Foreign property owners: the vacancy fee that could cost you thousands

Most foreign property owners think their obligations end at settlement. They do not. If your residential property is vacant for more than 183 days in a 12 month period, you could face a vacancy fee that runs into tens of thousands of dollars.

Even more surprising, you may still be required to lodge an annual vacancy fee return with the ATO, even if no fee is payable. Here is what every foreign owner in Queensland needs to understand before it becomes an expensive mistake.

Foreign property owners – the vacancy fee that could cost you thousands.

Foreign buyers who own residential property in Australia have ongoing compliance obligations after settlement, and one of the most commonly missed ones is the vacancy fee return.

Administered by the ATO (Australian Tax Office), the vacancy fee regime is designed to ensure foreign owned residential properties are occupied or genuinely available for rent, rather than being left vacant. It forms part of Australia’s broader foreign investment framework aimed at supporting housing supply and availability. Basically, if you’re foreign and you buy and have your property vacant, you pay heavily for the vacancy.

Failing to lodge correctly or on time can result in significant penalties even where no vacancy fee is ultimately payable. Before we go into unpacking vacancy fees guys, just make sure you subscribe so you never miss a blog and you stay up to date with the latest Queensland property news. It’s all free.

What is a vacancy fee return?

A vacancy fee return is an annual online return that certain foreign owners of Australian residential property must lodge with the ATO. The return reports how the property was used during a 12 month period known as the “vacancy year”, including whether the property was: lived in by the owners or their relatives, rented to tenants, genuinely available to rent or left vacant. Even if the property was fully occupied, the return must still be lodged, if you fall within the rules.

Who must lodge a vacancy fee return?

You’re generally required to lodge a vacancy fee return if you are a foreign person for foreign investment purposes, and acquired residential property in Australia after the 9th of May 2017, and purchased under foreign investment approval or an exemption certificate. This applies where the property is a house, an apartment, a new or near new dwelling and located in Brisbane or anywhere else in Queensland.

What is the vacancy year?

The vacancy year is a rolling 12 month period that usually starts on the date you first had the right to occupy the dwelling, often the settlement date. You must lodge a vacancy fee return within 30 days after the end of each vacancy year. Missing this deadline alone can trigger a vacancy fee, even if the property was not vacant.

When does a vacancy fee apply?

A vacancy fee may be imposed if during the vacancy year the property was not occupied for at least 183 days, and not genuinely available for rent for at least 183 days. Short term stays such as holiday letting or stays under 30 days generally do not count towards occupancy for vacancy fee purposes.

How much is the vacancy fee? (everybody wants to know this one).

The vacancy fee is linked to the foreign investment application fee, originally paid when approval was granted. Recent changes mean that in many cases, the vacancy fee is now double the original application fee, making non-compliance potentially extremely costly. This is why early advice and proper tracking of vacancy year deadlines is critical.

Let’s do an example – vacancy fee on a $1 million dollar purchase.

Rishi is a foreign buyer who purchases a newly developed apartment in Australia for $1 million. He obtains foreign investment approval and pays a FIRB application fee of $45,300. Settlement marks the start of Rishi’s vacancy year. If the apartment is not occupied or genuinely available for rent for at least 183 days, a vacancy fee may apply.

In this case, the vacancy fee would be $90,600, which is double the FIRB fee originally paid by Rishi. He must also lodge a vacancy fee return within 30 days after the end of each vacancy year, even if no fee is payable.

What happens if you don’t lodge?

If a vacancy fee return is not lodged on time, the ATO may impose the vacancy fee, issue, infringement, notices, and apply additional penalties.

Importantly, failing to lodge can result in a fee, even if the property was occupied – so you must diarise and do this annually.

How does this impact property sales and conveyancing?

For foreign owners selling property in Queensland, vacancy fee compliance is often overlooked during the conveyancing process. While vacancy fee returns are not a conveyancing document technically, issues can arise if the ATO has issued notices against the property, or any outstanding compliance matters, potentially delaying funds for settlement.

FAQ’s.

Do I still need to lodge if my property was rented out?

Yes. If you’ve been listening to this blog, the answer is yes. If you are required to lodge, the return must be submitted. Even if the property was rented or occupied for the full year.

Is the vacancy fee the same as land tax?

No, it’s not. Vacancy fees are separate from land tax and a part of Australia’s foreign investment compliance regime.

Can I claim an exemption?

In limited circumstances, such as where a property is genuinely uninhabitable, exemptions may apply. Evidence is usually required, and the return must still be lodged.

Is this handled by my conveyancer?

Vacancy fee returns are lodged through the ATO’s foreign investor portal and are not part of the standard conveyance.

Wrapping Up

Buying or selling property as a foreign owner.

If you’re a foreign owner buying or selling in Queensland and you want to understand how vacancy fee rules may affect your transaction, we strongly encourage you to visit the government website for more information (click here). We regularly assist our foreign buyers and sellers in Brisbane and across Queensland.

If you want to know more about the obligations of foreign buyers with AFAD – Additional Foreign Acquirer Duty or FIRB – Foreign Investment Review Board, here is the link to a blog we have already created on this exact topic. 

Legal expertise is required to navigate property transactions to make sure the experience is a smooth sail from start to finish with no costly, unexpected surprises.

Guys, if this one’s helpful and you’ve learned something, please drop a quick comment. Give us a like, it will help other people find us. Thank you very much. Hope you learnt a bit about foreign buyers and the vacancy fee, and we’ll see you next week.

Who has to lodge a vacancy fee return?

You must lodge if you are a foreign owner of Australian residential property and you made a foreign investment application after 7:30pm AEST on 9 May 2017, or you purchased under a developer’s exemption certificate after that date.

The return is required every year, whether or not a fee is payable. Lodging a nil return is not optional paperwork, it is the obligation.

How do you avoid paying the vacancy fee?

The property has to be residentially occupied for 183 days or more in each 12 month vacancy year. Occupation counts if you live in it, rent it out, or make it genuinely available for rent on the market, and it must be in blocks of at least 30 days at a time.

Short stay letting in blocks under 30 days does not count toward the 183 days. That surprises a lot of owners who assumed a busy Airbnb calendar would cover them.

How much is the vacancy fee?

For vacancy years starting from 9 April 2024, the fee is double the foreign investment application fee you originally paid. For earlier vacancy years it is equal to that fee.

Because the application fee scales with the property price, this is not a small number. On a mid range purchase it turns a five figure application fee into a five figure annual bill for leaving the property empty.

When is the vacancy fee return due?

Within 30 days of the end of each vacancy year. The vacancy year runs 12 months from the day you take occupation or the day you gain the right to occupy, not from the calendar year or the financial year.

What happens if you do not lodge the vacancy fee return?

Failing to lodge is a separate breach from failing to pay, and it carries its own consequences. It also removes any argument that the property was occupied, because the return is how you prove it. Keep tenancy agreements, letting records and utility accounts for each vacancy year.

Does the vacancy fee affect you when you sell?

Indirectly, and it is worth checking before settlement. Outstanding vacancy fees and the foreign investment framework sit alongside the other foreign resident obligations on a sale, including the ATO clearance certificate and foreign resident capital gains withholding. If you are a foreign owner selling, deal with all three together rather than discovering one of them in settlement week.