Developers targeted in the FIRB’s crack down on foreign acquisitions
Developers are currently able to apply for Advanced Off the Plan Certificates when selling new apartments in developments that have 100 or more dwellings on behalf of foreign investors, this has meant that foreign investors have not been required to apply for these certificates themselves through FIRB and no fees are charged for obtaining such certificates. The AOP Certificates are granted by FIRB to foreign investors when purchasing a new dwelling, on the basis that the developer has marketed the sale of the dwelling in both Australia and overseas.
As of 1 December 2015 this will no longer be the case. From this date, applications made for AOP Certificates will incur a fee of $25,000 upfront (noting that an application for an AOP Certificate will not be processed until this fee is paid) prior to the 30 day statutory time period to assess the application, with a further fee payable every six months, based on a reconciliation of the number of foreign sales achieved during that particular six month period in relation to the particular development.
Applications for AOP Certificates that have been made and submitted to FIRB prior to 1 December 2015 will not incur the new fees.
Along with the new application fees are new penalties that will be imposed on developers in the event that they do not comply with FIRB reporting conditions, with the approval of their AOP Certificate application or a breach of the AOP Certificate itself. These penalties include 250 penalty units, equating to $45,000 for an individual or for a developer company, it will be 1,250 penalty units equating to $225,000. It is important to note that property developers will still be able to apply for an AOP Certificate to sell new dwellings in a development of 100 or more to foreign investors, however, the value of all dwellings that can be bought by a single foreign investor is now limited to $3 million and if an investor wishes to purchase dwellings above this value, they will need to apply for the AOP Certificate individually and not through the developer.
Previously, if developers did not comply, they were simply refused approval for further AOP Certificate applications, however, now they are subject to civil and criminal penalties for breaching the market condition and the government wants to make sure that developers are marketing the dwelling in Australia as well as overseas, as well as the desire to have applicants of AOP Certificates subsidise the administration costs of granting these certificate approvals.
The new fees and penalties will be incorporated as amendments to the Foreign Acquisitions and Takeovers Act 1975 (Cth) which is expected to occur after August 2015.
These new fees will affect many developers and the projected feasibility of many off-the-plan developments.
