Annual Vacancy Fee for Foreign Owners in Australia

The Australian government introduced an annual vacancy fee for foreign owners of residential property in December 2017. This fee aims to address the issue of housing affordability and encourage foreign property owners to make their properties available for rental or sale, rather than leaving them vacant.

The fee is levied annually on residential properties that are unoccupied or not genuinely occupied for at least six months in a calendar year. Foreign owners are required to register their property with the Australian Taxation Office (ATO) and comply with the annual reporting and payment obligations. Failure to fulfil these requirements may result in penalties.

The Annual Vacancy Fee serves as a mechanism to encourage foreign property owners to contribute to the housing market by ensuring their properties are put to productive use.

Who Needs to Pay Annual Vacancy Fee?

The vacancy fee applies to foreign owners of residential property in Australia who do not occupy or rent out their property for more than 183 days in a year. If a foreign owner fails to meet this occupancy threshold, they are required to pay the vacancy fee. The fee is calculated at a rate of $2,200 per 183 days of vacancy.

This fee is aimed at encouraging foreign property owners to either occupy or make their properties available for rental, thereby contributing to the housing market and addressing issues of housing affordability.

It is important for foreign property owners to understand their obligations and comply with the vacancy fee requirements to avoid penalties or legal consequences.

Are There Any Exemptions Available?

There are a number of exemptions to the vacancy fee, including:

Occupied by a family member: If the residential property is occupied by a family member of the foreign owner, it may be exempt from the vacancy fee. However, specific criteria must be met to qualify for this exemption.
Used for business purposes: If the property is being used solely for business purposes, it may be exempt from the vacancy fee. This exemption typically applies when the property is used for commercial operations and not for residential purposes.
Under construction or renovation: Properties that are undergoing construction or substantial renovations may be exempt from the vacancy fee. This exemption recognizes that the property is temporarily vacant due to these activities.
Rented out for less than 6 months: If the property is rented out for less than 6 months in a calendar year, it may be exempt from the vacancy fee. This exemption applies to short-term rentals or situations where the property is not vacant for an extended period.

Considerations For Foreign Owners

Foreign owners subject to the vacancy fee should be mindful of their obligations and the associated costs. Here are some considerations for foreign owners:

Filing the return: It is crucial for foreign owners to file a return with the ATO by the specified deadline of 31 October each year. This return provides details on the occupancy status of the property and determines whether the vacancy fee applies.
Online or mail filing: Foreign owners have the option to file the vacancy fee return online through the ATO’s online services or by mail. It is important to choose the filing method that is most convenient and secure for you.
Financial impact: The vacancy fee can be a significant cost for foreign owners of residential property in Australia. It is important to consider this fee when evaluating the financial feasibility and profitability of your investment.
Occupancy strategies: To avoid the vacancy fee, foreign owners can explore various occupancy strategies. These may include renting out the property, using it for personal use or business purposes, or engaging property management services to ensure continuous occupancy.
Seek professional advice: Consulting with a tax advisor or property specialist experienced in foreign property ownership in Australia is advisable. They can provide guidance on compliance with the vacancy fee requirements, exemption eligibility, and strategies to minimise the impact of the fee.
Plan ahead: Before investing in Australian property, thoroughly research the vacancy fee regulations and their potential implications. Understanding the obligations and costs associated with foreign property ownership will help you make informed decisions and minimise surprises.

How to Avoid the Vacancy Fee

To avoid the vacancy fee or reduce its impact, consider the following strategies:

Rent out your property: Ensure that your property is rented out for at least 6 months within a calendar year. By maintaining a consistent occupancy, you can meet the minimum requirements and avoid the vacancy fee.
Utilise your property for business purposes: Consider using your property for business activities. Establishing a business operation within the property can exempt you from the vacancy fee. Ensure that the business use is legitimate and complies with relevant regulations.
Have a family member occupy the property: If a family member occupies your property, it may be exempt from the vacancy fee. Ensure that the occupancy meets the specific criteria set by the ATO to qualify for this exemption.
Maintain your property’s readiness: Keep your property in good condition and ready for rental. Regularly conduct maintenance, repairs, and necessary updates to attract potential tenants and minimise periods of vacancy.
Claim eligible expenses: If you are unable to avoid the vacancy fee, explore potential deductions to reduce its amount. Eligible expenses may include property management costs, repairs, maintenance, and other relevant expenses.

If you are unable to avoid the vacancy fee, you may be able to reduce the amount of the fee by claiming certain expenses, such as the cost of property management or the cost of repairs.

Contact Us for Personalized Advice

If you have any inquiries or concerns regarding the vacancy fee or need assistance with filing your return, we encourage you to reach out to our team. Our knowledgeable tax experts are here to provide guidance, clarify the requirements, and ensure compliance with the vacancy fee regulations.

Contact our tax specialists today and we will be more than happy to assist you with your inquiries and help you navigate the process smoothly.

Frequently Asked Questions

What is the vacancy fee?

The vacancy fee is a charge imposed on foreign owners of residential property in Australia who do not occupy or rent out their properties for more than 183 days in a calendar year.

Who is liable to pay the vacancy fee?

Foreign owners of residential property in Australia are liable to pay the vacancy fee if they do not meet the occupancy requirements.

How is the vacancy fee calculated?

The vacancy fee is calculated at a rate of $2,200 per 183 days of vacancy. This means that for each 183-day period or part thereof that the property remains unoccupied or not genuinely occupied, the fee is applicable.

How do I register and report for the vacancy fee?

Foreign property owners must register their property with the Australian Taxation Office (ATO) and file a return by 31 October each year to report their occupancy status and determine the vacancy fee liability. The return can be filed online or by mail.

What happens if I fail to comply with the vacancy fee requirements?

Failure to comply with the vacancy fee requirements may result in penalties and legal consequences. It is important to understand and fulfil your obligations to avoid any potential issues.

Can I claim any expenses to reduce the vacancy fee?

If you are unable to avoid the vacancy fee, you may be eligible to claim certain expenses as deductions to reduce the fee amount. Expenses such as property management costs or repairs may be deductible. Consult with a tax professional for guidance on eligible deductions.