By Jarrod Marchesi, Senior Associate
The Treasurer Scott Morrison MP has recently clarified that foreign buyers are entitled purchase an off-the-plan dwelling when another foreign buyer has failed to settle their purchase of that dwelling.
This is in response to a media report and some legal commentary suggesting that the ATO had changed its position, and that a dwelling would no longer be considered ‘new’ if it had been previously sold and did not proceed to settlement (i.e. terminated for default).
That commentary suggests that if a dwelling is sold after a previous contract is terminated, that dwelling then becomes an established dwelling. The effect of this would be to prevent foreign purchasers from being able to purchase that dwelling.
The Treasurer’s media release of 26 November 2016 (found here) addresses industry concerns and confirms that a dwelling is not considered an established dwelling if it is a newly built dwelling, or still under construction and for which title ‘never changed hands.’
In the event of a failure to complete settlement, the dwelling reverts to its previous status as a new dwelling.
The Treasurer’s statements are generally consistent with the definition of ‘new dwelling’ under the Foreign Acquisitions and Takeovers Act 1975, which provides that a dwelling is a new dwelling even if it has been sold by the developer of the development, as long as it has not been previously occupied for more than 12 months.
FIRB expects to update Guidance Note 8 to provide the industry with greater clarity.
In the meantime, the Treasurer’s statements provide comfort that a common-sense application of the law will be adopted.