Foreign investment policy for Australian property has tightened materially since 2022. Successive federal and state government changes have increased FIRB application fees, expanded foreign purchaser surcharges, restricted foreign acquisition of established residential dwellings, and adjusted absentee owner land tax rates. The cost stack for foreign-linked property buyers is now substantially higher than it was even three years ago.
This guide summarises the principal changes affecting foreign-linked property buyers, the practical impact on different buyer types, the current state of FIRB application fees and surcharges, and the buyer-side framework for navigating the current regulatory environment.
Foreign investment policy is moving consistently in one direction. The trajectory is toward higher costs and tighter restrictions for foreign buyers, particularly in residential. Compliance and pre-purchase cost modelling are more important than ever.
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, effective from 1 April 2025 and running through to 31 March 2027.
What is covered
The ban applies to foreign persons (and entities with foreign beneficial ownership above the threshold) acquiring established residential dwellings. The intent is to direct foreign capital toward new construction rather than competition for existing housing stock.
Exceptions
- 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
The 2-year ban removes foreign buyer participation in the established residential market entirely except in narrow exception cases. For foreign-linked buyers with existing Australian holdings, the ban does not affect current ownership, only new acquisitions.
1 FIRB Application Fee Increases
FIRB application fees have been increased substantially in successive federal budget rounds. The fee schedule is tiered by property value, with significantly higher fees for residential than for commercial.
Residential acquisition fees
Fees for established residential applications were tripled in 2024-2025 (where such applications can still be made under the exception provisions). For new dwellings and vacant land, fees remain substantial but lower than established residential.
Commercial acquisition fees
Commercial property fees scale with value. Substantial increases applied in 2023-2024 with further indexation since.
2 State Foreign Purchaser Surcharges
NSW
Surcharge Purchaser Duty applies to foreign persons acquiring residential property. The rate has been increased in recent state budgets, sitting at 9% as of 2026 (subject to subsequent budget updates). Surcharge Land Tax also applies to foreign-held residential.
Victoria
Foreign Purchaser Additional Duty applies to residential at 8% (subject to budget updates). Absentee Owner Surcharge on land tax applies to all taxable land held by absentee owners, including commercial.
Queensland
Additional Foreign Acquirer Duty (AFAD) applies at 8% on residential. Absentee surcharge applies on land tax for residential.
Other states
Western Australia, South Australia, Tasmania, and ACT each have their own foreign purchaser regimes with varying rates. Northern Territory has more limited surcharge application.
3 The Absentee Owner Land Tax Regime
Several states impose ongoing land tax surcharges on absentee owners (typically foreign-domiciled individuals and corporations with absentee control). These surcharges apply annually to the value of taxable land held by the absentee owner.
Victoria's Absentee Owner Surcharge applies to commercial property as well as residential. NSW and Queensland's absentee surcharges currently focus on residential.
For foreign-linked investors with multi-state portfolios, the absentee surcharge layer can materially increase annual holding costs.
4 Beneficial Ownership Transparency
Federal and state revenue authorities have increased focus on beneficial ownership transparency for property transactions. Recent developments:
- Foreign Investment Register expansion to capture more transactions.
- Cross-agency data sharing between FIRB, ATO, and state revenue offices.
- Penalties for failure to disclose beneficial ownership at acquisition.
- Foreign Resident Capital Gains Withholding regime (15% from 1 July 2025) requiring clearance certificates.
The compliance burden on advisers and trustees to identify and disclose beneficial ownership has increased materially.
5 The Foreign Resident CGT Withholding
From 1 July 2025, foreign resident sellers of Australian real estate are subject to a 15% non-final withholding tax on disposal proceeds. The buyer must withhold and remit the amount to the ATO at settlement, unless the seller provides a clearance certificate (for Australian residents) or a variation notice.
Practical impact:
- All sellers must obtain ATO clearance certificates before settlement (delays if not requested early).
- Foreign sellers face cash flow impact pending year-end tax calculation.
- Buyers have new compliance obligations at settlement.
6 Strategic Implications for Foreign-Linked Buyers
Direct foreign individual buyers
The 2-year ban on established residential closes most direct foreign individual residential purchases. New construction and BTR remain available. Commercial property is accessible subject to FIRB approval and surcharges.
Foreign-controlled corporate buyers
Subject to FIRB approval based on the foreign control threshold. The application fee and surcharge stack applies. Commercial property remains the principal accessible asset class.
Foreign-trustee discretionary trusts
Discretionary trusts with potential foreign beneficiaries are treated as foreign-linked unless the trust deed specifically excludes foreign beneficiaries. The drafting of trust deeds for surcharge avoidance has become standard practice for HNW Australian families with international exposure.
Mixed-ownership entities
Entities with mixed Australian and foreign beneficial ownership are subject to surcharge in proportion to the foreign ownership share in some states. The structuring affects total cost.
7 Buyer-Side Framework
- Beneficial ownership audit. Trace beneficial ownership through every layer of the buying entity. Foreign exposure determines the FIRB pathway and surcharge applicability.
- FIRB pathway. Identify whether FIRB applies, the 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 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, subject to FIRB approval, application fees, and applicable surcharges. The 2-year ban on established residential does not apply to commercial.
Does the 2-year ban affect existing foreign-held residential?
No. Existing ownership is not affected. The ban applies to new acquisitions of established residential during the ban period.
What if my discretionary trust has no actual foreign beneficiaries?
Most states apply the surcharge to discretionary trusts based on the potential to distribute to foreign beneficiaries, not actual distributions. Trust deed amendment to specifically exclude foreign beneficiaries is the standard surcharge avoidance approach (subject to state-specific drafting requirements).
Will these rules change?
The federal and state policy trajectory has been consistently toward tighter foreign investment treatment. Forward changes will be communicated through federal budget and state budget processes; specific outcomes for any single year are not predictable but the direction is.