The Federal government is stepping up efforts to address the housing crisis and tighten foreign investment rules, introducing a two-year ban on foreign investors buying established dwellings, as well as enhanced screening processes and stricter enforcement measures for any non-compliance. Attwood Marshall Lawyers Property and Commercial Senior Associate Mieke Elzer, explores the legal changes.
In a move to address the increasingly dire housing crisis and toughen up on foreign investment compliance, the Albanese government has introduced a temporary two-year ban on foreign purchases of established dwellings.
From 1 April 2025 until 31 March 2027, foreign investors, temporary residents and foreign-owned companies will be barred from buying established residential dwellings in Australia.
Some exceptions apply, including:
- Investments that will significantly increase housing supply.
- Purchases linked to the Pacific Australia Labour Mobility (PALM) scheme.
- Permanent residents, New Zealand citizens, and spouses of Australian citizens (or permanent/NZ citizens) are also not affected.
Foreign buyers with current or pending interests in an affected property must make sure they fall under one of the exceptions or reconsider their investment plans. Anyone already in the process of buying an established dwelling should speak to an expert property lawyer in case their eligibility has changed.
While the ban only targets established homes, it is a sign that the government is tightening its oversight of the property sector.
Part of the Albanese government’s $32 billion “Homes for Australia” plan, the reform package is aimed at addressing the housing crisis and focused on “boosting supply and helping more people into homes,” said Minister for Housing and Homelessness Clare O’Neil MP. The underlying idea is to increase the availability of homes for local buyers by limiting purchases that might otherwise be snapped up by foreign investors.
The Australian Taxation Office (ATO) and the Treasury Department will receive $8.9 million between 2025 and 2029 to enforce the ban, and a further $1.9 million in the following four years.
Compliance and enforcement measures
Foreigners that have invested in, or plan to invest in, Australian residential real estate are bound by myriad rules and requirements. These continue to change. Those active in the real estate market must be fully informed and be able to quickly respond to regulatory shifts.
Australian foreign investment rules can be complex, and the ramifications if investors do not comply with the law are significant – including the potential for forced divestment and large fines.
Since 2022, the Federal Court of Australia has issued penalty orders for breaches of Australian foreign investment rules. The first was a $250,000 fine against the buyer of several Melbourne properties after he failed to obtain authorisation from the Foreign Investment Review Board (FIRB).
At the time, the ATO (which brought the case) said the penalty should serve as a deterrent for anyone who attempts to bypass the rules.
The ATO will use the latest government funds to ramp up its enforcement measures – boosting its compliance team and enhancing its screening of foreign investment proposals for residential properties.
The government has also announced a full audit of current foreign investment approvals for vacant residential land development to ensure that foreign investors meet their development obligations.
The ban only applies to established residential dwellings. Still, both the ATO and the Treasury are expected to crack down on “land banking,” where foreign investors acquire vacant land and leave it undeveloped to sell when prices rise.
Any foreign investors failing to follow the development conditions imposed by FIRB when their approval was granted have now officially been put on notice.
Attwood Marshall Lawyers – helping people understand their rights and obligations when buying and selling property
We understand that buying and selling property can be a pressured time, and it is our goal to reduce that stress throughout the transaction.
If you are a foreign investor considering buying property in Australia, it’s vital to obtain legal advice before entering the market. FIRB rules can be strict, and the consequences for breaching them can be severe.
Our property and commercial team stay on top of these rule changes and are committed to helping our clients navigate an increasingly complex property and investment environment.
For help and advice on a property matter, please contact our Property and Commercial Department Manager Taylah Lein, on direct line 07 5506 8208, email tlein@attwoodmarshall.com.au, or free call 1800 621 071.
Our team are readily available at all our conveniently located offices at Coolangatta, Robina, Southport, Kingscliff, Brisbane, Sydney and Melbourne. Alternatively, you can also arrange a phone or video appointment.
