The Australian Government is set to implement changes under the foreign investment framework to allow foreign buyers to purchase an off-the-plan dwelling when another foreign buyer has failed to reach settlement.
The change addresses industry concerns, and means property developers won’t be left in the lurch when a foreign buyer pulls out of an off-the-plan purchase.
The idea is that markets won’t be affected negatively by an increased amount of off-the-plan sales, particularly from foreign purchasers, not being completed.
According to the government, it’s common sense that an apartment or house that has just been built, or is still under construction and for which the title has never changed hands, is not considered an established dwelling.
In the event of a failure to complete settlement, the dwelling will revert to its previous status – that is, a new dwelling.
For individual applications made by potential purchasers the policy change will be implemented immediately. Foreign buyers who apply to purchase a dwelling that’s considered established, only due to a failed settlement, will be assessed as if it was a new dwelling.
These issues also affect the current New Dwelling Exemption Certificates, which act as a pre-approval mechanism for foreign people purchasing new apartments in a specific development. A regulation change will be made at the next opportunity to enable developers to acquire a certificate that covers foreign persons purchasing a dwelling that’s considered established only due to a failed settlement.
The Commissioner of Taxation has advised no compliance action will be pursued against persons who, if not for a failed settlement preceding their purchase, would otherwise have been covered by an existing New Dwelling Exemption Certificate until the regulations are changed.
The government’s foreign investment framework allows foreigners to purchase new Australian dwellings as it encourages developers to build more houses and apartments, thereby increasing supply. Increased supply makes housing more affordable for more Australians.