Navigating Property Investment in Victoria, Australia: A Guide for Foreign Investors

Introduction

Are you eyeing a property investment in Victoria, Australia? Exciting as it may seem, foreign investors should tread cautiously through the intricate web of regulations and tax implications that govern such transactions. Below is an   overview of the relevant issues to help you navigate the nuances of buying property in Victoria.

1. Foreign Investment Review Board (FIRB)

Before diving into the property market, it's important for foreign investors to familiarise themselves with the regulations set out by the Foreign Investment Review Board (FIRB). These regulations are designed to ensure that foreign investment aligns with Australia's national interests, particularly in the realm of residential and commercial property.

Residential Property

Foreign investors are generally restricted to purchasing new dwellings.

Established Residential Homes

From 1 April 2025 to 31 March 2027, most foreign persons, including temporary residents, are prohibited from purchasing established residential homes in Australia. The ban generally applies to foreign non-residents and temporary visa holders. If you fall within these categories, you will generally not be permitted to purchase an existing residential property during this period.

Existing exceptions continue to apply, including acquisitions by Australian permanent residents, New Zealand citizens, and spouses of Australian citizens, permanent residents or New Zealand citizens, where the property is acquired as joint tenants. A further review will be undertaken to determine if the ban should be extended beyond 31 March 2027.

Residential Land

Foreign investors purchasing vacant land for residential development are also subject to strict conditions and notification requirements. These typically include an obligation to commence and complete construction within four years of acquisition, as well as a requirement not to sell the land until construction has been completed.

Vacancy Fee Return

If you are a foreign owner of a residential property in Australia, you must lodge a vacancy fee return every year. If the property is left empty for six months or more in a 12-month period, you may have to pay a vacancy fee.

You can usually avoid the fee if the property is lived in or genuinely available for long-term rent. However, if you bought an existing home as your main residence, it cannot be rented out and must be genuinely occupied by you or your family.

Importantly, failing to lodge the vacancy fee return on time can result in a fee and penalties.

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Commercial Property

Foreign investors are generally required to notify the Treasurer before acquiring an interest in commercial land, where the value of that investment is above a certain monetary threshold. Accordingly, you should verify the type of commercial land and the relevant threshold prior to purchasing a commercial property.

2. Stamp Duty - Foreign Purchaser Additional Duty (FPAD)

Stamp duty, a tax levied on property transactions, poses an additional financial consideration for foreign investors. Since July 1, 2019, foreign purchasers in Victoria are subject to an 8% Foreign Purchaser Additional Duty on top of the standard stamp duty if they buy residential property (see table below).

3. Land Tax and Land Tax Additional Surcharges

Foreign investors should also be mindful of Land Tax, an annual tax based on the total taxable value of all the land you own in Victoria. Land Tax is calculated using the site values of all taxable land you own as at midnight on 31 December of the year preceding the year of assessment.

In addition to the Land Tax, there may be additional Land Tax surcharges that may be applicable to foreign investors such as:

• Absentee Owner Surcharge (additional 4% of the total taxable value of properties owned by you). This tax surcharge is imposed on individuals who are not Australian citizens or permanent residents and do not ordinarily reside in Australia. If absent for more than six months in a tax year, they may incur this surcharge.
• Vacant Residential Land Tax: If a residential property is left unused or unoccupied for a continuous or aggregated period of six months or more in a given year, your residential property may attract this tax. For more information on Vacant Residential Land Tax, please see our article Vacant Residential Land Tax: Is your property portfolio caught in the net?

How Sharrock Pitman Legal can help?

Foreign investment rules are complex and depend on factors such as your visa status, residency status, and how the property is acquired. Purchasing property without the required approval can result in significant penalties and, in some cases, forced divestment.

Our experienced Property Law team, including an Accredited Specialist in Property Law, can assist by advising whether the ban applies to your circumstances, assessing any available exemptions or alternative ownership structures, and providing strategic advice in connection with property transactions.

If you are considering purchasing property in Australia and are unsure how the foreign investment rules may affect you, we are here to help.

Please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.

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‍The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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