Vacancy Fees & Property Usage (FIRB-Related Compliance)

If you are a foreign investor who owns residential property in Australia, you may be required to lodge an annual vacancy return and potentially pay a vacancy fee if the property is not occupied or genuinely available for rent for at least six months per year.

The vacancy fee regime is part of the Australian Government’s strategy to ensure that foreign investment adds to the housing supply and is not left idle. It applies to properties purchased under FIRB approval after 9 May 2017.

Failure to lodge a return or meet occupancy requirements can result in significant penalties and financial consequences — so it’s critical that foreign investors understand and comply with these rules.

Who Must Lodge Annual Vacancy Returns?

You are required to lodge an Annual Vacancy Fee Return if:

• You are a foreign person (non-resident, temporary visa holder, foreign entity); and

• You acquired residential property in Australia using FIRB approval granted on or after 9 May 2017; and

• The property is not exempt (e.g. commercial property or redevelopment sites)

Timing:

• The return is due within 30 days of each anniversary of the date you settled the property.

• It must be lodged annually with the Australian Taxation Office (ATO), even if you no longer own the property (within the year), or the property was fully occupied and you don’t owe a fee.

Note: Not lodging the return can automatically trigger a fee and penalties, even if the property was actually occupied.

What Counts as “Occupied”?

To avoid paying the vacancy fee, the property must be:

• Occupied or genuinely available for rent for at least 183 days (6 months) in a 12-month period

• The 183 days do not need to be consecutive, but must be within the vacancy year (based on your settlement date)

Acceptable Forms of Occupation:

• Occupied by the foreign owner or immediate family (e.g. children, spouse) for genuine residential use

• Leased to a tenant under a genuine arm’s-length rental agreement (not nominal rent)

• Listed for rent (e.g. with an agent or online) at market rate and available for at least 30 days

Not Acceptable:

• Short-term holiday letting (e.g. Airbnb) unless each individual lease is 30 days or more

• Property left vacant, under renovation, or held for capital growth only

• Listed for rent at above-market prices or with conditions that make it unattractive to renters

ATO Focus: They review listings, rental agreements, and even utility usage data to detect non-compliance.

How Is the Vacancy Fee Calculated?

If you fail to meet the 183-day occupancy rule, you may be liable for a vacancy fee equal to your original FIRB application fee.

Fee Examples (as of 2025):

• Property under $1M → FIRB fee: $14,100 → Vacancy fee = $14,100

• Property $1M–$2M → FIRB fee: $28,200 → Vacancy fee = $28,200

Fee increases with property value bands (up to hundreds of thousands for high-end properties)

This vacancy fee is payable annually if the property remains underutilised and a return is not correctly lodged.

How to Avoid the Vacancy Fee

To legally avoid paying the vacancy fee:

1. Meet the Occupancy Requirements

• Ensure the property is occupied or available for rent for at least 6 months a year.

• Keep evidence

  • Lease agreements

  • Rental income statements

  • Utility bills

  • Online rental listings

2. Lodge the Annual Vacancy Fee Return on Time

• Lodge online with the ATO via the FIRB portal

• Even if the property was fully occupied, you must still lodge

• Late or non-lodgement may result in the fee being automatically applied and penalties imposed

3. Apply for Exemption (if applicable)

You may apply for exemption if:

• The property was inaccessible due to natural disasters

• You had medical or compassionate grounds

• The property is undergoing genuine redevelopment

Exemptions are assessed case-by-case and must be substantiated with evidence.

Practical Tips for Foreign Investors

• Set a reminder for your vacancy fee return lodgement — it’s based on the property settlement anniversary, not financial year-end.

• Document everything — rental ads, leases, tenant details, or family occupancy.

• Engage a property manager who can ensure continuous leasing activity.

• Keep your FIRB approval number and property details accessible — you’ll need them for the return.

What If You Don’t Comply?

Failure to lodge the return or meet the occupancy requirements can lead to:

• Vacancy fee applied automatically

• Late lodgement penalties

• Interest on unpaid fees

• Criminal penalties for false statements

• Repeated non-compliance may trigger further FIRB scrutiny, ATO audits, and in rare cases, divestment orders requiring you to sell the property.