As of March 27, 2025, foreign investors in the Australian property market should take note of significant forthcoming changes. The Australian government is implementing a ban on the purchase of established homes by foreign persons, alongside tax adjustments that will increase costs, particularly in New South Wales (NSW). Allow us to outline what this entails.
From April 1, 2025, foreign individuals—including temporary residents and foreign-owned entities—will be prohibited from acquiring second-hand homes in Australia. This restriction will remain in place until March 31, 2027. Previously, those holding valid visas could seek approval from the Foreign Investment Review Board (FIRB) to purchase such properties. That option will cease after April 1, barring exceptional circumstances. The policy is designed to ensure greater availability of housing for Australian residents. For those intending to buy, applications to FIRB must be submitted prior to the deadline, making timely action essential.
Additionally, the government is strengthening its stance on land hoarding. Foreign investors purchasing vacant land are required to develop it within a specified period. While this rule has existed, enforcement has been inconsistent. Now, the Australian Taxation Office (ATO) will intensify oversight, conducting rigorous audits and imposing penalties on those who fail to comply, targeting speculative retention of undeveloped land.
Turning to taxation, new measures effective January 1, 2025, will alter the financial landscape for foreign investors. The Foreign Resident Capital Gains Withholding rate, which applies to the sale of taxable Australian property, will rise from 12.5% to 15%, increasing the amount withheld at settlement. In NSW, further changes apply: the surcharge purchase duty for foreign buyers of residential property will increase to 9%, in addition to standard duty, and the annual surcharge land tax on residential land ownership will rise to 5%. These adjustments will elevate both initial and ongoing costs.
For foreign investors, this means the window to purchase established homes is closing, with a cutoff in April unless applications are lodged beforehand. New developments or vacant land remain viable, provided development obligations are met. However, the higher tax rates necessitate careful financial and legal consideration, particularly in NSW.
Strafurd York is well-positioned to assist. Our team can advise on submitting FIRB applications before the April deadline, ensuring compliance with the updated tax framework, and structuring investments to align with these regulations. The ban will be reassessed in 2027, but the tax changes take effect in January, underscoring the need for proactive planning.
Should you require guidance on how these developments affect your interests, please contact us on 1300 158 066 to schedule a consultation. We are here to provide clarity and support.