Will The Vacancy Fee For Foreign Owners Have An Impact On Short Term Management Rights?

26 February 18

Following a series of amendments in November 2017, foreign owners who have applied for FIRB approval after the 9th May 2017 may be liable for a “vacancy fee” where their residential properties are not occupied for at least half a year. The vacancy fee was introduced by the Federal Government to address domestic housing affordability by encouraging foreign owners to put their properties on the rental market.

When does it apply?

Liability under the vacancy fee legislation will be imposed on a foreign person that has obtained FIRB approval on or after 9 May 2017, where the residential property is not residentially occupied for at least 183 days in a “vacancy year”.
Vacancy years will be different for each foreign owner as they are the 12 month period starting on the date the foreign owner has the right to occupy the dwelling (i.e. from settlement of their purchase).

How will it work?

Foreign owners who receive FIRB approval from 9 May 2017 will be required to lodge a vacancy fee tax return with the Commissioner of Taxation within 30 days of the end of each vacancy year.

Although the format of the proposed return has not yet been published and minimal guidance has been provided, ultimately the return should detail the dwellings use during the vacancy year. I would assume that the Australian Taxation Office would publish a copy of the vacancy fee return by May 2018.

If a foreign owner fails to lodge a vacancy fee return, the dwelling is deemed vacant and the owner is liable for approximately $52,500.00 in civil penalties.


Foreign owners of residential properties will not be liable for the vacancy fee where the dwelling is ‘residentially occupied’ for 183 days or more in a vacancy year. Under the new legislation a dwelling will be deemed to be residentially occupied where:


  • the foreign person, or a relative of the foreign person, genuinely occupies the dwelling as a residence (whether or not with another person);
  • the dwelling is genuinely occupied on that day as a residence under a lease or licence with a term of 30 or more days; or
  • the dwelling is genuinely available on that day for occupation as a residence under a lease or licence with a term of 30 or more days.


A dwelling will be considered to be genuinely available for occupation as a residence (with a term of 30 days or more) if the dwelling is:

  • made available on the rental market;
  • advertised publicly; and
  • available at a market rent.

The Explanatory Memorandum to the Bill provides an example of an apartment placed on Airbnb rented for generally less than one week at a time. In that example the apartment was not considered to be genuinely available for occupation as the owner used a web-based short-term stay site and only made the property available for periods of less than 30 days in order to maintain flexibility should the owner wish to use the property during the year.

Impact on short-term letting

Unfortunately, the legislation is not sufficiently clear to give short-term letting agents enough certainty on the question of how to treat short-term letting for offshore owners in the letting pool.

On one reading, so long as there is no advertised maximum term (or the maximum term is at least 30 days) short-term letting is not caught by the legislation. This appears to also cover the purpose of the legislation, as expressed in the Explanatory Memorandum.

An alternative reading is that all terms less than 30 days will be caught, so that even if a guest wished to stay for a longer time, if any guests stay less than 30 days, the legislation will apply.


We have not yet seen how this will work practically in terms of completing the return, because we have not yet seen what the return will look like.

There are also further considerations, including in particular town planning and residential tenancy issues with longer term leases.

This is by no means a simple issue, and it is hugely regrettable that the Government has not thought to consult the management rights industry with this knee jerk legislation. Perhaps the ATO’s interpretation of the legislation will be fair and reasonable ... but I’m happy to discuss odds with anyone who cares to have a wager on that!

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.


Contact Us Now

Phone:+ 61 7 5552 6666
Fax:+ 61 7 5528 0955
Address:Level 2, 17 Welch St Southport, Qld, 4215
Postal:PO Box 1876
Southport 4215



Most Popular Articles

Management Rights News

Number of news items returned: 1 to 15 records of 73

The Different Types of Caretaking Agreements

17 November 2014


 Essentially, there are three types of caretaking agreements in the marketplace: “Do” agreements; “Supervisory” agreements; Hybrid “Do” and “Supervisory” agreements. “Do” Agreements A “Do” agreement ...

Unit Entitlement in NSW

11 February 2013


The issue of unit entitlement was recently looked at again as part of the Department of Fair Trading’s Discussion Paper ...

What Managers Need to know about the NSW Child Window Safety Devices Act 2013

17 January 2014


Resident building managers have general obligations under their Caretaking Agreements to assist Owners Corporations with building and compliance issues. Managers ...

Is it Time to Change the Management Rights Model?

13 May 2013


I think the time is right for the management rights industry to explore the creation of a new model. I ...

The Law Relating to Management Rights in Queensland

14 June 2010


This article looks at the legislation in Queensland dealing with the constraints and obligations imposed on developers whilst they control ...

Be Careful with your Proxies!

03 October 2013


In June this year, I wrote an article headed “Proxy Farming”, which set out the relevant restrictions on caretakers using ...


16 July 2015


This month, we continue our examination of various clauses within caretaking and letting agreements and the important considerations to be ...

Duty Bound or Duty Free - Do you know what Your Duties Are?

23 September 2013


The day-to-day care and maintenance of your resort facilities and communal areas is essential to its ongoing performance and success. ...

Owners Corporation Insurance - How do we Stop the Spiraling Costs?

12 August 2013


In NSW, all strata schemes are required to be insured for the full replacement value, as well as public liability ...

Proxy Farming

10 June 2013


It is often stated that Strata and Community Schemes represent the “fourth tier of Government” and, as such, voting (either ...

"Legal Action", All those in Favour say "Why"

15 July 2013


I was recently involved in a New South Wales matter where an Executive Committee had received extensive legal advice from ...

For Your Eyes Only!

15 April 2013


Information is a commodity and for many, information is power. As you would most likely know from personal experience, the right ...

Caretaking and Letting Agreement Essentials Part 1

03 September 2014


We regularly prepare caretaking and letting agreements for new developments. However, it has become increasingly common for us to be ...

Manged Investment Schemes

15 July 2008


You may have heard the terms ‘MIA’ or ‘Managed Investments Scheme’ and wondered what it’s all about. If you operate ...

Being Aware of your Rights and Responsibilities

14 January 2013


Every resident building manager in NSW should have a copy of the booklet issued by the Department of Fair Trading ...