development Pty Ltd worth $1,200,000.00 for his daughter to attend university in Sydney next year. He is a foreign person and must apply to the FIRB for approval prior to the purchase. The fee for the approval is $10,100.00 and will take 30 days.
Zetland Development Pty Ltd has obtained a New Exemption Certificate for the project which relieves Yuming from having to making an application with FIRB, saving Yuming $10,100.00 and the time and inconvenience of having to make the application.
SOURCE:
Nathan Lu
02-9262 9393
[email protected]
