How the annual vacancy fee applies

August 2018

Foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee if their dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year.

Australian property has long been a designed investment for foreign owners, however foreign owners of Australian residential dwellings should be aware that they are required to an annual vacancy fee if their property isn't occupied or rented out for more than 183 days, starting from the first day the owner has the right to occupy.

A vacancy year is unique to each dwelling held by a taxpayer.

What does the ATO consider as 'residentially occupied'?

What does the ATO consider as 'residentially occupied'?

A dwelling is considered residentially occupied if, for at least 183 days in a vacancy year, any of the following circumstances are met:

  • The owner or a relative of the owner genuinely occupied the dwelling as a residence
  • The dwelling was genuinely occupied as a residence subject to lease or license for minimum terms of 30 days
  • The dwelling was made genuinely available as a residence on the rental market (with minimum terms of 30 days).

The period of residential occupancy does not need to be one continuous block of time. Residential occupancy can be made up of multiple continuous periods of at least 30 days throughout the vacancy year.

But don't think AirBNB is the solution

Properties that are made available for short-term lease of less than 30 days (think Airbnb or Stayz) are not considered residentially occupied and would not be considered in determining whether the 183-day threshold has been satisfied.

If a property owner can show that for at least 183 days in a vacancy year, the property was incapable of being occupied as a residence they will not be liable to pay the vacancy fee.

Circumstances, where this may be considered, include when the property is damaged, undergoing renovations, where occupation is restricted by law, or where the usual occupant was absent from the dwelling due to receiving long-term, in-patient, medical or residential care.

Paying the vacancy fee and keeping accurate records

Foreign owners of residential property must lodge a vacancy fee return with the ATO within 30 days of the end of each vacancy year, regardless of whether they will be liable for the annual vacancy fee. To lodge a vacancy fee return an owner will need to be registered on the Land and Water Register.

As always, keeping accurate records is a must, particularly occupation day and determining when the property is 'residentially occupied'.

For more information, contact our International Tax Team on 02 9957 4033. 

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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