In late 2017, the Australian Federal Government introduced an annual vacancy fee to be levied on foreign owners of residential property, where the property is not occupied or generally available on the rental market for at least 6 months in a 12 month period.
The aim of the annual vacancy fee is to encourage foreign owners to rent their properties, thus increasing available housing stock in Australia.
The requirement to lodge the return and pay the annual fee by the due date places a significant compliance and cash flow burden on foreign owners of residential property.
The Australian Taxation Office (ATO) has now released the vacancy fee return and payment instructions, meaning that the obligation to report is now active.
Who needs to lodge an annual vacancy fee return?
The annual vacancy fee return must be lodged by all foreign persons who acquired residential property after 9 May 2017.
The return is required to be lodged with the ATO within 30 days after the end of the “vacancy year” and will disclose the number of days the property was residentially occupied during the previous 12 month period. Occupancy records need to be kept for 5 years. The “vacancy year” is each (successive) 12 month period from when the foreign person held the property.
Where the residential occupancy requirements are not met, foreign owners will need to pay an annual vacancy fee. The vacancy fee return is required to be lodged by all foreign owners of residential property even where there is no obligation to pay the vacancy fee.
To lodge the return, foreign owners will need to be registered on the Land and Water Register.
How much is the annual vacancy fee and how is this calculated?
Foreign Acquisition Fees (approx.)
The ATO will assess the vacancy fee amount payable following lodgement of the return.
Generally, the vacancy fee will be the same as the residential land application fee paid by the foreign owner at the time the foreign investment application was submitted to acquire the property.
Purchase cost of property
What are the penalties for not complying with the annual lodgement requirements?
Failure to lodge the return by the due date or keep appropriate records in support of the vacancy fee, may carry with it significant civil penalties on top of any liability to pay the annual vacancy fee. Where any vacancy fee remains unpaid after the due date, the Treasurer has the right to seek recovery of the debt or place a charge over the Australian land owned by the foreign person.
How can RSM assist?
The above new measures are complex and require all foreign owners to exercise diligence to ensure they are on top of the reporting and notification requirements, as the failure to comply with the rules will have significant consequences.
Our property industry experts at RSM can assist by:
- Preparing the Annual Vacancy Fee Return
- Calculate the vacancy fee payable
- Advise on the intricacies of this tax.
Other important information for foreign owners of residential property in Victoria
Victorian Residential Vacant Land Tax
Victoria has its own Residential Vacant Land Tax. Owners of vacant land in Victoria need to submit the prescribed form on the State Revenue Office’s online portal by 15 January each year in lieu of the preceding calendar year.