When is FIRB approval required for the purchase of Australian commercial land?

There is much interest from offshore investors, or foreigners living in Australia on a non-permanent basis, in buying Australian commercial land, often for redevelopment or to enjoy an existing rental income stream.   

For a foreign purchaser (individual or corporation) of Australian residential property, they must obtain the approval of the Australian Government's Foreign Investment Review Board (FIRB) before signing a contract of sale.  However, a foreign purchaser buying commercial land, FIRB approval is not always required. 

What is commercial land?

Commercial land means any land in Australia (including any building on the land), except for:

1. land used wholly and exclusively for a primary production business;
2. land on which the number of dwellings that could reasonably be built is less than 10; or
3. land on which there is at least one dwelling (except commercial residential premises).  Examples of commercial residential premises are hotels, serviced apartments or retirement villages.  

In FIRB’s Guidance Note 14 which was last updated on 1 July 2016 (see https://firb.gov.au/resources/guidance/gn14/), FIRB approval is required if a foreign purchaser intends purchasing the following types of commercial real estate:

1. vacant land for commercial development, regardless of the value of the land;
    
2. developed commercial land that is valued at $252 million or more.  However, a different threshold may apply for a country investor or foreign government investor.  Commonly, if the value of the land the foreign purchaser intends to buy is less than $252 million, then FIRB approval is not required;    
    
3. if the land is considered to be 'sensitive', such as a land will be leased to the government, then a $55 million threshold applies.  

You should always seek professional advice before entering into a contract of sale for the purchase of Australian commercial land. 

When is FIRB approval not required when buying commercial land?

Foreign purchasers do not require FIRB approval to acquire an interest in commercial land in following situations:

1.  the acquisition is pursuant to a last will and testament of a deceased person, or is a  devolution by operation of law;
2. The acquisition is from an Australian Commonwealth, State, Territory or local government or local governing body, or an entity wholly owned by the Australian Government;
3. the foreign purchaser will hold less than 10% of shares in a listed company that is acquiring the commercial real estate, or less than 5% of shares in an unlisted company,  and the foreign purchaser does not hold a management position within the purchaser company. 

Different rules may apply for the purchase of commercial residential premises. 

If you are unsure if FIRB approval is required, please contact Yuan (Nathan) Xu at nxu@nevettford.com.au or Yao (Chloe) Chen at cchen@nevettford.com.au for more information.