Comprehensive Guide: Understanding the Vacancy Fee Return for Foreign Owners in Australia
- Sharlene
- 2 days ago
- 3 min read
If you are a foreign person holding residential property in Australia, do not overlook the mandatory Vacancy Fee Return—a critical annual obligation that carries heavy penalties for non-compliance.
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Foreign owners of Australian residential property are subject to annual reporting obligations under Australia’s foreign investment rules. The following summary outlines the current requirements for the Vacancy Fee Return, based on the latest guidance issued by the Australian Taxation Office (ATO).
1. Who Must Lodge?
An annual vacancy fee return is mandatory for owners classified as a "foreign person" who:
Submitted a foreign investment application for residential property after 7:30 pm AEST on 9 May 2017; or
Purchased a dwelling under a developer's New Dwelling Exemption Certificate after that date.
The return is required to be lodged for each vacancy year during the period of ownership, irrespective of whether the property was occupied or exempt. A return must still be lodged when an exemption is being claimed, and supporting evidence may be requested.
Where ownership or dwelling‑related details have changed, these details are required to be updated in Online Services for Foreign Investors before lodging the vacancy fee return, as such changes may affect the obligation to lodge.
2. Understanding the “Vacancy Fee Return” and "Vacancy Year"
A vacancy fee return is defined as an online annual report submitted via Online Services for Foreign Investors, providing information regarding the number of days during the vacancy year that the dwelling was occupied.
A vacancy year is defining each successive period of 12 months starting on the occupation day for the dwelling during which you have continuously held an interest in the dwelling.
The end of the vacancy year determines the relevant return year, and the return is required to be lodged within 30 days of the end of each vacancy year.
3. Residential Occupancy Requirements (The 183-Day Rule)
A vacancy fee becomes payable if the dwelling is vacant for 183 days (six months) or more within a vacancy year.
A dwelling is considered residentially occupied when any of the following conditions have been met for at least 183 days within the vacancy year:
Owner/Relative Occupation: The owner or a relative genuinely using the property as a residence.
Compliant Leasing: Occupancy under a formal lease or license for periods of at least 30 days. Established dwellings purchased as a principal place of residence by foreign persons are not permitted to be rented or leased, which affects their ability to satisfy occupancy or rental availability requirements.
Market Availability: Genuinely making the property available on the rental market at a market rent (with minimum terms of 30 days).
The required 183 days of occupancy may consist of multiple continuous periods of at least 30 days each. If none of these conditions are met, the ATO may deem the property to have been vacant for the purposes of calculating the fee.
4. Specific Exemptions from Paying the Vacancy Fee
The fee may not apply if the dwelling was unfit for occupation for at least 183 days due to:
Damage, fire, or ongoing major renovations.
Legal restrictions or court orders (such as probate) prohibiting occupation.
The long-term resident (e.g., the owner) being absent due to long-term medical or aged-care treatment.
5. Risks of Non-Compliance
Deemed Vacancy: If a return is not lodged on time, the property may be "deemed" vacant by the ATO. This means the vacancy fee becomes payable regardless of the property's actual usage.
Financial Penalties: Failure to lodge may also result in the issuance of infringement notices and additional administrative penalties from the ATO.
Source of information: Australian Taxation Office (ATO) current guidance on the Vacancy Fee Return for foreign investors.
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