Foreign investment traps

Over the years, the LPLC has dealt with multiple claims relating to failures to comply with foreign investment laws. These claims arise because practitioners do:

• not ask the client whether they are a foreign person
• not know the relevant law
• try to find a way around the statutory requirements.

To appreciate which clients are subject to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FIRB Act), and in turn the notification obligations under the FIRB Act, practitioners first need to understand who a ‘foreign person’ is.

Under the FIRB Act a “foreign person” is under defined in section 4 as:

• an individual not ordinarily resident in Australia (see section 5 of the FIRB Act for the meaning of an ordinary resident); or
• a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

• a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

• the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

• the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

• a foreign government; or

• any other person, or any other person that meets the conditions, prescribed by the regulations.

• Note: In certain circumstances, an associate of a foreign person may be taken to be a foreign person even if the associate is not a foreign person (see subsection 54(7) of the FIRB Act).

Further information on what constitutes a foreign purchaser, can be found at the Australian Government Foreign Investment in Australia website on the Key concepts page.

Sections 46 , 47 and 48 of the FIRB Act impose an obligation on any foreign person to seek approval by prior written notice of specified acquisitions from the Foreign Investment Review Board (FIRB). This includes where a foreigner wishes to acquire a substantial interest in an Australian corporation (see sections 19 and 19A) and/or an interest in Australian land (see section 12). A notifiable interest in Australian land is not limited to freehold interests and can include certain leasehold arrangements or licences,

The Australian Government Foreign Investment in Australia website has information on Key concepts in the FIRB requirements and guidance notes to assist practitioners understand their clients' obligations.

Practitioners need to be aware that there are different thresholds for notification depending on the type of investment and foreign purchaser.

For example, any foreigner must provide notice and obtain prior approval from the FIRB before acquiring any interest in residential land, national security land or vacant commercial land, as defined under the FIRB Act and regulations.

In contrast, certain classes of foreign investors that intend to acquire an interest in developed commercial land only need to provide notification and obtain prior FIRB consent where the value of the interest being acquired is more than $1.498 million (as at January 2026). For a detailed breakdown of the monetary thresholds see Monetary thresholds | Foreign investment in Australia.

Accordingly, practitioners need to familiarise themselves with the different notification thresholds.

From 1 April 2025 to 31 March 2027, foreign purchasers or foreign investors are banned from purchasing established dwellings, as defined under the FIRB Act. However, under this current government policy, there are limited exceptions to this policy. For further information, practitioners should refer to FIRB’s guidance note on residential land.

There are both civil and criminal penalties for breaching the FIRB Act set out in Part 5 of the Act. The range of penalties depends on the type of acquisition and the category of foreign purchaser as well as the seriousness of the breach. For more information on how the government deals with residential land compliance and penalties see Guidance Note 14 – Compliance and Penalties (Residential Land).

Typically, when a practitioner is acting for a foreign purchaser in a conveyancing transaction, foreign purchaser additional duty needs to be considered. In many states, including Victoria additional duty will apply where the purchaser is a deemed a foreigner under the relevant state duty act.

To further complicate matters, what constitutes a foreign purchaser under the relevant state duty legislation can differ from the FIRB Act.

Accordingly, when acting for foreign purchasers, practitioners also need to consider whether foreign purchaser additional duty may apply to the transaction, and if so, provide written advice to the purchaser client warning them that foreign purchaser duty is likely to apply and the potential duty implications for the client.

For further information on foreign purchaser additional duty that applies in Victoria, practitioners can refer to the following links below:

Foreign purchaser additional duty – does it apply?

Foreign purchaser additional duty for discretionary trusts — what you need to know

Foreign Purchaser Additional Duty and changes to the criteria for New Zealand citizens

Always ask your client whether they are a foreign person. This should be done as part of initial client intake and required as part of the Anti-Money Laundering (AML) requirements from 1 July 2026 for Designated Services.

Review the notice requirements for foreign ownership including state and federal laws. For example, in Victoria under the Duties Act 2000 (Vic), foreign purchaser additional duty may still apply to the client, even if the client is exempt from the FIRB regime.

When advising a foreign person pre-contract:

Advise the client that they cannot purchase an established dwelling, unless they are eligible for certain limited exemptions and receive prior approval for the exemption from the FIRB.

Consider seeking instructions to obtain prior approval from the FIRB – this is commonly done where a foreign person wishes to bid at an auction.

Where prior approval is not obtained, advise your client any contract should include a special condition making the contract subject to FIRB approval.

Provide the client with advice about foreign purchaser additional duty, if applicable.

When acting for a developer selling off-the-plan:

Consider the need to include a special condition in the contract of sale of land dealing with any foreign investment issues. For commercial reasons, some developers may want a condition that provides for FIRB approval and some may want a warranty from the purchaser that no FIRB approval is required.

Determine at the outset whether the vendor wishes to seek prior approval from the FIRB to sell to foreign persons. Where a vendor is eligible and has obtained a prior exemption certificate, in most cases it is not necessary for individual foreign purchasers to then apply for FIRB approval. A vendor may find it attractive as it may assist in selling to foreign people. For further information see the Australian Government Guidance note 6 on residential land and Guidance note 11 on protecting the national interest.

When a breach of the FIRB Act and/or any state laws about foreign ownership is discovered, advise the client of the consequences and inform the client they are obliged to give notice of the acquisition.

Terminate the retainer if the client instructs not to give the required notice.

The FIRB website is a valuable source of information about foreign investment. The seven guidance notes and checklist for online applications are particularly useful.

See also:

Foreign Acquisitions and Takeovers Act 1975 (Cth)

Foreign Acquisitions and Takeovers Regulation 2015 (Cth)

SRO Foreign Purchaser Additional Duty

Foreign purchaser… - Legal Practitioners' Liability Committee

Foreign purchaser… - Legal Practitioners' Liability Committee