Who is Liable to Pay Vacancy Fees
What is a Vacancy Fee?
A Vacancy fee is an annual fee which must be paid by certain ‘foreign’ owners of real residential property in Australia if the property that they own is unoccupied for more than half of the year (183 days). The purpose of this fee is to discourage holding empty properties and improve access to housing for native Australians. This fee is administered by the Australian Tax Office (ATO). All foreign owners of residential dwellings are required to file a ‘Vacancy Fee Return’ so that the ATO can assess whether a Vacancy Fee needs to be paid.
Who is liable to pay vacancy fees?
Anyone liable to pay a Vacancy Fee must have all of the following characteristics:
- They are a‘Foreign’ owner: A person who is not an Australian citizen and is not ordinarily resident in Australia (i.e., who has not stayed in Australia for 200 days out of the last year), who is
- The owner of Residential property, which
- Is not occupied or genuinely available on the market for at least 183 days out of the year, and who
- Applied for FIRB (Foreign Investment Review Board) approval in buying the property.
Those to whom the Vacancy Fees apply will have received notice from the ATO with their FIRB approval.
Note that the criteria do not include people who did not have to apply for FIRB approval. As permanent residents typically do not have to apply for FIRB approval, someone who is a permanent resident at the time of purchase of their property, and thus who did not need to seek FIRB approval, is typically not required to pay Vacancy Fees or lodge Vacancy Fee Returns.
How to file a Vacancy Fee return?
All foreign owners of residential property who applied for FIRB approval in purchasing the property are required to file a Vacancy Fee Return annually. The Vacancy Fee Return is a document which records the details of the property and helps the ATO decide whether a Vacancy Fee is payable.
All foreign owners of residential property need to file this return regardless of whether the property is occupied for 183 days out of the year. If the ATO determines that no vacancy fee is payable based on the Vacancy Fee Return, no amount will be required.
The electronic form for the Vacancy Fee Return is available at: https://www.ato.gov.au/FIRBvacancyfee/
Filling out the form requires information provided in an email reminder to pay the Vacancy Fee, which the ATO sends to the email in the FIRB application.
The Return must be filed within 30 days after the end of every 12 month period you own it. The time when you own it is the time from which you gained the right to occupy the property- usually, the completion date.If you complete a property purchase on 1 Jan, you have to file a Vacancy Fee Return by 30 Jan every year. Friendly reminder to all foreign owners of property- keep an eye on the anniversary of your purchase, and remember to file the return every year! Late payments may result in fines or interest payments.
After lodgement of the Vacancy fee return, you will see a confirmation page containing reference details, any amount you need to pay and how to pay. The amount of payment and the payment due date will also be contained within an email sent in response to lodgement .
Are there any exceptions to paying a Vacancy Fee?
Even if one is a person who has to file a Vacancy Fee Return, there may be an exception to paying the Vacancy Fee if the property was unable to be occupied. If you meet the following conditions or similar, you may be able to waive the Vacancy Fee, but you will still need to file a Vacancy Fee Return to claim this exception, along with supporting evidence.
Criteria for exemptions due to unsuitability for occupation include:
- the dwelling is damaged, unsafe or is otherwise unsuitable to be occupied as a residence
- the dwelling is undergoing substantial repairs or renovations
- occupation of the dwelling as a residence is prohibited or legally restricted, by an order of a court or tribunal or a law of the Commonwealth, state or territory; or
- a person (who may or may not be the foreign person) who ordinarily occupies the dwelling was absent from the dwelling due to receiving long-term, in-patient, medical or residential care.
For more information, please visit https://www.ato.gov.au/General/Foreign-investment-in-Australia/Annual-vacancy-fee/#Vacancyfeeexemptions
Please contact our firm for advice specific to your circumstances.
Disclaimer: This publication is general information only and does not purport to provide legal advice. We do not accept responsibility for any losses for reliance upon this publication.