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4 Changes Foreign Investors Need To Know About Purchasing Property in Australia

Anfernee Lai Perth, ATO Investigation, Blog & Articles, FIRB, FIRB Investigation, Foreign Investment Review Board, Property Investment, Tang Legal

The total value of foreign investment in Australia stood at $2.8 trillion at the end of 2014

(Statistic obtained from the Department of Foreign Affairs and Trade)

WHAT ARE THE RECENT CHANGES?

The current Government has introduced various changes to the foreign investment rules and the important ones include:
  1. Tougher penalties for foreigner who breached the rules relating to purchase of residential real estate – e.g. the existing criminal penalties have been increased to $135,000 or 3 years imprisonment or both for individual foreign citizens who breached the law;
  2. Although acquisition of agricultural land holdings are generally not required to be approved by the Foreign Investment Review Board (FIRB), Foreign-owned agricultural land holdings are required to be registered with the Australian Taxation Office’s newly established Agricultural Land Register;
  3. Introduction of an application fee for obtaining FIRB approval – e.g. $5,000 fee for obtaining approval for buying residential land where the price is $1 million; $10,000 fee for obtaining approval for buying residential land where the price is over $1 million and less than $2 million;
  4. Stronger enforcement process – the ATO has now taken over full responsibility for enforcing residential real estate purchases by foreign citizens. 

The recent changes are aimed to have stronger, more effective and more enforceable rules regarding foreign investment. The days where people thought that their breach of the foreign investment laws would never be caught are gone and every foreign citizen must carefully consider the legality of their intended purchase of assets in Australia.

THINGS TO CONSIDER WHEN BUYING RESIDENTIAL PROPERTY

Australia has a long established policy to strictly regulate the purchase of established houses by foreigners in order to maintain sufficient housing supply to its residents.

 

If you are a non-resident foreign person, you should consider the following general rules before buying any residential property:
·         you are prohibited from buying established dwellings(2nd hand house) in Australia;
·      you will need to apply and receive FIRB approval before buying new dwellings (e.g. newly developed apartment) and usually approval will be granted without any condition;
·        you will need to apply and receive FIRB approval before buying vacant residential land for development and usually approval will only be granted under the condition that you must develop the land within certain period of time.

 

 

THINGS TO CONSIDER WHEN BUYING COMMERCIAL/AGRICULTURAL PROPERTY

Whether a non-resident foreign person requires to notify FIRB prior to buying a commercial property depends on if the commercial land is vacant or developed. If the commercial land is vacant (no substantive permanent building on the land), FIRB notification is required. If the commercial land is developed(there is substantive permanent building on the land used for commercial purpose), foreign persons generally do not need to notify FIRB prior to the purchase unless the land is valued more than $252 million.
 
If a non-resident foreign person propose to buy an agricultural land, generally approval from FIRB is not required if the agricultural land valued less than $15 million. Agricultural land means land that is used wholly and exclusively for a primary production business. It is important to understand that “hobby farms” are not considered to be agricultural land and approval from FIRB will be required.


THINGS TO CONSIDER WHEN BUYING BUSINESS ASSETS

Australia usually encourages foreign investment into its business sector and therefore rules regulating business acquisition by foreigners is less stringent than rules regulating purchase of residential properties.
Generally, foreign persons (except foreign government investors) can buy business assets in Australia without approval if the interest to be acquired valued at less than $252 million. If the business is an “agribusiness” then approval is generally not required if the value of the investment is less than $55 million. Agribusiness includes industries such as agriculture, forestry, fishing, meat processing, poultry processing, dairy product manufacturing, grain mill product manufacturing, sugar manufacturing etc.
 

 

Finally, if you are a non-resident foreign person and you have any doubts about your proposed purchase of assets in Australia, you should seek legal advice before signing any contract because fail to comply with the foreign investment laws may result in very severe penalties (including imprisonment) being imposed against you.  
 

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About the Writer

Kelvin Tang

Kelvin has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing service on Commercial Law, Dispute Resolution & Litigation, Family Law, Wills & Estate Planning and Settlements.
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Defamation Case: How To Defend a Defamation Action?

Australian Defamation Lawyers, Blog & Articles, Commercial Disputes, Defamation and dispute, Defamation Law; Defamation Perth; Litigation, Tang Legal, 文章和出版物

The Story

Mr Wright, a shareholder of a company, had been served with a writ alleging he had defamed a company and its managing director in an online shareholder’s forum.

Mr Wright had been advised by the solicitors acting for the company and managing director that the damages could be in the vicinity of $80,000.

Solution

We were instructed by Mr Wright to defend the action and filed a statement of defense raising grounds of honest opinion amongst other defenses. 

Upon investigating further, we discovered the company had more than 10 employees and was therefore ineligible under the Defamation Act to commence a cause of action for defamation in Western Australia. 

 

Outcome

 

We advised the company and the managing director’s solicitors that we would file a notice to strike out the company’s claim against Mr Wright.

 

 

Whilst the managing director was still eligible to continue with the defamation action against Mr Wright, his solicitors agreed to discontinue the company’s claim and settle the managing director’s claim against Mr Wright for $10,000 plus a notice of retraction from the company to Mr Wright.

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Case Study: How Did Our Lawyers Handle Complex Case involving Commercial Transactions & Migration Law?

Blog & Articles, Business Disputes Perth, Business Migrants, Commercial Disputes, Commercial Law, FIRB, Immigration Law, Migration Law, Perth Immigration Lawyer, Tang Legal, Visa 132

The Story

Mr Lee and his family was granted permanent resident visa.  To get the grant of the visa, Mr Lee entered into an agreement with the State that he will, amongst other conditions:

11) Invest at least $1,500,000 into an “Eligible Business” in the State;  and
22) The “Eligible Business” must employ at least five (5) full time employees who are either citizen or permanent residents of Australia.
Mr Lee looked at many possible investments in the State but repeatedly encountered these problems:
1.       Language barrier – Mr Lee does not speak or understand English.  Communication was a huge barrier.
2.       Cultural difference – Mr Lee operates a large enterprise in Asia and he has many personnel under him to manage and run his businesses for him. He was surprised to learn that owner of the business here is very often key person to the business.  He will not be able to commit 100% into the business due to his other commitments.  Mr Lee is also concerned about the safety of his investment.
3.       Constant uncertainty as to whether the business is in fact an “Eligible Business” and whether it can help him satisfy the migration requirements.

 

Mr Lee finally decided to invest with a property developer.  Mr Lee’s instructed us to advise and represent him.

 

Solution

We advised Mr Lee that his proposed venture and transaction must be structured to achieve the overarching purposes of:
11) Complying with Commonwealth migration requirements and Mr Lee’s Agreement with the State; and
22) Securing his commercial interests and his capital.
In terms of Commercial Law, Mr Lee took the following steps with our advice:
1.       Formation of legal structures for Mr Lee to undertake the investment.
Amongst other issues, segregation of risk, protection of personal assets, complying with migration requirements, and tax implications are important considerations in undertaking this task.
2.       Negotiation and formulation of the transaction structure with the property developer.
Amongst other considerations: 
·         Specific focus on ownership structure, investment vehicle, investment structure, key personnel required, role and obligations of Mr Lee and the property developer is important for migration compliance. 
·         Control of project and funds, security or collaterals, timing of project, possible variations, and terms and conditions of investment are important considerations for protection of capital.
·         Transfer duty and tax implications must be considered PRIOR TO entering into formal agreements.
3.       Prepare and advice on the formal agreements required in order to put together the transaction.
4.       Carried out due diligence on the proposed investment and the property developer.
5.       Completion and settlements of the agreed transactions.

In Migration Law:

 

11) We conducted a full review of Mr Lee’s initial business plan and Agreement with the State, and we advised Mr Lee that given the changes to his agreement with the State, he needs to notify and obtain approval from the State for the variation.  Note:  The formal agreements between the parties were made subject to Mr Lee obtaining an approval to amend Agreement with the State.
22)  IMPORTANT issue to overcome: Investment in property is very often seen as a passive investment and does NOT qualify as an “Eligible Business”.   Special attention must be given to how the transaction is structured to avoid complications.
33) Also given his increase in the amount of investment into the “Eligible Business”, we advised that he could negotiate with the State for a more lenient requirement on the number of full time employees.

Outcome

Mr Lee and the property developer were successful in reaching an agreement.   We strategically structured mechanism into the transaction to achieve the overarching purposes of satisfying the migration requirements and protecting his commercial interests.

Upon our conduct of legal due diligence and comprehensive checks on the proposed investment and the property developer, Mr Lee was satisfied with the results.
Mr Lee also obtained approval and a more favorable agreement with the State for the proposed investment, as we were successful in negotiating with the State in reducing the number of employee from five (5) to two (2).  

The property project has since commenced.

About The Writer 

Kelvin Tang has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing migration advice to clients, advising on “Eligible Businesses” within the definition of the Migration Regulations, assisting migrants (investor of the business) with satisfying migration requirements, making visa applications and appealing cancelled or refused visas in the Federal Court of Australia, Administrative Appeals Tribunal and Migration Review Tribunal. Kelvin also has extensive experience in civil litigation, commercial and corporate law matters.
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Case Study: How Our Lawyers Handle Commercial Disputes At Your Best Interest?

Anfernee Lai Perth, Blog & Articles, Civil Litigation, Commercial Disputes; Business Disputes Perth, Litigation, Partnership Disputes, Shareholder Disputes, Tang Law, Tang Legal

These cases studies are based on real life situations, client names and images may have been changed to protect privacy. Each case study generally represents the experiences clients will have, however, each client has their own subjective goals and requirements to suit those specific goals and requirements. Thus, these case studies may not be deemed to create any warranty or representation that any other clients’ experience will be the same as the experience identified herein.

Genuine Story

Mr Chan was a successful entrepreneur in China who entered into joint venture agreements with Mr Smith with respect to property developments in Western Australia.

After the first project, Mr Smith invited Mr Chan to roll over his capital and profits, in excess of $1 million, from the first project into a second property development project.
After the second project, from which multi-millions of profits were made, Mr Smith again invited Mr Chan to roll over all his monies in the project into a third property development project. Mr Chan disagreed and requested to have his capital and profits from the projects returned to him.

Mr Smith refused. To the surprise of Mr Chan, Mr Smith secretly removed Mr Chan as a director of the company as well as issued more shares to himself.

 

Mr Chan engaged our firm to assist him to recover his capital and the agreed profits. Over the years, Mr Chen has invested approximately $1.2 million into the projects.

Solution

We were instructed by Mr Chan to commence proceedings in the Supreme Court against Mr Smith to recover his capital and the agreed profits.
Simultaneously, we assisted Mr Chan to successfully obtain a Freezing Order against Mr Smith which prevented Mr Smith from disbursing his personal assets as well as assets (including substantial amount of cash) held by the company.
Mr Chan and Mr Smith were unable to reach an out of court settlement and the dispute had to be determined by the Supreme Court after a 10 days trial.

Outcome

Mr Chan was successful in obtaining judgments from the Supreme Court in his favour for a sum in excess of $3.1 million plus recovering $300,000 in legal costs.

About the Writer

Kelvin Tang

Kelvin has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing service on Commercial Law, Dispute Resolution & Litigation, Family Law, Wills & Estate Planning and Settlements.
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What Can I Do If I Have a Dispute With Builders?

Blog & Articles, Building Disputes WA, Civil Litigation, Defamation and dispute, Litigation, Tang Legal, Western Australia Builders

BUILDING DISPUTES IN WESTERN AUSTRALIA

Since 2011 the adjudication of complaints relating to home building contracts and ‘regulated building services’ has been simplified for consumers and service providers. The Building Commission, and the State Administrative Tribunal in certain cases, has jurisdiction to hear complaints arising under the Home Building Contracts Act 1991 (“HBCA”) and the Building (Complaint Resolution and Administration) Act 2011 (“BCRA”).Builders also have recourse to the rapid adjudication processes provided by the Construction Contracts Act 2004in relation to payment disputes.


Home Building Contract disputes

 

Contracts for building work between $7,500 and $500,000 are classified as a ‘home building contract’ by the HBCA. The HBCA regulates home building contracts, including by prescribing terms to be included in the contract and requiring notices, home indemnity insurance and other procedures to be carried out or obtained prior to entry into a contract. Certain terms are also prohibited from inclusion in a home building contract.
As the HBCA relates specifically to matters relating to the contract, complaints arising under this act are primarily contractual in nature.   
Many building service providers incorrectly assume the HBCA only applies to builders undertaking substantial work on a home, such as the construction or renovation of a new home. In fact the HBCA extends to owner-builders and all associated building work, such as landscaping and cabinetry.
The HBCA contains civil penalty provisions for certain breaches of the act by a builder, for example requiring payment of a deposit that exceeds 6.5% of the contract price or undertaking home building work without obtaining the requisite insurance. This can result in the Building Commission commencing a prosecution and significant infringements subsequently being imposed on a builder. It is therefore essential that all providers of home building work, including associated work where the provider directly contracts with the owner, carefully review the provisions of the HBCA and ensure their written contracts comply with the HBCA before they are entered into.
The Building Commission has jurisdiction to hear complaints commenced within 3 years from the date the dispute arose. Remedies for an owner and a builder in relation to non-fulfilment of conditions imposed by the HBCA are set out in Schedule 1 of the Act, and include termination of the contract by the party not in breach.
The Commissioner has a number of remedial orders which can be made under the BCRA in respect of home building contracts, including orders restraining or requiring certain action by the builder, an order that a party pay an amount due under the contract or declaring that an amount is not payable, and an order requiring a party to pay specific compensation arising from a breach of the contract or the HBCA. Orders declaring a provision or a contract void can also be made in respect of specific breaches of the HBCA.
 

Workmanship disputes

A person adversely affected by the carrying out of a ‘regulated building service’ can make a complaint to the Building Commission on the basis that the building work was not carried out in a proper and proficient manner, or was faulty or unsatisfactory. Complaints made under the BCRA are therefore known as ‘workmanship complaints’.
The class of persons ‘adversely affected’ by a regulated building service extends beyond the owner who contracted with the builder, to a subsequent owner of the property or a neighbour for example. The complaint must however be made within 6 years from the date of practical completion where work was not carried out under a permit, or within 6 years from a notice of cessation or a notice of completion where work was carried out under a permit.
The term ‘regulated building service’ is defined in the BCRA as a building service carried out by a registered builder or approved owner-builder, and home building work under the HBCA. ‘Building service’ includes building work, demolition work (within the meaning of those terms in the Building Act 2011*), plumbing work and other prescribed works.
An aggrieved party must give 14 days’ notice to the other party before commencing a complaint, designed to encourage the parties to reach an informal resolution of the dispute with the need to resort to the formal complaint process.
Once the complaint is commenced, the Commissioner has the power to dismiss the claim, or require further details of the claim to be provided in deciding whether to accept or dismiss the claim. Once the claim is accepted, the Commissioner must cause an investigation to be carried out by an inspector, who subsequently produces a report. The report may include recommendations as to how the complaint should be dealt with. After receiving the report, the Commissioner may commence a conciliation process at which both parties must attend generally without their legal representatives present.
Building remedy orders may be made by the Commissioner or SAT if satisfied that the work was not carried out in a proper and proficient manner or was faulty or unsatisfactory. If the compensation or value of the work orders being sought by the aggrieved party exceeds $100,000, the Commissioner must refer the matter to the State Administrative Tribunal, which has jurisdiction up to $500,000.
The Commissioner or SAT can also award compensation in lieu of a building remedy order if it is just and expedient to do so, for example where a builder has shown itself to be incapable of performing any building work to the standard expected of a professional builder, or where the builder has refused to carry out the work.


Claims outside the BCRA

 

For latent defects that are not identified by a consumer within the 6 year limitation period provided in the BCRA, it may be necessary for the consumer to resort to remedies under the building contract, if still available, or a negligence claim against the builder. Such claims would need to be commenced in a Western Australian court,  depending on the value of the claim.
For causes of action based upon a builder’s professional negligence, a consumer will typically have a limitation period of 6 years from the date the damage caused by a latent defect was discovered by the consumer, or was capable of being discovered by the reasonable diligence of the consumer.
 
* The Building Act 2011 defines ‘building work’ as: (a) the construction, erection, assembly or placement of a building or an incidental structure; or (b) the renovation, alteration, extension, improvement or repair of a building or an incidental structure; or (c) the assembly, reassembly or securing of a relocated building or a relocated incidental structure; or (d) the changing of ground levels of land for the purposes of work of a kind mentioned in paragraph (a), (b) or (c) to an extent that could adversely affect land beyond its boundaries; or (e) site work on any land for the purposes of, or required because of, work of a kind mentioned in — (i) paragraph (a), (b), (c) or (d); or (ii) paragraph (a) or (b) of the definition of demolition work; or (f) other prescribed work,
‘demolition work’ is defined as (a) the demolition, dismantling or removal of a building or an incidental structure; or (b) the changing of ground levels for the purposes of work of a kind mentioned in paragraph (a) to an extent that could adversely affect land owned by a person other than an owner of the land on which the building or incidental structure that is the subject of the demolition work is located; or (c) other prescribed work, but does not include work of a kind prescribed for the purposes of this definition as not being demolition work;
‘incidental structure’ means a structure attached to or incidental to a building and includes — (a) a chimney, mast, swimming pool, fence, free-standing wall, retaining wall or permanent protection structure; and (b) a part of a structure.
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