House of Representatives

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017

Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 3 - Vacancy fees for foreign acquisitions of residential land

Outline of chapter

3.1 This Chapter explains the amendments to the Foreign Acquisitions and Takeovers Act 1975 (FATA) contained in Schedule 3 to the Bill. Schedule 3 implements an annual vacancy fee on foreign owners of residential real estate where property is not occupied or genuinely available on the rental market for at least six months in a 12 month period.

Context of amendments

3.2 Under Australia's foreign investment framework, foreign persons generally need to apply for foreign investment approval before purchasing residential real estate in Australia.

3.3 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. It can also increase government revenues, in the form of stamp duties and other taxes, and from the overall higher economic growth that flows from additional investment.

3.4 Foreign investment applications are therefore generally considered in light of the overarching principle that the proposed investment should increase Australia's housing stock (by creating at least one new additional dwelling).

3.5 The vacancy fee builds on this overarching principle which seeks to increase the number of houses available for Australians to live in. The fee provides a financial incentive for the foreign owner to make their property available on the rental market.

3.6 The imposition of an annual vacancy fee is expected to result in greater utilisation of foreign owned residential properties. Reporting and notification requirements are also expected to provide greater visibility of vacancy rates for foreign owned residential properties.

3.7 The vacancy fee is part of the Government's comprehensive housing affordability plan, designed to improve outcomes across the housing spectrum, announced at the 2017-18 Budget.

3.8 To address housing affordability and ensure that available housing is either occupied or on the rental market, the annual vacancy fee will be levied on foreign owners of residential properties where the property is not occupied or genuinely available on the rental market for at least 183 days in a 12 month period.

3.9 This amendment is expected to increase the number of homes available to Australians wishing to rent. Where a foreign-owned residential property is not occupied or available to rent for at least 183 days in a 12 month period, a fee will be levied on the foreign owner equivalent to the foreign investment application fee which was paid at the time of application to the Foreign Investment Review Board for approval.

Summary of new law

3.10 Foreign owners of residential real estate will be liable to pay a vacancy fee where a residential property is not occupied or genuinely available on the rental market for at least six months in a 12 month period.

3.11 If the owner or a relative of theirs occupies their dwelling for 183 days or more in a 12 month period, they will not be liable to pay the vacancy fee.

3.12 If the dwelling is subject to lease/s or licence/s with a minimum duration of 30 days which total 183 days in a 12 month period, then the owner will also not be liable to pay the vacancy fee.

3.13 Similarly, if the dwelling is made genuinely available on the rental market, with minimum durations of 30 days, for a total of 183 days in a 12 month period, the owner will not be liable to pay the vacancy fee.

3.14 An owner will be liable to pay a vacancy fee if the dwelling is not residentially occupied, or genuinely available to be occupied, for at least 183 days in a 12 month period (referred to as a vacancy year).

3.15 A vacancy year commences on the owner's initial right to occupy the dwelling (the occupation day).

3.16 The foreign person is required to give a vacancy fee return to the Commissioner of Taxation (Commissioner) after the end of each year during which the person may be liable for a vacancy fee for a dwelling.

3.17 The Commissioner will issue a notice to the foreign person if a vacancy fee is payable, explaining why the liability has arisen. Schedule 3 amends the FATA to provide the Treasurer with powers to recover unpaid amounts.

3.18 The Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 amends the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (the Fees Act) to set the level of vacancy fee payable.

Comparison of key features of new law and current law

New law Current law
A vacancy fees is payable where a residential property has been occupied for fewer than 183 days in the relevant 12 month period (vacancy year). No equivalent in the current law.
A foreign person must give the Commissioner of Taxation a 'vacancy fee return' in the approved form to advise of the number of days a residential property was occupied in a 12 month period (vacancy year). No equivalent in the current law.
The Treasurer has the power to recover a vacancy fee if it remains unpaid, as a debt due to the Commonwealth in a court of a competent jurisdiction, or by notifiable instrument which declares a charge over the residential property. Section 104 of the FATA enables the Treasurer to create a charge over land where a court finds that a person has contravened the FATA such that civil penalties under Division 3 of Part 5 of the FATA apply.

Section 113 provides that the Treasurer may recover unpaid fees that relate to exemption certificates given to developers under section 57 of the FATA as debts due to the Commonwealth in a court of a competent jurisdiction.

A civil penalty may apply where a foreign person fails to submit a 'vacancy fee return' or keep the required records. Subdivision C of Division 3 of Part 5 provides for civil penalties in relation to residential land including where a foreign person fails to notify the Treasurer of an action or does not meet the conditions included in an approval letter.

Detailed explanation of new law

3.19 Schedule 3 to the Bill amends the FATA to insert a new Part, Part 6A into the FATA. [Schedule 3, item 7, Part 6A of the FATA]

3.20 New Part 6A establishes that a fee, a 'vacancy fee' which is a new defined term, is payable by foreign persons if a residential dwelling they hold an interest in is not occupied for at least 183 days in a 12 month period. [Schedule 3, item 1, section 4 of the FATA]

3.21 The Commissioner has the general administration of the vacancy fee, and relevant provisions in the FATA. [Schedule 3, item 7, subsection 115B(2) of the FATA]

3.22 A foreign person with an interest in a residential dwelling is required to give the Commissioner a vacancy fee return in the approved form, annually. The date for providing the vacancy fee return is determined by reference to the occupation day of the relevant dwelling on the land. [Schedule 3, item 7, section 115D of the FATA]

3.23 The occupation day will usually align with the first day the foreign person has the right to occupy the dwelling. This will typically be a settlement day, but could also be the day on which a fitness for occupancy certificate is provided in respect of the property. [Schedule 3, item 1, section 4 of the FATA]

Example 3.1 Benji purchased an established residential dwelling in Chatswood, Sydney via auction on August 12th. He will be entitled to occupy the dwelling on the date stipulated in the contract of sale which, in this case, is the 23rd September or six weeks after the auction date. Benji's first occupation day is the 23rd September 2017.

3.24 For a new dwelling or one which has undergone significant renovations ore redevelopment, a fitness for occupancy certificate will generally be provided to a developer or builder once the new dwelling or renovation meets the relevant standards for occupation in the State or Territory of its construction.

Who is in scope?

3.25 The amendments included in Schedule 3 to the Bill apply to a person who is a foreign person, has acquired an interest in residential land on which one or more dwellings is located, or will be located, and the acquisition is a notifiable action or it would have been a notifiable action had an exemption certificate not been in place. [Schedule 1, item 7, subsection 115B(1) of the FATA]

3.26 The note to subsection 115B(1) refers the reader to the existing regulation power at section 37 of the FATA which provides that regulations may be made which prescribe certain circumstances where these provisions may not apply to a foreign person or a dwelling. [Schedule 3, item 7, Note to subsection115B(1) of the FATA]

When is the vacancy fee payable?

3.27 Where a residential dwelling owned by a foreign person is not occupied for at least 183 days in a 12 month period, the foreign person will be liable to pay a fee. [Schedule 3, item 7, subsection 115C of the FATA]

3.28 A new term, vacancy fee, is inserted into the FATA to refer to this fee. The amount of the vacancy fee is set out in the Fees Act. [Schedule 3, item 1, section 4 of the FATA]

3.29 In determining whether a dwelling has been occupied for a period of 183 days, a new definition, 'vacancy year' is inserted into the FATA to define the 12 month reference period. [Schedule 3, item 1, section 4 of the FATA]

3.30 The vacancy year, is unique to each foreign person and each dwelling on the land. It is determined based on the first and each successive period of 12 months since the occupation day for the specific dwelling where the foreign person has held an interest in the land. [Schedule 3, item 7, subsection 115C(2) of the FATA]

3.31 To establish whether a dwelling is occupied, a new definition, 'residentially occupied' is inserted into the FATA. [Schedule 3, item 1, section 4 of the FATA].

3.32 A dwelling will be considered occupied if:

·
The property owner or the owner's relative/s genuinely occupy the dwelling as a residence;
·
The dwelling is occupied under lease/s or licence/s covering a period/s of 30 days or more; or
·
The dwelling is made genuinely available as a residence, for example as a rental property for 30 days or more.

[Schedule 3, item 7, subsection 115C(5) of the FATA]

3.33 If a dwelling is covered by lease/s or licence/s which extend across a vacancy year as defined in the FATA, the dwelling is considered to be residentially occupied under lease/s or licence/s for a total of 183 days or more in each vacancy year where each lease or licence endures for a minimum of 30 days. [Schedule 3, item 7, subsection 115C(6) of the FATA]

3.34 Example 3.2 below illustrates how the vacancy fee applies to foreign persons who own a dwelling and either use it themselves, or enable a relative to use it, as a residence for a total of 183 days or more in each vacancy year.

Example 3.2 Benji owns a house in Sydney. He spends most of his time in Denmark due to work commitments and is unable to be in the house for 183 days or more in a vacancy year.However, Benji's brother Jonte resides mainly in Benji's Sydney residence for two years and, as a result, Benji meets the test of having his dwelling residentially occupied for at least 183 days in the relevant vacancy years. Benji advises the Commissioner in his annual vacancy fee return that he has occupied the dwelling for more than 183 days in the vacancy year.

Example 3.3 Nick purchases a new apartment on the Gold Coast. He intends to spend significant time there as he has business interests on the Gold Coast and his family enjoy coming to Australia to holiday from Hong Kong.Nick finds that his work in Hong Kong takes up more and more time so he decides to place his apartment on Airbnb. He feels that this will provide the flexibility he requires to be able to use the property through the year as a holiday residence as the apartment is rented via Airbnb for generally less than one week at a time. Nick ends up spending only two weeks in Australia in the relevant vacancy year.Because Nick's apartment is not genuinely available as a rental property for a continuous period of 30 days or more, it will not be considered to be residentially occupied for the purposes of the vacancy fee and Nick will be liable to pay the vacancy fee for this apartment.

3.35 Example 3.3 illustrates a difference in how the property is made available by the foreign person who owns it and, as a result, where the vacancy fee will be applied. In the example, the owner chooses to utilise a web-based short term stay site and only makes the property available for periods of less than 30 days in order to maintain flexibility should the owner wish to use the property during the vacancy year. This type of rental does not make the property genuinely available for periods of 30 days or more. As a result, the foreign owner would be liable to pay the vacancy fee even if the residence was rented as a short stay apartment, for example, a weekend rental, via Airbnb, for more than 183 days or more in the vacancy year.

3.36 A dwelling will be considered genuinely available for occupation as a residence (with a term of 30 days or more) if the dwelling is:

·
made available on the rental market;
·
advertised publicly; and
·
available at a market rent.

Example 3.4 Max and Christine purchase a house in Perth which they use as a holiday home when visiting Australia from London. They understand that if their house is not genuinely available for occupation as a residence for a minimum of 30 days that they will be subject to the vacancy fee.Max and Christine are not excited by the prospect of renting their new home so they ask the real estate agent to place it on the rental market with an advertised per week rental cost of $3,000. Similar homes in the area are available for rent at a rate of $1,500 per week.While the dwelling is available to rent with a term of 30 days or more, the inflated rental price means it is very unlikely any tenants for the dwelling can be found. In the relevant vacancy year, their dwelling remains vacant even though it was technically available for lease. As a result, Max and Christine will be subject to the vacancy fee as they have not made their property genuinely available. The inflated rental price, when compared with similar homes in the area, means the dwelling cannot be considered to have been made genuinely available.

3.37 A new term, occupation day, is inserted into the FATA. [Schedule 3, item 1, section 4 of the FATA]

3.38 The occupation day will usually align with the first day the foreign person has the right to occupy the residential property. This will typically be the contracted settlement day, but could also be the day on which a fitness for occupancy certificate is provided to the foreign person in respect of the property. [Schedule 3, item 7, subsections 115C(3) and (4) of the FATA]

3.39 If the foreign person purchases a dwelling from a developer and the relevant purchase is covered by the developer's new dwelling exemption certificate, the occupation day will be the first day on which the foreign person has the right to use the dwelling. This may be later than the date on which a certificate of fitness for occupancy is provided as that certificate may be provided to the developer before the foreign person has the right to use the property. [Schedule 3, item 7, subparagraph 115C(3)(b)(ii) of the FATA]

Example 3.5 Aline enters into a contract with a developer on 18 August 2017 for an apartment off-the-plan.The contract specifies that settlement is 30 days after the developer receives an occupancy certificate from the relevant authority.The developer is issued with an occupancy certificate on 1 February 2018. Settlement occurs on 2 March 2018 at which time Aline can move into the apartment. Aline's occupation day is 2 March 2017 and Aline's vacancy year, in respect of this dwelling, is 2 March every subsequent year she owns the dwelling.

3.40 To create flexibility within the regime and take into account unexpected vacancies in relevant dwellings, a new regulation making power is inserted into the FATA which will allow the occupation day to be prescribed. This will enable regulations to be made which consider whether the occupation day has been affected by substantial renovations or repairs are taking place, or the legal ownership of the property changed during the year. [Schedule 3, item 7, paragraph 115C(3)(c) of the FATA]

3.41 Where a foreign person is liable to pay the vacancy fee, the Treasurer or Commissioner must give the person a notice which includes the amount of the fee payable and the reasons why the person is liable to pay the fee. [Schedule 3, item 7, subsection 115E(1) of the FATA]

3.42 The vacancy fee is payable on the date included in the notice form. It cannot be earlier than 21 days after the notice was given to the person. [Schedule 3, item 7, section 115E of the FATA]

3.43 The Commissioner, Secretary or Treasurer may service notices and other documents to the foreign person at any address of the person in Australia or in a foreign country. Address in this case also means any electronic address of the foreign person including a business address that is last known to the Commissioner, Secretary or Treasurer. [Schedule 3, item 8, subsection 135A of the FATA]

3.44 The Treasurer also has powers to waive or remit all or part of the vacancy fee. Where the Treasurer is satisfied that it is not contrary to the national interest, the Treasurer may, on behalf of the Commonwealth waive or remit all or part of the vacancy fee. [Schedule 3, item 7, section 115H of the FATA]

3.45 The Treasurer does not need to give reasons if he or she decides to waive or remit all or part of the vacancy fee. [Schedule 3, item 7, subsection 115E(2) of the FATA]

Information that must be provided to the Commissioner of Taxation

3.46 A foreign person must give the Commissioner a return in respect of each dwelling on residential land which the foreign person holds an interest in. The 'vacancy fee return' must be in the approved form and be provided within 30 days after the end of a vacancy year. [Schedule 3, item 7, subsections 115D(1) and (2) of the FATA]

3.47 A person who owns residential land without a dwelling will not be required to submit a vacancy fee return until there is a dwelling on the land and an occupation day has occurred. Generally, where a foreign person is given approval to buy vacant residential land, it is on condition that a dwelling is built on the land within a specified period of time.

3.48 A person is also not required to submit a vacancy fee return if they have disposed of their interest in the residential dwelling before the end of the vacancy year. [Schedule 3, item 7, Note to section 115D of the FATA]

3.49 The vacancy year is explained at paragraph 1.28 above.

Example 3.6 Steven purchased a new dwelling in Sydney. He will be entitled to occupy the dwelling on 23 September.In this case, the first occupation day is 23 September, and it will be no later than 12 months and 30 days from this day that Steven will be required to submit a vacancy fee return.

3.50 The foreign person may be required to provide the Commissioner with evidence to establish that the minimum level of occupancy has been reached and that the person is not liable to pay a vacancy fee. This evidence might include leases, tenancy agreements or letting arrangements. [Schedule 3, item 7, section 115G of the FATA]

3.51 In order to be able to produce this evidence, a foreign person is required to keep records that detail and explain all transactions and other steps in respect of each dwelling the person owns and that are relevant to establishing a vacancy fee liability. These records must be kept for five years following the disposal of the dwelling. [Schedule 3, item 7, subsection 115G(1) of the FATA].

3.52 However, a foreign person will not be required to retain a record if the Commissioner advises the person that the record does not need to be kept or the foreign person is a company that has been finally dissolved. [Schedule 3, item 7, subsection 115G(3) of the FATA)].

3.53 The records must be in English or readily accessible and easily convertible into English. [Schedule 3, item 7, subsection 115G(2) of the FATA].

3.54 A foreign person who fails to keep the required records for the required timeframe maybe subject to 250 penalty units.

3.55 Section 100 of the FATA is amended to provide that the Commissioner is able to issue an infringement notice if a person fails to keep the required records for the timeframe specified or fails to lodge a vacancy fee return by the due date. [Schedule 3, items 2 and 3, subsection 100(1) and subparagraph 100(5)(b)(iv) of the FATA].

Recovery of unpaid fees

3.56 A new term, unpaid vacancy fees, is inserted into the FATA. It refers to those vacancy fees which remain unpaid after the due date. [Schedule 3, item 1, section 4 of the FATA]

3.57 Unpaid vacancy fees for a dwelling may be recovered as a debt or by the creation of a charge over Australian land owned by the foreign person.

3.58 The Treasurer is able to recover a vacancy fee that is overdue on behalf of the Commonwealth, as a debt due to the Commonwealth, in a court of competent jurisdiction. [Schedule 3, item 7, section 115I of the FATA]

3.59 In addition, the Treasurer may declare that a charge applies in relation to any Australian land owned by the foreign person if the Treasurer is satisfied that the declaration is necessary to secure the payment of the unpaid vacancy fee. [Schedule 3, item 7, sections 115J and 115K of the FATA].

3.60 In order to create a charge over the Australian land, a person must be liable to pay a vacancy fee or the person is deemed liable to pay the vacancy fee as they have not provided the Commissioner with an annual vacancy fee return, the vacancy fee is due and has not been paid, the interest in Australian land held by the person can be registered on a land register and the Treasurer makes a declaration in respect of the land. [Schedule 3, item 7, subsection 115K(1) of the FATA]

3.61 The Treasurer's declaration is a notifiable instrument. [Schedule 3, item 7, subsection 115L(1) of the FATA]

3.62 The charge is created at the time the declaration made by the Treasurer comes into force. [Schedule 3, item 7, subsection 115J(3) of the FATA]

3.63 However, a charge will not be created over the land if at the time the declaration made by the Treasurer comes into force a restraining order is in force in relation to the land under Part 2-1 of the Proceeds of Crime Act 2002; a forfeiture order is in force in relation to the land under Part 2-2 of that Act; or an order of a kind prescribed by the regulations is in force in relation to the land under a law of the Commonwealth, a State or a Territory. [Schedule 3, item 7, subsection 115J(4) of the FATA]

3.64 A declaration made by the Treasurer must specify the period during which the declaration is in force and the Australian land to which it applies. [Schedule 3, item 7, subsection 115L(2) of the FATA]

3.65 The charge created over the Australian land remains in force until the interest in the land is sold or all of the following are paid:

·
the unpaid amounts of vacancy fee that are due; and
·
any costs incurred by the Commonwealth in relation to recovering the vacancy fee.

[Schedule 3, item 7, subsection 115M(2) of the FATA]

3.66 A charge created on land has priority over other interest in the land and is not affected by any change in ownership of the land. [Schedule 3, item 7, subsections 115M(1) and (3) of the FATA]

3.67 The Treasurer has power, on behalf of the Commonwealth, to do, or authorise the doing of, anything necessary or convenient to obtain the registration of the charge on a land register. This includes executing any instrument that is required to be executed or signing any certificate that states that a charge is created on the land and specifies the land on which the charge is created. [Schedule 3, item 7, subsections 115M(4) and (5) of the FATA]

3.68 The Treasurer or the Commissioner of Taxation may apply to a court of competent jurisdiction (which will typically be the Federal Court or a Supreme Court of a State or Territory), seeking a court order to vest an interest in Australian land in the Commonwealth. [Schedule 3, item 7, subsection 115N(1) of the FATA]

3.69 Following the Commissioner or Treasurer's application, a court may make the order sought if the Australian land is subject to a charge under section 115K of the FATA and the court considers that it is necessary to make the order to recover the unpaid vacancy fees. This provision again will not apply if certain actions including restraining or forfeiture orders are in place under the Proceeds of Crime Act 2002. [Schedule 3, item 7, subsections 115N(2) and 115N(3) of the FATA]

3.70 Once a court order is made in favour of the Treasurer or the Commissioner under section 115N of the FATA, the interest in the land will vest in equity in the Commonwealth but it will only vest at law in the Commonwealth once the applicable registration requirements have been complied with. [Schedule 3, item 7, subsection 115P(2) of the FATA]

3.71 The Treasurer is provided with the power to do anything necessary or convenient to give notice of or otherwise protect the Commonwealth's equitable interest in the land. This includes executing any instrument or signing any certificate stating that the land has vested in the Commonwealth. [Schedule 3, item 7, subsections 115P(2) and (3) of the FATA]

3.72 After the period for lodgement of an appeal against the court's order vesting equitable interest in the Australian land in the Commonwealth has expired, or an appeal against such an order has been determined in the Commonwealth's favour, the Commonwealth will be entitled to begin dealing with interests in the land. [Schedule 3, item 7, subsection 115Q(1) of the FATA]

3.73 Once an interest in Australian land has been vested in the Commonwealth by operation of section 115P of the FATA, the Treasurer must dispose of that interest as soon as practicable after the time for lodgement of appeal against the court order has expired or an appeal has been finally determined in accordance with section 115Q of the FATA. [Schedule 3, item 7, subsection 115R(1) of the FATA]

3.74 Where the Treasurer sells the interest in the land, the Treasurer may give full and effective title to the land free of all other interests. This extinguishes all other interest in the land, allowing the purchaser to have full title. [Schedule 3, item 7, section 115R(2) of the FATA]

3.75 The Treasurer must apply the proceeds of the sale against any:

·
unpaid vacancy fees;
·
any costs incurred by the Commonwealth in relation to recovering the unpaid vacancy fees; and
·
costs incurred by the Commonwealth in relation to the sale.

3.76 If there are any proceeds remaining, the Treasurer must pay these in the following order, noting that not all persons listed may be paid if the proceeds are insufficient:

·
a person holding a mortgage, charge or other interest over the land if the mortgage, charge or interest relates to a debt due by the owner and it has been registered on a land register;
·
the Commonwealth in relation to any other penalty of debt that is due and payable to the Commonwealth by the owner;
·
the owner.

[Schedule 3, item 7, subsections 115R(3) and (6)]

3.77 If the remainder of the proceeds are insufficient to pay all the persons holding a mortgage, charge or other interest over the land, the Treasurer must pay each person proportionately. [Schedule 3, item 7, subsection 115R(5)]

3.78 Section 115 does not affect the right of the Commonwealth to recover debts or penalties by other means. [Schedule 3, item 7, subsection 115R(7)]

3.79 No stamp duty or other tax or fee is payable under a law of a State or Territory in respect of a vesting of an interest in Australian land under new section 115K, or anything connected with the vesting of that interest, if the Treasurer declares that the interest in the land has vested under new section 115K in an instrument which specifies the interest in the land. To assist the reader the Bill explicitly provides that an instrument made under new section 115M is not a legislative instrument. Such an instrument is of an administrative character, rather than a legislative character. [Schedule 3, item 7, section 115S of the FATA]

3.80 If the operation of Division 3 of Part 6A would result in an acquisition of property from a person otherwise than on just terms (within the meaning of section 51(xxxi) of the Constitution), the Commonwealth is liable to pay a reasonable amount of compensation to the person. If the Commonwealth and the person cannot agree on the amount of compensation, the person may institute proceedings in a court of competent jurisdiction. [Schedule 3, item 7, section 115T of the FATA]

3.81 These powers are provided to the Treasurer and Commissioner to be used in cases of systemic avoidance of payment of the vacancy fee. It is not envisaged that the powers will be used to recover unpaid vacancy fees for one or two years. If vacancy fees remain unpaid for several years, then the charge and disposal mechanism is provided to enable recovery of unpaid vacancy fees.

Other amendments

3.82 Minor editorial amendments are also made to the FATA to incorporate these changes. [Schedule 3, items 4 - 6, Part 6, section 115 and subsection 115(3) of the FATA]

Taxation Law

3.83 The Commissioner has the general administration of the vacancy fee and relevant provisions in the FATA. This means new Part 6A of the FATA will be a taxation law for the TAA 1953. [Schedule 3, item 7, subsection 115B(2) and Note to subsection 115B(2) of the FATA]

3.84 However, the provisions of the TAA 1953 mentioned in subsection 138(2) of the FATA do not apply to the newly inserted Part 6A with respect to vacancy fees which is consistent with other parts of the FATA. [Schedule 3, item 7, subsection 115B(3) of the FATA]

3.85 Existing subsection 138(2) is rewritten to further clarify that, while liabilities incurred under the FATA and the Fees Act are tax-related liabilities, some provisions in the TAA 1953 do not apply to application fees and vacancy fees under the FATA and Fees Act. [Schedule 3, item 9, subsection 138(2) of the FATA]

Persons who cannot be found in Australia

3.86 As noted above at paragraph 1.42, section 135A is inserted into the FATA to deal with those circumstances where a foreign person is not located in Australia and a notice or document needs to be served on the person for the purposes of this Act.

3.87 Where the Secretary, the Treasurer or the Commissioner are satisfied that the person is not in Australia, the document may be served by posting it to an Australian or international address, or sending it to an electronic address for the person. This insertion will provide administrative flexibility which is appropriate in the circumstances as the relevant persons the vacancy fees will apply to are necessarily foreign persons and may be easier to locate via an overseas address. [Schedule 3, item 8, section 135A of the FATA]

Consequential amendments

Amendments to the Taxation Administration Act 1953

3.88 Schedule 3 to this Bill also amends the TAA 1953 to include reference to fees payable under the FATA. This clarifies the circumstances in which provisions in the TAA 1953 will apply. [Schedule 3, items 10 and 11, Note to subsection 250-10(2) and subsection 250-10(2), of the TAA 1953]

Amendments to the Foreign Acquisitions and Takeovers Fees Imposition Act 2015

3.89 The Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 (the Fees Amendment Bill) amends the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Fees Act) to set out the fee payable by a foreign person in relation to a residential dwelling which is left vacant. [Schedule 1, item 10, Division 3, section 12A of the Fees Act]

3.90 Broadly, the vacancy fee amount is the same amount as the fee that was payable at the time a notice was submitted to acquire the land or the application for the exemption certificate which covered the acquisition was submitted. [Schedule 1, item 10, section 12A, of the Fees Act]

3.91 Where the person acquired their interest under an exemption certificate held by a developer, for example a new dwelling exemption certificate or a near-new dwelling exemption certificate, the fee payable is the amount of the fee that would have been payable if a notice of a notifiable action under section 81 of the FATA had been given for the action covered by the certificate, at the time of the action (regardless of any regulations made for the purposes of section 11 of the FATA).

Example 3.7 Angela, a foreign person under the FATA, purchases an apartment in Melbourne from Jas Co, a property developer who obtained exemption certificates in July 2017 to cover sales of both new dwellings and near-new dwellings to foreign persons. The consideration paid by Angela, at the time of purchase (April 2018), was $550,000.The vacancy fee payable is calculated as if Angela obtained an individual foreign investment approval herself without an exemption certificate.In this case, Angela's liability for the vacancy fee will be $5,500 (based on the consideration paid by her for the apartment at the time of purchase) should she leave the apartment vacant during a vacancy year for more than 183 days.

3.92 If a fee that would have been payable at the time of notifying of an action or applying for an established dwelling exemption certificate was waived, the vacancy fee payable is the lowest fee that would have been payable for a residential land acquisition. [Schedule 1, item 10, section 12A, table items 1(b), 3(b), 4(b) and 6(b) of the Fees Act]

Example 3.8 Levi and Tildy received a waiver of the $5,500 appplication fee in respect of their purchase of a house in Launceston, Tasmania. Levi and Tildy do not wish to rent their house while they are overseas.As a result, they are liable to pay the vacancy fee for their Launceston house. Their fee is calculated based on the lowest tier residential land fee payable at that time. As a result, Levi and Tildy have to pay $5,500 as a vacancy fee.

3.93 The vacancy fee payable by a person is not indexed but any changes to the fee structures within the FATA and the Fees Act will apply in future years.

3.94 The fee amounts are as follows:

Table 3.1

Provision reference Type of acquisition Fee amount
Table item 1, section 12A Acquiring the interest in land is a notifiable action

Where acquiring the interest in a dwelling or residential land is a notifiable action under section 47 of the FATA.

The amount of the fee that was payable in accordance with section 7 of the Fees Act at the time the notice was given.

If that fee was waived, the fee payable is equal to the lowest tier residential land fee that would have been payable at the time notice was given.

Table item 2, section 12A New dwelling certificate

Where the acquisition meets the definition of 'a new dwelling acquisition'.

Sub-section 113(4) of the FATA defines a 'new dwelling acquisition' as an acquisition by a foreign person of an interest in a new dwelling covered by an exemption certificate given to a developer.

The amount of the fee that would have been payable for an acquisition of the same value in accordance with section 7 of the Fees Act, had the person applied individually for the acquisition outside of an exemption certificate.
Table item 2, section 12A Near-new dwelling certificate

Where an acquisition occurs under a certificate issued under section 43A of the FATA Regulation.

Broadly, this is a dwelling in a development that otherwise would have been covered by a new dwelling exemption certificate except that the property sold but failed to settle before it was occupied.

The amount of the fee that would have been payable for an acquisition of the same value in accordance with section 7 of the Fees Act, had the person applied individually for the acquisition outside of an exemption certificate.
Table item 3, section 12A Established dwelling certificate

Where a foreign person acquires an established dwelling under an exemption certificate.

The amount of the fee that was payable in accordance with section 6 of the Fees Act when the application was submitted.

If that fee was waived, the fee payable is equal to the lowest tier residential land fee that would have been payable at the time notice was given.

Table item 3, section 12A Residential land certificate

Where the residential land was acquired under a residential land (other than established dwellings) certificate within the meaning of the FATA Regulations.

This certificate allows the purchase of a new dwelling, near-new dwelling or vacant land.

The amount of the fee that was payable in accordance with section 6 of the Fees Act when the application was submitted.

If that fee was waived, the fee payable is equal to the lowest tier residential land fee that would have been payable at the time notice was given.

Table item 4, section 12A Order under Subdivision A of Division 2 of Part 3

Where the action to acquire the interest residential land is specified in an order made under Subdivision A of Division 2 of Part 3 of the FATA or is specified in a no objections notification.

The amount of fee that was payable as worked out under section 8 of the Fees Act when the order or notification was given.

If that fee was waived, the fee payable is equal to the lowest tier residential land fee that would have been payable at the time notice was given.

Example 3.9 Susie and Greg decide to buy a new house close to their Australian relatives in Brisbane to use as their residence when they visit each year.On 22 August 2017 they apply for a no objections notification for a property they wish to buy in Mango Hill which is less than $1 million. The fee payable for the application is $5,500.Susie and Greg leave the property vacant for nine months in a given vacancy year and are liable to pay the vacancy fee. The vacancy fee will be set at $5,500 for that vacancy year and each future vacancy year - they should be liable to pay the vacancy fee.

Example 3.10 Ivan travels to Australia for business regularly and wants to buy a new apartment to live in while he is here in Australia. He never spends more than four months in a 12 month period in Australia.On 11 July 2017 he buys a property off-the-plan for $1.5 million from a developer who has been issued with a new dwelling exemption certificate. Ivan does not need to separately seek an approval to purchase the property.As Ivan does not occupy the apartment for at least 183 days each 12 month period, Ivan is liable to pay the vacancy fee.The vacancy fee is calculated based on the application fee that Ivan would have paid had he applied for to the Foreign Investment Review Board individually to purchase the apartment. Regarding the purchase price that Ivan paid for the property, Ivan would have paid an $11,100 application fee.Therefore Ivan's vacancy fee is $11,100 for each vacancy year he is liable to pay the vacancy fee.

Example 3.11 Lola is on a temporary resident visa and applies for and is issued with an exemption certificate which allows her to purchase one established dwelling up to the value of $1.6 million. The application fee is $11,100.If at any stage Lola is liable to pay the vacancy fee, it will be set at $11,100 for each vacancy year that Lola is liable to pay the vacancy fee.

Example 3.12 Soh-Yeon owns a property in Melbourne which she bought for $1.7 million. Soh-Yeon is issued with a notice from the Commissioner of Taxation notifying her that a vacancy fee is owed on the property.At the time that Soh-Yeon sought a no objections notification, the application fee for a new residential dwelling valued at more than $1 million was $11,100. However, this fee was waived.The vacancy fee payable is determined not on the fee that Soh-Yeon paid ($0) but the lowest tier residential land fee that would have been payable at the time that the property was purchased. The lowest fee for a new residential dwelling at the time Soh-Yeon applied was $5,500.The vacancy fee payable is set at $5,500 and any liability Soh-Yeon has to pay the vacancy fee in future vacancy years will be $5,500.

3.95 Editorial amendments have also been made to the Fees Act to incorporate these changes. [Schedule 1, items 1A to 9, sections 5 and 11 and subsections 4(1), 9(1), 11(1), 11(2), 12(1) and 12(8) and paragraphs 12(8)(a), (b), and (d) of the Fees Act]

Application and transitional provisions

3.96 The amendments included in this Schedule and in the Fees Amendment Bill will apply to foreign persons who submit a notice or an application to acquire residential dwelling or residential land from 7:30PM (AEST) on 9 May 2017.

3.97 Foreign persons who acquire an interest in residential land under a New Dwelling Exemption Certificate or a Near-new Dwelling Exemption Certificate which was approved prior to 7.30PM (AEST) on 9 May 2017 and who enter into the new contract after 7.30pm (AEST) on 9 May 2017 are not liable for the vacancy fee. [Schedule 3, item 12]


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