House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Chapter 2: Amendments of the Regulations

Outline of chapter

2.1 Schedule 2 to the Fees Imposition Bill amends the Regulations to triple foreign investment application fees for the purchase of established dwellings and double the vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017. These fee changes are designed to boost Australia's housing stock and provide more homes for Australians as announced by the Government on 10 December 2023.

2.2 Schedule 2 to the Fees Imposition Bill amends the relevant fee indexation provisions for consistency with changes to the fee cap indexation provisions in Schedule 1 to the Fees Imposition Bill.

2.3 All legislative references in this chapter are to the Regulations unless otherwise indicated.

Context of amendments

2.4 The amendments to the Regulations follow from the amendments to the Act in Schedule 1 to the Fees Imposition Bill.

2.5 Section 47 of the FATA provides that an action by a foreign person to acquire an interest in Australian land is a notifiable action.

2.6 Australian land includes residential land and other types of land. Residential land is land in Australia where there is at least one dwelling on the land (or the number of dwellings that could reasonably be built on the land is less than 10) and does not include land that is used wholly and exclusively for a primary production business or on which the only dwellings are commercial residential premises.

2.7 The FATA provides that a foreign person must seek approval before taking a notifiable action and must pay a fee as part of their application for approval. The FATA also imposes obligations on a foreign person who acquires an interest in residential land (including requiring foreign persons with interests in residential dwellings to lodge vacancy fee returns).

2.8 Part 6A of the FATA provides that a foreign person is liable to pay a vacancy fee if they acquire a residential dwelling and the dwelling is residentially occupied for less than 183 days in any year (called the vacancy year). Vacancy fees are payable in relation to residential land acquired on or after 7.30 pm on 9 May 2017.

2.9 A range of fees are payable by a foreign person under the FATA, and these are prescribed in the Act.

2.10 The Regulations provide methods for working out different fees as follows:

•

Part 2 – fees relating to various actions, such as an application for an exemption certificate, or giving notice of a notifiable action (section 6 of the Regulations sets out the fees covered under Part 2);

•

Part 3 – vacancy fees, which may arise when foreign persons do not utilise their residential property (section 42 provides for fees covered under Part 3); and

•

Part 4 – adjusting fees, which provides how a fee may be adjusted despite other parts of the Regulations.

2.11 On 10 December 2023, the Treasurer announced the Government's plan to adjust the foreign investment framework to encourage foreign investors to purchase new housing stock instead of established dwellings and to make their unused properties available to renters. The changes include:

•

a tripling of foreign investment fees for the purchase of established dwellings; and

•

a doubling of vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017 (which together with the tripling means a six-fold increase in vacancy fees for future purchases of established dwellings as the vacancy fees are calculated based on the foreign investment fees for the purchase of the dwelling).

Summary of new law

2.12 Schedule 2 to the Fees Imposition Bill amends the Regulations to triple foreign investment application fees for the purchase of established dwellings.

2.13 In addition, Schedule 2 to the Fees Imposition Bill doubles the vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017. This results in:

•

a six-fold increase in vacancy fees (in conjunction with the tripling of the foreign investment application fees for the purchase of established dwellings) for established dwellings purchased after commencement of the Fees Imposition Bill;

•

a doubling of vacancy fees for established dwellings already purchased on or after 7.30 pm on 9 May 2017; and

•

a doubling of vacancy fees for new dwellings purchased on or after 7.30 pm on 9 May 2017 (including dwellings purchased after commencement of the Fees Imposition Bill).

Detailed explanation of new law

Updating fee figures to reflect indexed amounts

2.14 The Regulations prescribe methods for working out the amount of fees imposed by the Act. The fees relate to actions taken, or proposed to be taken, by foreign persons under the FATA.

2.15 Schedule 2 to the Fees Imposition Bill updates fee amounts across various sections of the Regulation (see Table 2.1), so that the text of the legislation reflects the current fee (including indexation that has been automatically applied prior to the commencement of the Fees Imposition Bill). These fees have not been increased, as the amendments are simply about incorporating prior indexation into the amount specified in the text of the legislation.

Table 2.1 Fee amounts reflective of indexation applied on 1 July 2023

[Schedule 2 to the Fees Imposition Bill, items 2 to 6, item 8, item 10, items 12 to 17, items 31 to 32, item 34, items 42 to 47, sections 10, 12, 16, 27, 28, 30, 31, 40, 41, 53, 54 and 55 of the Regulations]

Fees for giving notice of notifiable actions or notifiable national security actions

2.16 Division 2 of Part 2 to the Regulations sets out how to work out the fee for giving notice of a notifiable action or a notifiable national security action. Subdivision B covers fees for giving notice of notifiable actions.

Particular rules for notifiable actions

2.17 As a general rule, the fee for giving notice of a notifiable action is worked out using the method in section 10 of the Regulations, where the fee amount is worked out by comparing the fee constant to the value of the consideration for the action. The method for working out the fee payable depends on the type of interest acquired.

2.18 The amendments provide that the amount of the fee for an action to acquire an interest in residential land on which there is at least one established dwelling is triple the fee worked out using the method in subsection 10(1) of the Regulations. [Schedule 2 to the Fees Imposition Bill, item 7, subsection 10(2) of the Regulations]

2.19 The amounts in Example 2.1 below are based on current indexed amounts in Table 2.1 of this explanatory memorandum.

Example 2.1 – The fee payable for an acquisition of residential land on which there is at least one established dwelling is determined below:

For an acquisition with a consideration of $1 million or less: triple $14,100.

For an acquisition of more than $1 million, worked out as follows:

•

Step 1. Apply the following formula:

-

If the consideration for the acquisition is a multiple of the fee constant:

(Consideration of the acquisition-1)/1 million, rounding down to the nearest whole number

-

Otherwise:

(Consideration for the acquisition)/1 million, rounding down to the nearest whole number;

•

Step 2. Multiply the step 1 amount by $28,200.

•

Step 3. Triple the step 2 amount.

•

Step 4. The step 3 amount is the amount of the fee capped at $3,357,300 (which is triple the maximum fee of $1,119,100).

Particular rules for notifiable national security actions

2.20 The amount of the fee for giving notice of a notifiable national security action:

•

to acquire an interest in Australian land that, at the time of acquisition, is national security land and residential land on which there are no established dwellings is equal to the fee that would be worked out under Subdivision B of Division 2 for an action to acquire an interest in residential land on which there are no established dwellings; or

•

to acquire an interest in Australian land that, at the time of acquisition, is national security land and residential land on which there is at least one established dwelling is equal to the fee that would be worked out under Subdivision B of Division 2 for an action to acquire an interest in residential land on which there is at least one established dwelling. [Schedule 2 to the Fees Imposition Bill, item 9, section 13 (table items 3 and 3A) of the Regulations]

2.21 For the avoidance of doubt, the policy settings for notifiable national security actions that do not cover residential land (established dwellings) actions, are not changed by this amendment. The fee for notifiable national security actions that do cover residential land (established dwellings) is triple the fee worked out under subsection 10(1) of the Regulations.

Fees for giving notice of reviewable national security actions

2.22 The amount of the fee for giving notice of a proposal to take a reviewable national security action:

•

to acquire an interest in Australian land that is residential land on which there are no established dwellings is equal to 25 per cent of the fee that would be worked out under Division 2 for an action to acquire an interest in residential land on which there are no established dwellings; or

•

to acquire an interest in Australian land that is residential land on which there is at least one established dwelling is equal to 25 per cent of the fee that would be worked out under Division 2 for an action to acquire an interest in residential land on which there is at least one established dwelling. [Schedule 2 to the Fees Imposition Bill, item 11, subsection 17(1) (table items 3 and 3A) of the Regulations]

2.23 For the avoidance of doubt, the policy settings for reviewable national security actions that do not cover residential land (established dwellings) actions, are not changed by this amendment. The fee for notifiable national security actions that do cover residential land (established dwellings) is 25 per cent of triple the fee worked out under subsection 10(1) of the Regulations.

Fees for applications for exemption certificates

2.24 Subdivision A of Division 7 to Part 2 of the Regulations sets out how to work out the amount of the fee for an application for an exemption certificate.

Applications for exemption certificates generally

2.25 Fees for applications for exemption certificates are calculated by treating the same kinds of actions permitted under a certificate as if they were a single action.

2.26 The kinds of actions are as follows:

•

acquisition of an interest in residential land (including residential land on which there is at least one established dwelling and residential land on which there are no established dwellings);

•

acquisition of an interest in agricultural land;

•

acquisition of an interest in commercial land, tenements, businesses and entities; and

•

other actions (including starting a national security business and certain other reviewable national security actions).

Applications for exemption certificates under section 59 of the FATA (about established dwellings)

2.27 Section 32 of the Regulations covers the fee payable for applying for an exemption certificate under section 59 of the FATA (exemption related to established dwellings).

2.28 The fee for an application for an exemption certificate under section 59 of the FATA is equal to the fee that would be paid if the exemption certificate were not held. That is, the fee is equal to the fee worked out under Division 2 to Part 2 of the Regulations if the actions to be covered by the exemption certificate were covered by that Division.

2.29 This ensures that the amendments mentioned in paragraph 2.18 of the explanatory memorandum are picked up, such that the fee amount is triple the fee worked out using the method in subsection 10(1) of the Regulations.

2.30 For example, a foreign person proposes to acquire an interest in residential land with one or more established dwellings with a consideration of $10 million and applies for an exemption certificate under section 59 of the FATA. The fee for the application is equal to the fee for giving notice of a notifiable action to acquire an interest in residential land with one or more established dwellings for consideration of $10 million. The application fee is equal to triple $253,800 (fee worked out using method in subsection 10(1), based on current indexed amounts in Table 2.1 above), totalling a fee of $761,400.

Applications for most other kinds of exemption certificates

2.31 Schedule 2 to the Fees Imposition Bill repeals and replaces subsection 33(1) of the Regulations to clarify that the method for determining fees under section 33 applies to applications for the following types of exemption certificates:

•

exemption certificates under section 58 of the FATA (about acquisitions of interests in Australian land);

•

businesses or entities certificates;

•

tenements and mining, production or exploration entities certificates;

•

exemption certificates under section 43BA of the FATR (about notifiable national security actions); and

•

exemption certificates under section 43BB of the FATR (about reviewable national security actions). [Schedule 2 to the Fees Imposition Bill, item 23, subsection 33(1) of the Regulations]

2.32 The fee for an application for an exemption certificate specified in subsection 33(1) is the lesser of:

•

75 per cent of the sum of fees that would apply for the kinds of action covered by the certificate had the applicant applied for a single approval for each of those actions (the sum of fees method); and

•

if the actions to be covered by the exemption certificate do not include residential land (established dwellings) actions—75 per cent of the maximum fee specified in paragraph (b) of column 2 of item 2 of the table in subsection 10(1) (the maximum fee method); or

•

if the actions to be covered by the exemption certificate include residential land (established dwellings) actions—75 per cent of the adjusted maximum fee (the adjusted maximum fee method). [Schedule 2 to the Fees Imposition Bill, item 23, subsection 33(2) of the Regulations]

2.33 However, the fee for an application for an exemption certificate which covers only reviewable national security actions, is calculated differently. In this case, the fee is the lesser of:

•

25 per cent of the sum of the fees that would be worked out under Division 2 if the action was an action covered by that Division and of an equivalent kind (the reviewable sum of fees method); and

•

if the actions to be covered by the exemption certificate do not include residential land (established dwellings) actions—25 per cent of the maximum fee specified in paragraph (b) of column 2 of item 2 of the table in subsection 10(1) (the reviewable maximum fee method); or

•

if the actions to be covered by the exemption certificate include residential land (established dwellings) actions—25 per cent of the adjusted maximum fee (the reviewable adjusted maximum fee method). [Schedule 2 to the Fees Imposition Bill, item 23, subsection 33(2A) of the Regulations]

2.34 For the avoidance of doubt, the fee calculated under subsections 33(2) or 33(2A) may be adjusted if the person applies for another certificate within 14 days (per paragraph 2.53 of this explanatory memorandum).

2.35 For the avoidance of doubt, the maximum fee specified in paragraph (b) of column 2 of item 2 of the table in subsection 10(1) is subject to indexation. Further, the policy settings for exemption certificates that do not include residential land (established dwellings) actions, are not changed by this amendment. [Schedule 2 to the Fees Imposition Bill, item 23, subsections 33(2) and 33(2A) of the Regulations]

2.36 For the sum of fees method for reviewable national security actions, this is 25 per cent of the fees that are calculated under the general rule in Division 2 of Part 2, rather than under section 17 (which provides that the fee payable for giving notice of a proposal to take a reviewable national security action is 25 per cent of the fee for an equivalent notifiable action).

2.37 The table in subsection 33(3) of the Regulations sets out how to determine the sum of fees method and reviewable sum of fees method for each kind of action. [Schedule 2 to the Fees Imposition Bill, item 25, subsection 33(3) of the Regulations]

Other kinds of exemption certificate with residential land actions

2.38 Residential land actions are split into two kinds: actions involving acquisitions of interests in residential land on which there are no established dwellings (called residential land (other than established dwellings) actions) and actions involving acquisitions of interests in residential land on which there is at least one established dwelling (called residential land (established dwellings) actions). [Schedule 2 to the Fees Imposition Bill, item 25, subsection 33(3) of the Regulations]

2.39 Where an application for a residential land action exemption certificate does not cover residential land (established dwellings) actions, the amount of the fee for the actions is the amount that would be payable under Subdivision B of Division 2 if all of the actions of each kind covered by the exemption certificate were single acquisitions of that kind. The consideration for each single acquisition is the sum of the values of the consideration for all of the actions of that kind. For the avoidance of doubt, the policy settings for exemption certificates that do not cover residential land (established dwellings) actions, are not changed by this amendment. [Schedule 2 to the Fees Imposition Bill, item 25, subsection 33(3) (table item 1) of the Regulations]

2.40 There are two cases where an application for one of these kinds of exemption certificates may cover residential land (established dwellings) actions. The first case is where the application is only in relation to residential land (established dwellings) actions. The second case is where the application is in relation to different types of action including residential land (established dwellings) actions.

2.41 Where an application for one of these kinds of exemption certificates covers only residential land (established dwellings) actions, the amount of the fee for the actions is the amount that would be payable under Subdivision B of Division 2 if all of the actions of that kind was a single acquisition. The consideration for the acquisition is the sum of the values of the consideration for all of the actions of that kind. For the avoidance of doubt, the fee where all actions are residential land (established dwellings) actions, is triple the fee worked out under subsection 10(1) of the Regulations. [Schedule 2 to the Fees Imposition Bill, item 25, subsection 33(3) (table item 1A) of the Regulations]

2.42 Where one or more of the different types of actions to be covered by a certificate is a residential land (established dwellings) action (so that the certificate is a mixed-use established dwelling exemption certificate), the maximum fee under subsection 10(1) of the Regulations is adjusted to reflect the value of the consideration for the actions which are residential land (established dwellings) actions.

Adjusted maximum fee method and reviewable adjusted maximum fee method

2.43 The maximum fee under subsection 10(1) is adjusted through the introduction of an adjusted maximum fee (as described in paragraphs 2.45 to 2.48 of this explanatory memorandum). [Schedule 2 to the Fees Imposition Bill, item 26, subsection 33(4) of the Regulations]

2.44 This mechanism is necessary because:

•

if the tripled maximum fee applied to mixed-use established dwelling exemption certificates, the part of the application fee which is attributable to actions other than residential land (established dwellings) actions could be greater than the maximum fee for applications for exemption certificates which do not cover residential land (established dwellings) actions; and

•

if the maximum fee for applications for exemption certificates which do not cover residential land (established dwellings) actions applied to mixed-use established dwelling exemption certificates, the part of the application fee which is attributable to actions that are residential land (established dwellings) actions could be less than triple the earlier fee.

2.45 The adjusted maximum fee is worked out by adding together:

•

the established dwellings fee; and

•

the product of the maximum fee for actions that are not residential land (established dwellings) actions (the maximum fee (other than for established dwellings)) and the percentage of established dwellings maximum fee not charged (the maximum fee percentage not charged).

2.46 The established dwellings fee is the sum of fees that would apply for each residential land (established dwellings) action. This is worked out under column 2 of item 1A of the table in subsection 33(3).

2.47 The maximum fee (other than for established dwellings) is the maximum fee for actions that are not residential land (established dwellings) actions. This is the amount in paragraph (b) of column 2 of item 2 of the table in subsection 10(1). The amount is subject to indexation.

2.48 The percentage of established dwellings maximum fee not charged is the established dwellings fee as a percentage of the amount that is triple the amount in paragraph (b) of column 2 of item 2 of the table in subsection 10(1), subtracted from 100 per cent. [Schedule 2 to the Fees Imposition Bill, item 26, subsection 33(4) of the Regulations]

2.49 The amounts in Examples 2.2 to 2.6 below are based on current indexed amounts in Table 2.1 of this explanatory memorandum.

Example 2.2 – Calculating the percentage of established dwellings maximum fee not charged

A foreign person applies for a single exemption certificate under section 58 of the FATA to undertake a program of acquisitions of interests in Australian land. The person proposes to acquire up to $9 million in residential land with at least one established dwelling.

The established dwellings fee for the application is $676,800. This value is 20.16 per cent of the amount that is triple the amount in paragraph (b) of column 2 of item 2 of the table in subsection 10(1), which is $3,357,300 (subject to indexation). The percentage of established dwellings maximum fee not charged is 79.84 per cent.

Example 2.3 – Fee for applying for an exemption certificate that does not cover residential land (established dwellings) actions or reviewable national security actions

A foreign person applies for an exemption certificate under section 58 of the FATA to undertake a program of acquisitions of interests in Australian land. The person proposes to take notifiable actions to acquire up to $250 million in commercial land and $58 million in agricultural land.

The ordinary fee for this application is equal to 75 per cent of the sum of the fees for giving notice of notifiable actions to acquire $250 million in commercial land and $58 million in agricultural land. The ordinary fee payable is 75 per cent of $112,800 plus $789,600 (which is $677,800). This is less than 75 per cent of the maximum fee (other than for established dwellings) of $1,119,100 (which is $839,235). Therefore, the fee is $677,800.

Example 2.4 – Fee for applying for an exemption certificate that covers reviewable national security actions but does not cover residential land (established dwellings) actions

A foreign person applies for an exemption certificate under section 43BB of the FATR to undertake a program of acquisitions of interests in Australian land. The person proposes to take reviewable national security actions to acquire up to $10 million in agricultural land and $10 million in commercial land. All of the actions to be taken under the exemption certificate are reviewable national security actions.

The ordinary fee for this application is equal to 25 per cent of the sum of the fees for giving notice of notifiable actions to acquire $10 million in commercial land and $10 million in agricultural land. The ordinary fee payable is 25 per cent of $14,100 plus $112,800 (which is $31,725). This is less than 25 per cent of the maximum fee (other than for established dwellings) of $1,119,100 (which is $279,775). Therefore, the fee is $31,725.

Example 2.5 – Fee for applying for an exemption certificate that covers residential land (established dwellings) actions but does not cover reviewable national security actions

A foreign person applies for an exemption certificate under section 58 of the FATA to undertake a program of acquisitions of interests in Australian land. The person proposes to take notifiable actions to acquire up to $9 million in residential land with at least one established dwelling and $20 million in agricultural land.

The ordinary fee for this application is equal to 75 per cent of the sum of the fees for giving notice of notifiable actions to acquire $9 million in residential land with at least one established dwelling and $20 million in agricultural land. The ordinary fee payable is 75 per cent of $676,800 plus $253,800 (which is $697,950). This is lower than 75 per cent of the adjusted maximum fee of $1,570,300 (which is $1,177,700). Therefore, the fee is $697,950.

The adjusted maximum fee is calculated as the sum of:

•

$676,800 (the established dwellings fee); and

•

the product of 79.84 per cent (the percentage of established dwellings maximum fee not charged calculated in Example 2.2) and $1,119,100 (the maximum fee (other than for established dwellings)), which is $896,500.

Example 2.6 – Fee for applying for an exemption certificate that covers residential land (established dwellings) actions that are reviewable national security actions

A foreign person applies for an exemption certificate under section 43BB of the FATR to undertake a program of acquisitions of interests in Australian land. The person proposes to take reviewable national security actions to acquire up to $1 million in residential land with at least one established dwelling.

•

Acquisitions by foreign persons of interests in residential land only constitute reviewable national security actions in very limited circumstances. In most circumstances, acquisitions by foreign persons of interests in residential land constitute notifiable actions.

The ordinary fee for this application is equal to 25 per cent of the sum of the fees for giving notice of a notifiable action to acquire $1 million in residential land with at least one established dwelling. The ordinary fee payable is 25 per cent of $42,300 (which is $10,575). This is less than 25 per cent of the maximum fee (other than for established dwellings) of $1,119,100, which is $279,775. Therefore, the fee is $10,575.

Applications for multiple exemption certificates

Applications for multiple residential land exemption certificates covering a single proposed acquisition

2.50 The fee payable for the application of a second residential land certificate under section 34 of the Regulations is updated. In the circumstances specified under subsection 34(1), the fee for the second certificate is nil if the fee for the first certificate had been paid and was higher than or the same as the fee that would be payable for the second certificate. For the avoidance of doubt, there is no reduction or refund of the full fee paid for the first certificate. If the fee for the second certificate would be higher than the fee paid for the first certificate, the fee payable for the second certificate is the difference between the fee paid for the first certificate and the fee payable for the second certificate. The circumstances under subsection 34(1) are not changed. [Schedule 2 to the Fees Imposition Bill, item 27, subsection 34(2) of the Regulations]

2.51 This effectively provides a way for foreign persons who are not able to purchase one type of residential dwelling (established dwelling or dwelling other than an established dwelling) to add the other type of residential dwelling to their exemption certificate by only paying a top-up fee if necessary.

2.52 The fee amounts in Examples 2.7 to 2.8 below are based on current indexed amounts in Table 2.1 of this explanatory memorandum.

Example 2.7 – Applications for multiple residential land exemption certificates covering a single proposed acquisition

A foreign person temporarily working in Australia has previously applied for and been granted an exemption certificate under section 59 of the FATA to acquire an established dwelling in Bondi for up to $2 million. The fee for the application was $84,600. After having attended several auctions without success, the person applies for an exemption certificate under section 43B of the FATR to acquire a new dwelling in Bondi for up to $2 million. The fee for the application would normally be $28,200. Since the person has not yet acquired a dwelling under the first certificate, and the fee for the first certificate was paid and was higher than the fee that would be payable for the second certificate, the fee for the second certificate is nil.

Example 2.8 – Applications for multiple residential land exemption certificates covering a single proposed acquisition

A foreign person temporarily working in Australia has previously applied for and been granted an exemption certificate under section 43B of the FATR to acquire a new dwelling in Bondi for up to $2 million. The fee for the application was $28,200. The person applies for an exemption certificate under section 59 of the FATA to acquire an established dwelling in Bondi for up to $2 million. The fee for the application would normally be $84,600. Since the person has not yet acquired a dwelling under the first certificate, and the fee for the first certificate was paid and was lower than the fee that would be payable for the second certificate, the fee for the second certificate is $56,400 (which is the difference between the fee paid for the first certificate and the fee that would be payable for the second certificate).

Multiple applications for land, entities, tenements and national security exemption certificates

2.53 A special rule is applied if a foreign person applies for a second exemption certificate mentioned in section 33 within 14 days of applying for a first exemption certificate mentioned in section 33. The fee for the applications is worked out as if they were an application for a single certificate covered by subsection 33(1). [Schedule 2 to the Fees Imposition Bill, item 28, subsection 35(2) of the Regulations]

Example 2.9 – Application for another exemption certificate within 14 days of applying for the first exemption certificate

A foreign person applies for a land exemption certificate under section 58 of the FATA covering $5 million in agricultural land. Five days later, the applicant also applies for another exemption certificate covering $150 million in commercial land. The fee for the applications is the same as if the applicant instead applied at the same time for one land exemption certificate covering $5 million in agricultural land and $150 million in commercial land.

Adjusting fees

Fee payable for multiple acquisitions of different kinds of land (the dominant land type) where the dominant land is residential land

2.54 An agreement may include one or more actions in an action group to acquire an interest in Australian land or in a tenement, where the types of land action are:

•

acquisition of an interest in residential land;

•

acquisition of an interest in agricultural land; and

•

acquisition of an interest in commercial land or tenements.

2.55 The fee payable for this type of acquisition is worked out by identifying the dominant land type. The dominant land type is worked out by determining the kind of relevant land which has the highest consideration.

2.56 The amendments provide that the value of the consideration for residential land is the sum of the consideration for residential land with at least one established dwelling (residential land (established dwellings)) and the consideration for all other types of residential land (residential land (other than established dwellings)).

2.57 The fee method where the dominant kind of land is not residential land is unchanged by the amendment.

2.58 However, as fees for residential land (established dwellings) are higher than fees for residential land (other than established dwellings), if the dominant kind of land is residential land, the calculation of fees is adjusted. [Schedule 2 to the Fees Imposition Bill, item 41, subsection 51(5) of the Regulations]

2.59 Where the dominant kind is residential land, and the residential land includes residential land (established dwellings) and residential land (other than established dwellings), two separate fees are calculated. The total fee payable is the sum of the two fees.

2.60 The first part of the total fee is determined on the basis that each action to acquire an interest in residential land (established dwellings) is considered as a single land action. The value of consideration for this single land action is equal to the sum of the values of the consideration for each land action to acquire an interest in residential land (established dwellings). In essence, the consideration of each land action to acquire an interest in residential land (established dwellings) is added together to produce the total consideration that this part of the fee is calculated on. [Schedule 2 to the Fees Imposition Bill, item 41, paragraph 51(5)(a) of the Regulations]

2.61 The second part of the total fee is determined on the basis that each land action that is not a residential land (established dwelling) action is considered as a single land action to acquire an interest in residential land (other than established dwellings). The value of consideration for this single action is equal to the sum of the values of the consideration for each land actions that are not an action to acquire an interest in residential land (established dwellings). This is the sum of the value of the land action for residential land (other than established dwellings), and the value of the land actions that are not residential land actions. [Schedule 2 to the Fees Imposition Bill, item 41, paragraph 51(5)(b) of the Regulations]

2.62 The total fee payable is subject to the adjusted maximum fee method outlined in paragraphs 2.45 to 2.48 of this explanatory memorandum. However, the amount calculated for the established dwellings fee in the formula for the adjusted maximum fee method is replaced by the amount calculated under paragraph 51(5)(a). For the avoidance of doubt, the established dwellings fee calculated under paragraph 51(5)(a) also applies to the calculation of the percentage of established dwellings maximum fee not charged. [Schedule 2 to the Fees Imposition Bill, item 41, paragraph 51(5)(c) of the Regulations]

2.63 The consideration of relevant land types other than residential land is treated as consideration for an action to acquire residential land (other than established dwellings). This ensures other kinds of land actions are not subject to the tripled fees payable for residential land (established dwellings). [Schedule 2 to the Fees Imposition Bill, item 41, paragraph 51(5)(b) of the Regulations]

2.64 For the avoidance of doubt, if there is only one land action in the action group, then the fee continues to be worked out in the same way the fee for that action would otherwise have been worked out under the Regulations.

2.65 The fee amounts in Examples 2.10 to 2.11 below are based on current indexed amounts in Table 2.1 of this explanatory memorandum.

Example 2.10 – Dominant land type is not residential land

Under a single agreement, a foreign person proposes to take three actions that are notifiable actions to acquire an interest in Australian land. The person proposes to acquire $5 million of residential land, $5 million of agricultural land and $10 million of commercial land, for total consideration of $20 million. The dominant land type is the land with the highest value – commercial land. This means the fee for all of the actions is $14,100.

Example 2.11 – Dominant land type is residential land

Under a single agreement, a foreign person proposes to take three actions that are notifiable actions to acquire an interest in Australian land. The person proposes to acquire $6 million of residential land (established dwellings), $4 million of residential land (other than established dwellings), $2 million of agricultural land, and $7 million of commercial land, for total consideration of $19 million. The dominant land type is the land with the highest value—residential land. The residential land is made up of $6 million of residential land (established dwellings) and $4 million of residential land (other than established dwellings). The value of the consideration for the actions to acquire residential land ($9 million) is treated as consideration for the residential land (other than established dwellings) actions for the purpose of calculating the fees.

The fee is therefore calculated as if the person proposed to acquire $6 million of residential land (established dwellings) and $13 million of residential land (other than established dwellings). The fee for the actions under the agreement is the sum of:

•

the fee for the action to acquire residential land (established dwellings), which is $253,800; and

•

what would be the fee for an action to acquire residential land (other than established dwellings) for consideration of $13 million, which is $338,400.

The fee for the actions under the agreement is $592,200. The fee is less than the adjusted maximum fee, which is $1,288,300 (calculated using the method described in paragraphs 2.45 to 2.48 and paragraph 2.62 of this explanatory memorandum).

Fee payable if the value of the consideration for the action is less than $75,000

2.66 The amendments provide that the fee for giving notice of an action is $4,200 (subject to indexation) if the value of the consideration for the action is less than $75,000. This is simply updating the text of the fee in legislation to align with indexation. [Schedule 2 to the Fees Imposition Bill, item 42, paragraph 53(1)(a) of the Regulations]

2.67 The amendments further provide that the fee is 25 per cent of the amount (that is 25 per cent of $4,200 (subject to indexation)) if the action is a reviewable national security action. The fee is triple the relevant amount if the action is to acquire an interest in residential land on which there is at least one established dwelling. The relevant amount is $4,200 (subject to indexation) if the action is not a reviewable national security action while the relevant amount is 25 per cent of $4,200 (subject to indexation) if the action is a reviewable national security action. [Schedule 2 to the Fees Imposition Bill, item 42, paragraphs 53(1)(b) and 53(1)(c) of the Regulations]

2.68 The fee for giving notice of two or more actions is $4,200 (subject to indexation) if a single agreement covers the actions and the value of the consideration for each action under the agreement is less than $75,000. The fee is 25 per cent of this amount if all of the actions are reviewable national security actions. The fee is triple the relevant amount if any of the actions under the agreement is an action to acquire an interest in residential land on which there is at least one established dwelling. The relevant amount is $4,200 (subject to indexation) if any of the actions is not a reviewable national security action while the relevant amount is 25 per cent of $4,200 if all the actions are reviewable national security actions. [Schedule 2 to the Fees Imposition Bill, item 43, paragraphs 53(2)(a), 53(2)(b) and 53(2)(c) of the Regulations]

Vacancy fees

2.69 Per item 12 of Schedule 3 to the Treasury Laws Amendment (Housing Tax Integrity) Act 2017, vacancy fees are payable in relation to residential land acquired on or after 7.30 pm on 9 May 2017.

2.70 The vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017 are doubled as per paragraphs 2.71 to 2.74 of this explanatory memorandum. This results in:

•

a six-fold increase in vacancy fees for future purchases of established dwellings (in conjunction with the tripling of the foreign investment application fees for the purchase of established dwellings);

•

a doubling of vacancy fees for established dwellings already purchased on or after 7.30 pm on 9 May 2017; and

•

a doubling of vacancy fees for new dwellings purchased on or after 7.30 pm on 9 May 2017 (including new purchases).

2.71 The vacancy fee payable for the acquisition of an interest in residential land that was notified by the person under section 81 of the FATA is double:

•

the fee that was payable by the person for giving a notice of the acquisition; or

•

if the fee payable for giving notice was waived—the amount of the fee listed at item 1 of the table in subsection 10(1) of the Regulations at the time the notice is given.

[Schedule 2 to the Fees Imposition Bill, items 35 and 36, section 43 of the Regulations]

2.72 The vacancy fee for the acquisition of an interest in residential land that was covered by a new dwelling or near-new dwelling exemption certificate is double the fee that would have been charged if the person did not have the exemption certificate and instead was required to notify of the acquisition under section 81 of the FATA. [Schedule 2 to the Fees Imposition Bill, item 37, section 44 of the Regulations]

2.73 The vacancy fee for an acquisition covered by an exemption certificate not mentioned in section 43 of the Regulations is double:

•

the fee payable for applying for that exemption certificate; or

•

if the fee payable for applying for the exemption certificate is waived—the lowest fee for that exemption certificate.

[Schedule 2 to the Fees Imposition Bill, item 38, section 45 of the Regulations]

2.74 The vacancy fee for an acquisition of residential land that the Treasurer made an order or decision about is double:

•

the fee payable for giving a notice of an acquisition of residential land; or

•

if the fee payable for giving notice is waived—the amount of the fee listed at item 1 of the table in subsection 10(1) of the Regulations at the time the notice is given.

[Schedule 2 to the Fees Imposition Bill, items 39 to 40, section 46 of the Regulations]

Updates to fee and fee component indexation provisions

2.75 The changes to the indexation provisions for the fees and fee components in the Regulations (as outlined in paragraphs 2.76 to 2.80 of this explanatory memorandum) are consistent with the changes to the fee cap indexation provisions in Schedule 1 to the Fees Imposition Bill. The amendments facilitate a coherent process for the indexing of the fees, fee components and fee cap.

2.76 Fees payable under the foreign investment framework and related fee component amounts are subject to indexation every financial year. These amounts, as set in the Regulations, are to be indexed from 1 July each year starting on or after 1 July 2024. [Schedule 2. Item 48, subsection 59(2) of the Regulations]

2.77 If the indexed amount for the current year is less than the indexed amount for the previous financial year, the indexed amount for the current year is equal to the indexed amount of the previous year. This also applies to the indexed amount for the year starting on 1 July 2024. [Schedule 2 to the Fees Imposition Bill, item 49, paragraph 59(4)(a) of the Regulations]

2.78 Each specified fee amount and fee component will be indexed by multiplying it by the indexation factor. The indexation factor is:

The sum of the index numbers for the four quarters in the year ending on 31 March just before the start of the relevant financial year

Divided by:

The sum of the index number for the four quarters in the year ending on 31 March in the financial year before the financial year in which this subsection commences.

2.79 For example, if subsection 60(1) of the Regulations commences in the 2023-24 financial year, indexation of the fee cap would first occur on 1 July 2024 financial year. In this circumstance, the indexation factor is:

The sum of the index numbers for the four quarters in the year ending on 31 March 2024

Divided by:

The sum of the index number for the four quarters in the year ending on 31 March in the 2022-23 financial year (that is, 31 March 2023).

2.80 The denominator of the indexation factor formula replicates the denominator of the indexation factor formula in subsection 8(1) of the Act, which is used to index the fee cap. The previous denominator in subsection 60(1) of the Regulations was the sum of the index numbers for the four quarters in the year ending on 31 March 2022. This sum is replaced as it is no longer relevant nor current. [Schedule 2 to the Fees Imposition Bill, item 50, subsection 60(1) of the Regulations]

Further minor amendments

2.81 A minor editorial amendment is made to the start of a section, to accommodate the addition of a new subsection. [Schedule 2 to the Fees Imposition Bill, item 1, section 10 of the Regulations]

2.82 A new note is added at the end of a subsection to clarify that a residential land (near-new dwellings interests) certificate is issued under section 43A of the FATR. A minor editorial amendment is also made at the start of the note preceding the new note, to accommodate the addition of the new note. [Schedule 2 to the Fees Imposition Bill, items 18 and 19, subsection 31(1) of the Regulations]

2.83 A further minor editorial amendment is made to a section for further clarity of the provision. The amendment omits words from the section to prevent any ambiguity about whether the character of an action is changed. The action retains its inherent character, as to whether the action relates to land on which there is or is not an established dwelling. [Schedule 2 to the Fees Imposition Bill, item 20, sections 32 of the Regulations]

2.84 A new note is added at the end of a subsection to clarify that a residential land (other than established dwellings) certificate is issued under section 43B of the FATR. A minor editorial amendment is also made at the start of the note preceding the new note, to accommodate the addition of the new note. [Schedule 2 to the Fees Imposition Bill, items 21 and 22, section 32 of the Regulations]

2.85 A minor editorial amendment is made to subsection 33(3) to reflect the new operation of subsection 33(2). [Schedule 2 to the Fees Imposition Bill, item 24, subsection 33(3) of the Regulations]

2.86 Other minor editorial amendments specify the kind of residential land action referred to in a section. [Schedule 2 to the Fees Imposition Bill, items 29 and 30, paragraphs 37(2)(b) and 38(2)(b) of the Regulations]

2.87 A new note at the end of a table in a subsection for additional clarity and consistency throughout the Regulations. This note is modelled on equivalent notes in the Regulations. [Schedule 2 to the Fees Imposition Bill, item 33, subsection 40(1) of the Regulations]

Other provisions

2.88 Provisions of the Regulations amended or inserted by Schedule 2 to the Fees Imposition Bill (once enacted), and any other provisions of those regulations, may be amended or repealed by regulations made under section 13 of the Act, with reference to subsection 13(5) of the Legislation Act 2003.

2.89 Section 13 of the Act provides that the Governor-General may make certain regulations not inconsistent with the Act. In accordance with subsection 13(5) of the Legislation Act 2003, the amendment of a legislative instrument does not prevent the instrument, as so amended, from being amended or repealed by the Governor-General. [Section 3 of the Fees Imposition Bill]

2.90 In other words, any regulations amending the Regulations with suspended commencements do not affect the amendments made by Schedule 2 to the Fees Imposition Bill. Additionally, any amending regulations made by the Governor-General post the commencement of the Fees Imposition Bill can amend or repeal the Regulations (including any amendments to the Regulations made by Schedule 2 to the Fees Imposition Bill).

Commencement, application, and transitional provisions

2.91 Schedule 2 to the Fees Imposition Bill commences on either the day after Royal Assent or 1 April 2024, whichever occurs later. [Section 2 of the Fees Imposition Bill]

2.92 Generally, the amendments to the Regulations made by Schedule 2 to the Fees Imposition Bill apply in relation to fees that become payable on or after the commencement of those amendments.

2.93 However, this general rule does not apply where the amendments made relate to vacancy fees. Vacancy fees are payable in relation to residential land acquired on or after 7.30 pm on 9 May 2017. In this situation, the amendments apply in relation to vacancy years starting on or after the commencement of the amendments, regardless of whether the dwelling in respect of which a fee is payable is acquired before, on or after that commencement. For example, if the amendments commence on 1 April 2024:

•

the amendments would apply in relation to vacancy years starting on or after 1 April 2024; and

•

the amendments would not apply in relation to vacancy years which started before 1 April 2024.

2.94 For the avoidance of doubt, if the Fees Imposition Bill commences after 1 July 2024, the indexation required by subsection 59(2) of the Regulations, as amended by the Fees Imposition Bill (once enacted), applies on the first 1 July after that commencement. [Schedule 2 to the Fees Imposition Bill, item 51, section 67 of the Regulations]