R2 Form: Information Guide
This guide should be read in conjunction with the Urban Land Policy available at www.firb.gov.au
The R2 Fform aims to simplify the process for foreign persons who are acquiring Australian residential property in individual names (not through company or trust structures) and submitting applications for prior approval. The R2 Form requests the standard information needed for examination of straightforward proposals under the Government's foreign investment policy. The form covers most acquisitions of residential real estate. It may not cover more complex proposals related to less frequently occurring situations. If you believe that the form does not adequately address your situation, it is suggested that you contact the Foreign Investment Review Board to clarify the application process and its requirements.
A Section 26A (Form 3) notice under the Foreign Acquisitions and Takeovers Act 1975 (FATA) must also be attached to this application and can be found on our website or faxed to you by telephoning the inquiry number above.
All contracts to acquire residential real estate must be made conditional on receiving foreign investment approval.
Completing the Form
Two sections of R2 Form must be completed. Section 1 of the form must be completed by all purchasers. Depending on the type of property being purchased one of the following sections must also be completed.
Note: All parts of the relevant section must be completed before an application can be processed.
Timing
Applicants should allow a 30 day period for a decision.
Who does not require foreign investment approval to acquire residential real estate?
The following do not require foreign investment approval:
§ Australian citizens, residing in Australia or abroad;
§ Holders of Australian permanent resident visas;
§ Persons entitled to hold a special category visa (this category usually only applies to New Zealand citizens acquiring residential real estate); and
Australian citizens and their foreign spouse1 purchasing residential real estate as joint tenants.
Undertaking
Undertakings must be signed by the foreign person(s) purchasing the property(ies) (or developer in the case of new dwellings). Undertakings signed under a power of attorney are not accepted.
Different classes of property
SECTION 2: Vacant Land
To obtain foreign investment approval in this category:
· the purchaser/s must undertake to commence continuous development on the land within 12 months of receiving foreign investment approval;
· development must be substantial and construction costs of the dwelling(s) must be equivalent to at least 50 per cent of the land cost; and
· details of the proposed development must be provided.
It is important to note that continuous construction must commence within the 12 month period irrespective of any other circumstances.
The undertaking in Section 2 must be completed by the individual purchaser/s acquiring the vacant land, or the house and land packages’ (ie. where construction has not commenced).
SECTION 3 : Second-hand dwelling (dwellings previously owned or occupied)
Acquisitions of these dwellings by foreign persons are restricted. Generally, foreign investment approval is not available to foreign persons except where the foreign person(s):
(i) holds an eligible temporary resident visa (such a visa would permit continuous residence in Australia for a minimum further period of more than 12 months from the time of foreign investment application); and
(ii) undertakes that the second-hand dwelling will be their principal place of residence, they will not rent or lease the dwelling and will resell the property to an Australian or other eligible person when they no longer reside in Australia, their visa expires or they no longer occupy the property.
The undertaking in Section 3 must be completed and signed by the individual purchaser/s.
SECTION 4 : New dwellings in a complex or development of more than one dwelling
A dwelling not previously owned or occupied and purchased directly from the developer is considered a ‘new dwelling’. Ownership of such dwellings by foreign persons may be approved where the dwelling is part of a ‘development’ and no more than 50 per cent of the dwellings in the development have been sold to foreign interests. The developer is defined as the owner of the property. The developer (unless they are a builder themselves) usually employs a builder to undertake development of the land.
Examples of ‘new dwellings’ include:
§ partly constructed dwellings;
§ house/land packages where construction has commenced; and
· extensively redeveloped buildings where the building's use has undergone a change from non‑residential (eg office, warehouse) to residential, and the cost of redevelopment is equivalent to at least 50 per cent of the total acquisition cost based on purchase price or market value of the property.
New dwellings do not include developed residential real estate that has been refurbished.
The undertaking in Section 4 must be completed by the developer of the complex or development.
SECTION 5 : A stand alone house not previously occupied or sold (ie. still brand new)
Where the proposed new dwelling to be purchased is a stand alone dwelling (for example, a house/land package where construction has commenced or been completed) information needs to be provided detailing a similar new dwelling by the same developer. The similar dwelling must have overlapping construction dates, a similar consideration, proximal location and has been or is to be purchased by an Australian or other eligible person. If a similar dwelling does not exist, foreign investment approval is not available under this category.
The undertaking in Section 3 must be completed by the developer of the dwelling.
SECTION 6 : A second hand property to be demolished and a new dwelling(s) erected (Redevelopment)
Proposals may be approved under this category provided that the property is at the end of its economic life (that is, generally uninhabitable) and/or the proposal provides for an increase in the number of dwellings (that is, demolish one dwelling and build two or more). The equivalent of a minimum of 50 per cent of the acquisition cost or current market value (whichever is the greater) must be spent on the redevelopment of the site.
In the case where one dwelling is to be demolished and replaced by a single dwelling the following additional information is required:
§ a valuation of the existing structures on a depreciated replacement cost basis by a licensed valuer showing that the property is at the end of its economic life; and/or
§ alternative evidence showing that the dwelling is uninhabitable, which might include:-an order condemning the subject property from a council or government authority; an order by a council or government authority to make extensive improvements to the subject property; a history of vacancy where the building has been derelict for a sustained period of time; photographic evidence that the property is uninhabitable and showing major structural damage.
It is important to note that if the building is merely suffering from neglect, it is not necessarily at the end of its economic life.
The existing dwelling(s) may not be occupied prior to demolition and redevelopment.
The undertaking in Section 6 must be completed by the individual purchaser/s acquiring second hand dwellings to be redeveloped.
Entering a contract for sale and breaches of the Act
Entering a Contract for Sale
Foreign parties wishing to acquire Australian residential real estate need prior foreign investment approval to do so. Purchasers must also identify a specific property before applying for approval. All contracts by foreign persons to acquire interests in Australian residential real estate must be made conditional upon receiving foreign investment approval (unless foreign investment approval was obtained prior to entering into the contract). For properties to be purchased at auction, prior foreign investment approval must be obtained and if successful a copy of the signed contract forwarded to the FIRB.
Breaches of the Act
The Government takes seriously breaches of the FATA. Persons or corporations who fail to obtain prior approval to buy property (as well as assets and/or shares) may be subject to penalties under the FATA. There are also provisions under law that make it an offence to provide false or misleading information, or to enter into any schemes for the purpose of avoiding the provisions of FATA. Additionally, the Department of Immigration and Multicultural and Indigenous Affairs, the Australian Taxation Office and the Australian Federal Police or other relevant agencies may be provided with information for the purpose of taking any action they deem appropriate. In some cases, entry into Australia has been refused.
