Confusion Reigns for Foreign Investors on Vacancy Fee Payments

06 August 2018

Following the Government’s introduction of an annual vacancy fee for foreign owners of residential dwellings, BDO Australia has flagged that confusion reigns.

Lance Cunningham, National Tax Director for BDO said:

“Many non-residents who have received foreign investment approval to purchase residential property in Australia since 9th May 2017 need to lodge a vacancy fee return with the Australian Tax office. They need to lodge a vacancy fee return even if they are not liable to pay the vacancy fee. 

The vacancy fee is payable if the property is capable of being occupied but is not occupied for at least 183 days in the vacancy fee year. The annual vacancy fee will generally be the same amount as the foreign investment application fee paid by the purchaser. 

“If they do not lodge the return within 30 days after the end of the vacancy fee year, the ATO will assess the property holder with the vacancy fee even if the property was not vacant for at least 183 days during the vacancy fee year. 

The vacancy fee year is not the same for everyone.  The first vacancy fee year starts on the day the property is first capable of been occupied, which will usually be the date of settlement of the property purchased.  In future years it starts on the anniversary of that date. 

“For example, if a non-resident obtained foreign investment approval to acquire a residential property on 10 May 2017 and the purchase of the property settled on 15 June 2017, they would be required to lodge a vacancy fee return by 15 July 2018.  If they have not already done so, they need to do it as soon as possible to ensure they are not liable for the vacancy fee and possibly other penalties.”