Foreign Investment Changes for Australian Property
Foreign investment policy for Australian property has tightened hard since 2022. Successive federal and state changes have raised FIRB application fees, widened foreign purchaser surcharges, shut most foreign buyers out of established residential dwellings, and lifted absentee owner land tax rates. A foreign-linked buyer now carries a cost stack substantially higher than it was even three years ago.
None of these changes is subtle, and they stack. A foreign-linked buyer can still make a sound acquisition, but only once the full cost of fees, surcharges and holding taxes has been modelled against the deal. Guessing at it is how buyers get caught.
Every change since 2022 has pushed the same way: foreign capital pays more and can buy less, and the residential door is closing fastest of all.
The Two-Year Pause on Established Residential
In early 2025 the Federal Government announced a two-year temporary ban on most foreign buyers acquiring established residential dwellings. It took effect on 1 April 2025 and runs to 31 March 2027.
What is covered
The ban catches foreign persons, and entities with foreign beneficial ownership above the threshold, buying established residential dwellings. The point is to push foreign capital into new construction rather than have it bid against local buyers for existing housing stock.
Exceptions
A handful of cases sit outside the ban:
- Investments in build-to-rent developments meeting specific criteria.
- Investments that substantially increase housing supply (new constructions, redevelopment, vacant land for development).
- Specific use cases (PR pathway holders, certain workforce-related cases).
Practical effect
For the two years it runs, the ban takes foreign buyers out of the established residential market almost entirely, leaving only the narrow exceptions. It bites on new acquisitions only. Foreign-linked buyers with existing Australian holdings keep them; nothing about current ownership changes.
1 FIRB Application Fee Increases
FIRB application fees have climbed sharply across successive federal budgets. The schedule is tiered by property value, and residential sits well above commercial.
Residential acquisition fees
Fees for established residential applications were tripled across 2024-2025, in the cases where such applications can still be made under the exception provisions. New dwellings and vacant land attract lower fees, though still substantial.
Commercial acquisition fees
Commercial fees scale with value. The larger increases landed in 2023-2024, with indexation since.
2 State Foreign Purchaser Surcharges
NSW
Surcharge Purchaser Duty applies to foreign persons buying residential property. Recent state budgets have pushed the rate up, and it sits at 9% as of 2026, subject to later budget updates. Surcharge Land Tax applies on top for foreign-held residential.
Victoria
Foreign Purchaser Additional Duty applies to residential at 8%, subject to budget updates. The Absentee Owner Surcharge on land tax reaches all taxable land held by absentee owners, commercial included.
Queensland
Additional Foreign Acquirer Duty (AFAD) runs at 8% on residential, with an absentee surcharge on land tax for residential.
Other states
Western Australia, South Australia, Tasmania and the ACT each run their own foreign purchaser regimes at varying rates. The Northern Territory applies surcharges more narrowly.
3 The Absentee Owner Land Tax Regime
Several states levy an ongoing land tax surcharge on absentee owners, usually foreign-domiciled individuals and corporations under absentee control. The surcharge applies each year to the value of taxable land the absentee owner holds.
Victoria's Absentee Owner Surcharge covers commercial as well as residential. The NSW and Queensland absentee surcharges currently sit on residential.
For a foreign-linked investor running a multi-state portfolio, this layer can lift annual holding costs materially.
4 Beneficial Ownership Transparency
Federal and state revenue authorities have sharpened their focus on who really owns a property. The Foreign Investment Register has been expanded to capture more transactions, and FIRB, the ATO and state revenue offices now share data across agencies. Failing to disclose beneficial ownership at acquisition carries penalties, and the Foreign Resident Capital Gains Withholding regime (15% from 1 July 2025) now requires clearance certificates.
The onus this puts on advisers and trustees to identify and disclose beneficial ownership has grown materially.
5 The Foreign Resident CGT Withholding
From 1 July 2025, foreign resident sellers of Australian real estate face a 15% non-final withholding tax on their disposal proceeds. The buyer withholds the amount and remits it to the ATO at settlement, unless the seller produces a clearance certificate (for Australian residents) or a variation notice.
The reach is wider than it first looks. Every seller now needs an ATO clearance certificate before settlement, and requesting one late is a common cause of delay. Foreign sellers wear a cash flow hit until the year-end tax calculation trues it up. Buyers pick up a fresh compliance obligation at settlement.
6 Strategic Implications for Foreign-Linked Buyers
Direct foreign individual buyers
The two-year ban closes off most direct residential purchases by foreign individuals. New construction and BTR are still open, and commercial property remains accessible subject to FIRB approval and the surcharges.
Foreign-controlled corporate buyers
These sit within FIRB approval once the foreign control threshold is met, and the full application fee and surcharge stack applies. Commercial property is the main asset class still open to them.
Foreign-trustee discretionary trusts
A discretionary trust with potential foreign beneficiaries counts as foreign-linked unless the deed specifically excludes them. Drafting the deed to exclude foreign beneficiaries has become standard practice for HNW Australian families with international exposure.
Mixed-ownership entities
Where an entity mixes Australian and foreign beneficial ownership, some states apply the surcharge in proportion to the foreign share. How the entity is structured drives the total cost.
7 Buyer-Side Framework
- Beneficial ownership audit. Trace beneficial ownership through every layer of the buying entity. The foreign exposure sets both the FIRB pathway and whether surcharges apply.
- FIRB pathway. Work out whether FIRB applies, which application fee tier, and the timeline.
- State surcharge modelling. Calculate the surcharge stamp duty and the recurring land tax surcharge for the specific entity and property.
- Trust deed review. For discretionary trusts, confirm the foreign beneficiary exclusion clauses are in place where surcharge avoidance is intended.
- CGT withholding planning. For sellers, confirm clearance certificate timing.
Frequently Asked Questions
Can a foreign buyer still purchase Australian commercial property?
Yes. It needs FIRB approval, the application fees and any applicable surcharges, but the two-year ban on established residential does not touch commercial.
Does the 2-year ban affect existing foreign-held residential?
No. Existing ownership stands. The ban applies only to new acquisitions of established residential while it runs.
What if my discretionary trust has no actual foreign beneficiaries?
Most states apply the surcharge on the potential to distribute to foreign beneficiaries, not on actual distributions. Amending the trust deed to specifically exclude foreign beneficiaries is the standard way to avoid the surcharge, subject to state-specific drafting requirements.
Will these rules change?
Federal and state policy has moved consistently toward tighter treatment of foreign investment. Any further change will come through the federal and state budget processes. The outcome in any single year is hard to call, but the direction is not.
