FIRB approval required to transfer real property to a foreign resident
10 August 2021
Working with its specialist National Elder Law and Succession Law Committee, as well as the Foreign Investment Committee of the Business Law Section, and Constituent Bodies, the Law Council draws the attention of practitioners to certain significant changes to Australia’s foreign investment laws, commonly referred to as the ‘FIRB Regime’, which took effect on 1 January 2021 – in particular with respect to the impact of these changes on estate administration and will-making.
The Foreign Acquisitions and Takeovers Act 1975 (Cth) (the Act) deals with the acquisition of interests in securities, assets or Australian land by a foreign person, in particular the steps required to obtain approval for the proposed acquisition of certain assets. The framework is administered by the Australian Foreign Investment Review Board (FIRB).
Recent changes include the removal of the exemption for acquisitions pursuant to a will, such that foreign persons who inherit Australian assets could be subject to a FIRB approval requirement.
There is an updated set of Guidance Notes available which were released on 21 July 2021 and are available on the FIRB website.
FIRB Guidance Note 2 has been updated to clarify that the point at which a foreign person is considered to have acquired an asset under a will is when the person acquires a legal interest on completion of administration of the will. The updated Guidance Note also provides that a foreign person can seek FIRB approval within 30 days after acquiring a legal interest, in circumstances where the person was not certain that they would acquire that interest. This is a welcome development.
It has also been confirmed that the executor of a will generally does not need to seek FIRB approval to perform their executor duties, as the vesting of interests with the executor following a death are covered by the exemption of devolution by operation of law.
’Foreign persons’ includes anyone not ordinarily resident in Australia (this includes Australian citizens residing overseas). To be ‘ordinarily resident in Australia’ you must have resided in Australia for 200 days of the previous 12 months.
The Act requires a foreign person who acquires an interest in certain types of Australian land (including residential land) or an interest in certain types of securities in entities to notify the Registrar. Penalties apply for those who do not comply.
Conditions may be imposed, particularly in cases of established residential properties which may include an obligation to sell within a specific timeframe.
These changes should be of interest not only to executors of deceased estates but also to estate planning lawyers who may need to advise their clients of the consequences of leaving Australian property to beneficiaries who are foreign persons.