If you are a foreign person who owns residential property in Australia, you may need to lodge an annual vacancy fee return with the Australian Taxation Office (ATO). Read on to find out more.
What is an annual vacancy fee return?
The annual vacancy fee return is required to be lodged by foreign owners with the ATO annually and provides details of occupation. An annual vacancy fee is levied on foreign owners of residential real estate whose property remains unoccupied or genuinely unavailable for rent for six months of a 12 month period.
This initiative forms part of the housing affordability plan introduced by the Government and is designed to encourage foreign investors rent their property when unoccupied to increase the number of properties available for Australians to live in.
Who must lodge an annual vacancy fee return?
The vacancy fee return applies to foreign owners (including individuals, corporations, trustees and foreign governments) who either:
- Made a foreign investment application to purchase a residential property after 7.30pm AEST on 9 May 2017; or
- Purchased a residential property under a New Dwelling Exemption Certificate which was applied for by a developer after 7:30pm AEST on 9 May 2017.
When do you need to lodge an annual return?
An annual vacancy fee return needs to be lodged with the ATO within 30 days of the end of every “vacancy year”. A vacancy year is unique to each property as it is each 12 month period starting from the occupation day of the property.
If the property is residential vacant land, a vacancy fee return does not need to be lodged until a dwelling has been constructed on the land and it is ready for occupation.
How much is the vacancy fee?
The vacancy fee will generally be the same amount as the foreign investment application fee paid when purchasing the property. For example, in March 2020 this fee is $5,700 for a property purchased for less than $1million.
If you purchased the property under a New Dwelling Exemption Certificate, the fee is equal to the lowest tier foreign investment application fee that would have been payable had the certificate not been given. In March 2020, the lowest fee payable is $5,700.
Who needs to pay the annual vacancy fee?
You will need to pay an annual vacancy fee if your residential property is not occupied or available to rent for more than 183 days during the vacancy year.
A vacancy fee return is still required to be lodged even if your property is occupied for more than 183 days. If you do not lodge a vacancy fee return by the due date, a vacancy fee may also apply.
Are there any exceptions from paying the vacancy fee?
A foreign owner may be exempt from paying the vacancy fee if:
• The owner or their relative occupies the property for more than 183 days in a 12 month period;
• The property is leased or is made available for lease more than 183 days in a 12 month period; or
• The property is not able to be occupied (eg due to undergoing substantial repair or renovation, the property is vacant land etc).
What happens if you don’t lodge your annual vacancy return?
If an annual vacancy fee return is not lodged on time, the foreign owner may be liable to pay the vacancy fee regardless of whether the property was occupied. Civil penalties may also be imposed for failing to lodge the return with the ATO.
If the vacancy fees are not paid, the Government may take action to recover the debt, which may include court proceedings, placing a charge over the property or taking ownership of the property.
What if my vacancy rate has been affected by COVID-19?
If COVID-19 (coronavirus) has affected how your property was residentially occupied and you need help completing your vacancy fee return, you should contact the ATO by phone, or by email at FIRBVacancy@ato.gov.au.
How can we help?
We can help you determine if you are a foreign person and whether you are required to lodge an annual vacancy fee return.
Please feel free to telephone our office on (07) 3220 2929 or email us at firstname.lastname@example.org, if you require any further information regarding annual vacancy fee returns.
About Dennis Renderos
Dennis Renderos is a Solicitor in the Property teams at Plastiras Lawyers. Dennis has a particular interest in helping clients with property sales, acquisitions and leasing, including commercial, retail and residential premises.