Federal Vacancy Fee
The Australian Government introduced a vacancy fee on December 2017. The fee presently is applied foreign owners only and specifically residential dwellings.
The tax is designed to discourage housing speculation and people from leaving homes vacant in major urban centres. Various countries around the world including Canada as a similar case have been expanding vacancy fees and application, with New York City looking at applying it to everyone, rather than limiting to foreign ownership, potentially commercial land as well.
In Australia however the fee is presently for foreign owners of unoccupied residential dwellings.
`Under the vacancy fee legislation, foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee. Vacancy as a classification is met if the dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year. There are exemptions to this for valid reasons of vacancy, outlined later in this blog.
This fee differs from the “Absentees for land tax” that is in Queensland which is a separate case.
In the case of the Absentee land tax in QLD, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more broadly though is a topic in itself.
As such you may be liable to pay a vacancy fee if you own a residential dwelling and are a foreign owner.
About the vacancy fee
Who needs to lodge a vacancy fee return:
A vacancy fee ‘return’ must be lodged by or for foreign owners of residential dwellings who:
made a foreign investment application for residential property after 7.30pm AEST on 9 May 2017
purchased under a New Dwelling Exemption Certificate that a developer applied for after 7:30pm AEST on 9 May 2017.
The vacancy fee can also apply if a foreign person failed to submit a foreign investment application while having purchased a residential property before 9 May 2017.
Foreign owners of vacant land do not have to lodge a vacancy fee return until a dwelling has been constructed on the land. When multiple dwellings are constructed on the land, a vacancy fee return must be lodged for each new dwelling constructed. Please note once more this is different to the Absentees for land tax.
You must lodge a return even when the dwelling has been occupied or made available for rent.
If the dwelling is owned by two or more people as joint tenants, you only need to lodge one return.
If you own a share of a dwelling as a tenant in common, you each must lodge a vacancy fee return.
If any of the following occur during a vacancy year, a vacancy fee return will not be required to be lodged:
the dwelling is sold or otherwise legally transferred (including in the event of the death of the owner)
you are no longer a foreign person, in which case congratulations on that process being complete.
Who can lodge a vacancy fee return
You may lodge your own vacancy fee return or engage an authorised agent, such as an accountant ie, the Great Bean Counters to lodge on your behalf.
Conveyancers, real estate agents and other persons charging a fee for services relating to the vacancy fee obligations should review the Tax Practitioners Board website relating to the provision of tax agent services and vacancy fee obligations.
Who needs to pay an annual vacancy fee
You will need to pay an annual vacancy fee if your dwelling is not residentially occupied or genuinely available on the rental market for more than 183 days during the vacancy year.
The vacancy fee may also apply if the vacancy fee return is not lodged by the due date.
What is a vacancy year
A vacancy year is a term used to apply the vacancy fee rules. The period of a vacancy year is measured as a successive period of twelve months. The period of a vacancy year is designated as beginning on the first day you have the right to occupy the dwelling.
This first day you have the right to occupy is known as the ‘occupation day’. While the typical occupation day does assess by right to occupy (often the settlement date), it can also reflect the first day that the occupancy certificate, showing the dwelling is fit to occupy, has been issued for a new dwelling.
A vacancy year is unique to each dwelling held by you and is not a calendar year or a financial year.
When is a dwelling residentially occupied
A dwelling is considered residentially occupied if, for at least 183 days in a vacancy year, any of the following circumstances are met:
the owner or a relative of the owner genuinely occupied the dwelling as a residence
the dwelling was genuinely occupied as a residence subject to lease or license for minimum terms of 30 days
the dwelling was made genuinely available as a residence on the rental market (with minimum terms of 30 days).
Residential occupancy of at least 183 days does not need to be one continuous block of time. Residential occupancy can be made up of multiple continuous periods of at least 30 days throughout the vacancy year.
Dwellings made available for short term lease of less than 30 days (including via web based stay sites) are not considered residentially occupied and would be liable for a vacancy fee.
A dwelling will be considered genuinely available for occupation as a residence (with a term of 30 days or more) if the dwelling is:
made available on the rental market
available at a market rent.
To prove a dwelling was residentially occupied during a vacancy year, you may be required to provide supporting evidence.
Vacancy fee exemptions
If you can show that for at least 183 days in a vacancy year, your dwelling was incapable of being occupied as a residence you will not be liable to pay the vacancy fee. You must lodge a vacancy fee return to claim this exemption.
Your dwelling may be considered incapable of being occupied as a residence if:
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.
To prove a dwelling was incapable of being occupied as a result of one of the above exemptions, you may be required to provide acceptable supporting evidence.
In limited circumstances all or part of the vacancy fee may be remitted or waived. Remissions and waivers are determined on a case by case basis.
When to lodge a return
You must lodge your vacancy fee return with us within 30 days of the end of each vacancy year. The first day of the 30-day period is the day following the last day of the vacancy year.
Before you lodge
To lodge your vacancy fee return you need to be registered on the Land and water register. This will create a Land registration number that you need to lodge your vacancy fee return.
If you have not registered on the land and water register, submit a land and water registration form. There is no cost involved in registering.
We will use the information you provide in your land and water registration to send you a reminder email to lodge your vacancy return each year at least one week before the end of your current vacancy year.
It will contain important information including your land registration number and relevant vacancy year dates to help you complete and lodge your return on time.
You are required to complete a vacancy fee return even if you do not receive a reminder from us. It is your responsibility as an owner to be aware of the vacancy fee return requirements.
How much is the vacancy fee
The vacancy fee will generally be the same amount as the foreign investment application fee you paid at the time you submitted your foreign investment application.
In all cases we will tell you how much your vacancy fee is when you lodge your vacancy fee return – there is no requirement for you to calculate it yourself.
If you acquired the dwelling under a New Dwelling Exemption Certificate, the vacancy fee payable will be equal to the foreign investment application fee that would have been payable for the dwelling, had the exemption certificate not been in place.
If the application fee was waived, the vacancy fee payable will be equal to the lowest tier foreign investment application fee that would have been payable (for example $5,500).
In the case of joint tenants, only one return needs to be lodged and only one fee will be payable. For tenants in common, each tenant will need to lodge a return and the fee payable will be the foreign investment application fee that was payable by each individual tenant.
Paying the vacancy fee
When your vacancy fee form has been lodged you will be informed if you are liable and the amount you need to pay in such as case.
The fee itself will be payable via email after you have lodged.
You will be provided with the reasoning for you fee being applied and a due date to make the payment in line with the supplied payment details.
What penalties may apply
If you do not lodge your vacancy fee return by the due date you may be liable to pay a vacancy fee regardless of the number of days the dwelling was residentially occupied during the vacancy year.
You may be liable for an infringement notice or a civil penalty if you fail to lodge a vacancy fee return on time or fail to keep records that are relevant to your liability for vacancy fees. These records are required to be kept for at least five years after the end of the vacancy year.
If your situation changes
If or when your circumstances change around trhe ownership or use of your property, you can and should update your details, which occurs once more via vacancy fee forms.
Self-disclose a breach
If you suspect you’ve breached your foreign investment conditions or wish to report a suspected breach of foreign investment rules it is advised to fill out the appropriate forms to notify the Australian Government.
So just remember, the Vacancy fee return must be lodged by:
foreign owners of residential dwellings who made a foreign investment application for residential property after 7.30pm AEST on 9 May 2017
foreign owners of residential dwellings who purchased under a New dwelling exemption certificate that a developer applied for after 7:30pm AEST on 9 May 2017.
The Vacancy fee may also apply if a foreign person failed to submit a foreign investment application but purchased a residential property before 9 May 2017.
Foreign owners of vacant land do not have to lodge a Vacancy fee return until a dwelling has been constructed on the land.
As always, if you have any queries feel free to contact the Great Bean Counters.