Update in foreign investment regulations: temporary ban on foreign home buyers

In an effort to improve housing affordability, the Federal Government has recently announced it will temporarily ban foreign persons, including temporary residents and foreign-controlled companies, from purchasing existing residential dwellings in Australia from 1 April 2025 to 31 March 2027. Limited exceptions, however, will apply, including where the purchase would significantly increase housing supply or support the availability of housing supply.

In an effort to ensure compliance and enforcement of the ban, the Federal Government will also increase funding to the Australian Taxation Office. The Federal Government expects this policy will improve housing affordability for Australian residents in reducing competition from overseas buyers.

This article provides a high-level overview of the ban, its policy objectives, the exceptions which will apply and other key details to be aware of in respect of the ban.

Overview

The Federal Government has decided to introduce a temporary ban on foreign persons, which include temporary residents and foreign-controlled companies, purchasing ‘established dwellings’ in Australia from 1 April 2025 to 31 March 2027.

To ensure adequate enforcement and compliance with the ban, the Federal Government is funding $5.7 million towards the Australian Taxation Office’s (ATO) foreign investment compliance team over four years from July 2025.

In conjunction with the ban, the Federal Government is also increasing funding towards the ATO and Treasury to implement an audit program to prevent ‘land banking’ practices by foreign persons, i.e. persons purchasing vacant land with the intention of holding it to later sell for a profit.

Rationale of the temporary ban

The Federal Government is intending to ease pressure on the housing market by removing foreign persons from purchasing existing dwellings and ensure any vacant land purchased by a foreign person will lead to residential housing and/or commercial developments. The Federal Government expects this will improve housing affordability for non-foreign purchasers.

In a joint media release with the Hon Jim Chalmers MP, Treasurer, the Minister for Housing and Homelessness, Clare O’Neill stated that the housing ban is "all about easing pressure on our housing market at the same time as we build more homes’, adding that the ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign investors".[1]

Exceptions to the ban

There are certain exceptions to the ban, which have been further elaborated in guidance from the Treasury since the original announcement was made. The relevant exceptions, subject to foreign investment approval, are where the:

• foreign person seeks to redevelop the established dwelling to significantly increase housing supply by at least 20 additional dwellings;
• foreign person purchases an established dwelling that supports housing supply on a commercial scale, e.g. acquiring one or more established dwellings in multi-unit developments such as retirement villages, assisted living or aged care facilities, or student accommodation;
• foreign-controlled company is required to provide housing for its workers from Pacific island countries and Timor-Leste, including those part of the Pacific Australia Labour Mobility (PALM),[2] and is doing so by purchasing an established dwelling; and
• foreign person purchases a ";Build to Ren" development with the intention of continuing it as such.

Applications for foreign persons to purchase an established dwelling will be considered on a case-by-case basis, and will be permitted under either a no objection notification or an exemption certificate.

Implementation of the temporary ban

Non-foreign purchasers, which include Australian citizens and permanent residents, can continue to purchase existing dwellings and will not be impacted by the temporary ban. If, however, non-foreign persons are considering purchasing existing dwellings on behalf of foreign persons, legal advice should be sought before doing so.

It is expected that the ATO and Treasury will provide further policy guidance on how the ban will be implemented, so developments in relation to the application of the ban should be closely monitored. A review will be undertaken prior to the end of the ban in March 2027 to determine whether it should be extended beyond the initial period.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

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[1]https://ministers.treasury.gov.au/ministers/clare-oneil-2024/media-releases/albanese-government-clamping-down-foreign-purchase

[2] The PALM scheme allows eligible Australian businesses to hire workers from certain Pacific islands and Timor-Leste when there are not enough local workers available (see further details here: https://www.palmscheme.gov.au/).