Under Australia’s foreign investment rules, almost every property transaction by a non-citizen or foreign-controlled entity must pass the “foreign person” test. The definition goes far beyond nationality — it includes temporary visa holders, foreign shareholders, trustees and even spouses.
At Ensure Legal, we help foreign buyers and developers understand how these rules apply before they sign a contract.
The Core Definition — More Than Just Citizenship
Under the Foreign Acquisitions and Takeovers Act 1975, a person is a “foreign person” if they are:
- an individual not ordinarily resident in Australia;
- a corporation where a foreign person holds at least 20 per cent interest;
- two or more foreign persons holding a combined 40 per cent interest;
- the trustee of a trust meeting those same thresholds; or
- a foreign government or sovereign wealth fund.
These tests apply whether the investment involves shares, units or land interests.
How FIRB Treats Temporary Visa Holders
Even if you live in Australia, you may still be a foreign person.
Ordinary Residence Test
To be “ordinarily resident”, you must have:
- spent at least 200 days in Australia over the past 12 months; and
- no legal time limit on your stay, such as a permanent visa.
Visa Status Summary
- Temporary residents (student, work, bridging visas) — foreign persons
- Permanent residents — not foreign persons
- Visitors on short-term visas — foreign persons
Example:
A Chinese academic on an 18-month visa who stays 257 days is still time-limited and therefore a foreign person.
How Companies and Trusts Become “Foreign”
A company or trust can become foreign even if registered in Australia.
Companies
If a foreign shareholder holds 20 per cent or more, or multiple foreign shareholders hold 40 per cent or more, the company is a foreign person.
Trusts
If a foreign beneficiary is entitled to 20 per cent or more of income or property, or the trustee can distribute to them at discretion, the trustee becomes a foreign person.
Even an Australian family trust can become foreign if a relative marries a foreign spouse, because that spouse becomes a potential beneficiary. When the trustee buys property, FIRB approval may be required even if no foreign distribution has occurred.
Common Traps for Buyers and Developers
| Scenario | FIRB Risk | Reason |
|---|---|---|
| Buying through a family trust with a foreign spouse | Likely | Trust becomes a foreign person |
| Using a Hong Kong-based company to hold shares in an Australian developer | Likely | Foreign-controlled entity |
| Temporary visa holder purchasing an apartment off-plan | Must notify | Temporary residents are foreign persons |
| Australian citizen living overseas buying with offshore funds | Depends | May not be “ordinarily resident” |
Exemptions That May Apply
Some exemptions exist under the Regulations:
- New Zealand citizens with a Special Category Visa are exempt for residential land.
- Australian citizens living abroad are exempt if they maintain a close connection to Australia.
- Foreign custodians acting purely on behalf of clients may also be exempt.
However, these exemptions are technical and should always be confirmed before exchange of contracts.
The Importance of an FIRB Clause in Your Contract
Why It Matters
If you need FIRB approval, your contract must include a “FIRB condition” allowing you to withdraw or delay settlement if approval has not yet been received. Without this clause, you could be forced to settle even if your FIRB application is still pending — risking breach of contract or forfeiture of deposit.
How Ensure Legal Customises It
We tailor this clause to fit the transaction:
- For off-the-plan or staged contracts, we match the FIRB timeline with the developer’s finance and sunset clauses.
- For land or development site acquisitions, we include extension options if Treasury processing times exceed expectations.
- For joint ventures or trust purchasers, we clarify which entity is responsible for obtaining approval.
A well-drafted FIRB clause protects both your deposit and legal position — and it’s standard practice in all Ensure Legal foreign-buyer conveyances.
How Ensure Legal Can Help
For foreign buyers and developers, we:
- review ownership structures to determine if your entity or trust is classed as foreign
- identify exemptions and thresholds to avoid unnecessary applications
- prepare and lodge FIRB applications aligned with your settlement deadlines
- draft and insert the correct FIRB clause into your contract before exchange
- advise on contract conditions to ensure compliance and deposit protection
