In this informative article, we look at Federal Annual Vacancy Fee in Victoria.
Federal Annual Vacancy Fee
The Federal Annual Vacancy Fee or ‘ghost tax’ was introduced on 9 May 2017. This fee applies to purchases of property made by foreign persons from 9 May 2017.
Why is this fee payable?
The fee is designed to encourage foreign owners of residential dwellings/houses/properties to make them available for rent where the house is not used as a residence. This increases the number of houses available for Australians to live in.
When is this fee payable?
This fee applies to an individual who is ‘not ordinarily resident’ in Australia. This includes a holder of a visa that permits the individual to remain in Australia for only a limited period, which is subject to the rules. A foreign owner can also include a company or trust. This fee is an annual fee.
Who Will Need to Pay the Fee/Reporting Obligations
When purchasing or investing in property in Australia, Foreigners have reporting obligations.
Foreigners who wish to purchase property and make a foreign investment application for residential property, and Foreigners who also acquire residential properties using the New Dwelling Exemption Certificate are required to annually inform the Australian Taxation Office (ATO) whether properties owned by them are ‘residentially occupied’ or ‘genuinely available’ on the rental market as a residence for at least six months per year.
|The property is considered to be ‘residentially occupied’ if for at least 6 months (equivalent to 183 days) it can be proven that:
1. The property owner or a relative of the owner genuinely occupied the property as a residence; and
2. The property was occupied because it was leased/rented or licensed to someone for at least 30 days
The property must have been made ‘genuinely available’ as a residence (place to live) on the rental market, with minimum durations of 30-day terms
i.e. the rental period must be at least 30 days
If the above can be proved, then you will not need to pay the fee.
The ‘vacancy year’ is based on the first and each 12 months period after the owner’s initial right to occupy the dwelling/property.
An ‘Annual Vacancy Fee Return’ form is required to be lodged by all affected foreign person and is expected to require disclosure of the number of days that the property was residentially occupied. You must lodge this form, and keep records relating to people occupying/living in the property for five years. If you fail to do so, then this will result in penalties as high as $52,500 and you will have to pay the fee for that year.
If you fail to notify the ATO, or if you notify the ATO that the property was not residentially occupied or genuinely available then you will also be liable for the fee.
The fee is the equivalent to the relevant foreign investment application fee for the property at the time it was acquired/purchased by the foreign investor.
The fee currently ranges between $5,000.00 and $91,300.00 depending on the purchase price of the property and is assessed by the ATO upon lodging the ‘Annual Vacancy Fee Return’.
Please see our COMPARISON-TABLE summary.
We invite you to contact us if you require further information and/or assistance with identifying and managing your obligations in relation to the cost of owning your property in Victoria.
Disclaimer: The information contained in this briefing is general in nature, not intended to be definitive, and does not take into account specific circumstances.
It is recommended that you seek appropriate legal advice as to the application of the taxes discussed in this briefing to your specific circumstances.