The Australian Government introduced a Vacancy Fee Return for foreign residential property owners in Australia. This fee aims to encourage foreign investors to rent out their properties instead of keeping them vacant, and it is a response to Australia’s ongoing housing affordability crisis.
What Is the Annual Vacancy Fee?
The Australian Taxation Office (ATO) implemented the Annual Vacancy Fee in 2017 as part of the government’s housing affordability plan. It serves as a financial incentive for foreign property owners to rent their homes and expand the housing options in Australia.
Furthermore, the vacancy fee will often equal to the foreign investment application fee for foreign investment. You won’t need to calculate your vacancy fee because the ATO will inform you of the amount when you file your vacancy fee report.
Foreign investors must inform the ATO of the occupation status of any of their properties in Australia. If the property is unoccupied for 183 days or more of the year (six months), and is not occupied by the owner, a family member, or renters, the ATO may levy fees against the owner.
What Are the Exemptions?
You won’t be required to pay the vacancy fee if you can prove with acceptable supporting evidence that your home cannot be inhabited as residence for at least 183 days during a vacancy year. You must file a return if you want to use this exemption. Your residence is considered incapable of being occupied if the following circumstances exist:
- The house needs repairs, is hazardous, or is otherwise unfit to serve as a home.
- There is an ongoing repair or renovation in the house.
- An order of a court or tribunal or legislation of the Commonwealth, state, or territory prohibits or restricts the use of the residence as a place of abode.
- The person who ordinarily occupies the house receives long-term, in-patient, medical or residential care.
Note: If you are not sure whether you are a joint tenant or a tenant in common, you may refer to the Foreign Investment Review Board (FIRB) site.
What Is the Vacancy Fee Return?
The Vacancy Fee Return is a policy introduced by the ATO to provide relief to landlords who face vacancy periods. The policy allows landlords to claim up to 15% of their property’s annual rent if it remains vacant for over six months. This policy encourages landlords to invest in the rental property market without being deterred by the financial burden of vacancy periods.
Who Needs to Lodge the Annual Vacancy Fee Return?
Foreign investors of residential buildings who:
- made a foreign investment application for residential property after 7:30 pm AEST on 9 May 2017;
- purchased under a New Dwelling Exemption Certificate that a developer applied for after 7:30 pm AEST on 9 May 2017; or
- failed to submit a foreign investment application but purchased a residential property before 9 May 2017.
If the land is vacant, foreign owners do not have to lodge a fee return until a house or residence has been constructed. On the other hand, if multiple residential buildings are on the land, ATO requires the owner to lodge a return for each new building constructed.
Eligibility Criteria
To be eligible for the vacancy fee return, you must meet these criteria:
- The property must be residential and unoccupied for at least six months in a given year.
- The property must have been continuously advertised for rent during the vacancy period.
- A foreign person or entity must own the property.
- The property must be subject to the vacancy fee payable.
If you meet these criteria, you may be eligible to receive a refund of the vacancy fee.
How to Apply for the Vacancy Fee Return?
Foreign investors eligible for the return can apply for it through the Australian Taxation Office. The ATO requires foreign investors to use the Online Services for Foreign Investors from 26 June 2023.
The ATO will implement a new Register of Foreign Ownership of Australian Assets on 01 July 2023 as part of reforms to foreign investment. Foreign investors can now manage these foreign investment obligations online through the service:
- Residential approval application
- Asset registration
- Updating of details
- Lodging of vacancy fee return
To access the Online Services for Foreign Investors, foreign investors, and representatives must:
- Set up a myGovID account through the app. This app is the Australian Government’s Digital Identity software, enabling you to authenticate yourself using Online Services. Furthermore, you will need a personal email address to set up your myGovID account.
- Have an Australian Tax File Number (TFN). The information most frequently used comes from a notice of assessment and the bank account you used to file your tax return. If you don’t have a TFN, you can use the following:
- Passport and visa details
- ATO reference number (ARN) if you have an ARN notification letter
- The date you submitted your residential foreign investment application and the fee amount
- The date on your residential foreign investment approval
- Your previous Australian real estate transaction’s payment method, such as your application fee or vacancy fee liabilities
- The date that you lodged your last vacancy fee return.
Benefits of the Vacancy Fee Return
1. It Encourages Investment.
The policy aims to encourage foreign investment in the Australian property market. By allowing foreign property owners to claim a refund of their vacancy fee if they rent out their property, the policy makes investing in property in Australia more attractive for foreigners. This, in turn, could lead to increased investment in the Australian property market, which could positively impact the economy.
2. It Provides an Incentive to Rent Out Property.
One of the key reasons why the Australian government introduced the vacancy fee was to encourage foreign property owners to rent out their property. By charging a fee to foreign property owners who do not rent out their property, the government hoped to incentivise them to rent out their property and increase the availability of rental properties in Australia. The policy takes this one step further by providing a financial incentive for foreign property owners to rent their property.
3. It Helps to Address the Housing Shortage
Australia is experiencing a housing shortage, particularly in major cities such as Sydney and Melbourne. The policy could help to address this shortage by encouraging foreign property owners to rent out their property. By increasing the availability of rental properties in Australia, the policy could help alleviate some pressure on the housing market and make it easier for Australians to find affordable housing.
How Can a Lawyer Help With Vacancy Fee Return Issues?
If you own a property in Australia, you are likely familiar with the vacancy fee return issues. The Australian Government introduced this fee in 2017 as part of the Federal Budget. Vacancy fees can be costly, and failure to comply with the regulations can result in hefty penalties. This is where a lawyer can help.
Understanding the Vacancy Fee Regulations
One of the primary ways a lawyer can assist you with vacancy fee return issues is by providing you with a thorough understanding of the regulations. They can guide you through determining whether your property is subject to the fee and your obligations in terms of reporting and payment. A lawyer can also advise you on the available exemptions and help you determine if you are eligible.
Compliance With Reporting Requirements
A lawyer can assist you in complying with the reporting requirements for vacancy fee returns. They can help you gather the information and documentation to complete the return accurately. A lawyer can also ensure that you meet the deadlines for reporting and payment of the fee, reducing the risk of penalties for non-compliance.
Legal Representation in Disputes
A lawyer can provide legal representation if you face a dispute or challenge about the vacancy fee return. They can represent you in negotiations with the Australian Taxation Office (ATO) and other relevant authorities. A lawyer can also assist you in appealing decisions made by the ATO or other relevant bodies.
Our team of property lawyers at JB Solicitors can thoroughly understand the regulations, assist you in complying with reporting requirements, and provide legal representation in disputes. With our help, you can navigate the complexities of vacancy fee return regulations and minimise non-compliance risks.
Contact us now for further details. Please note that if you are not looking for legal advice, and are instead looking for professional to help you with the vacancy fee return lodgement, our team of lawyers can get you connected with the right person for such matters.
