A vacancy fee return is not a tax refund claim or an optional property report. It is an annual reporting obligation for certain foreign owners of Australian residential property. Whether a fee is payable depends largely on how the dwelling was used during its own vacancy year, but lodging the return on time matters even where the property was occupied or rented.
For foreign investors, families with overseas ownership interests, developers and advisers, the rules can be easy to overlook because the vacancy year is not necessarily the financial year or calendar year. Understanding who must lodge, what counts as occupation and when an exemption may apply can help prevent avoidable compliance issues.
Who needs to lodge a vacancy fee return?
The vacancy fee regime applies to foreign persons who acquire an interest in residential land where the acquisition is a notifiable foreign investment action, or would have been notifiable but for an applicable exemption certificate.
In practical terms, the obligation commonly affects foreign persons who acquired Australian residential property after obtaining foreign investment approval, including where a property was purchased under a developer’s new dwelling or near-new dwelling exemption certificate. The obligation can continue for each vacancy year while the person remains a foreign owner of the property.
The first question is therefore not whether the property earned rent. It is whether the owner and acquisition fall within the foreign investment rules.
A person should review their circumstances carefully if they:
- applied for approval to buy Australian residential property as a foreign person;
- bought a new or near-new dwelling through a developer exemption certificate;
- own property through a company, trust or other ownership structure;
- have had a change in residency, citizenship or visa circumstances;
- co-own a dwelling with another person; or
- acquired land and later completed construction of one or more dwellings.
Australian citizens are generally not foreign persons for these purposes. However, residency and ownership structures can be more complex than they first appear. A permanent resident, temporary resident, company or trustee may need to consider the statutory definitions and their particular facts rather than relying on ordinary descriptions such as “Australian resident” or “overseas investor”.
The vacancy fee return is lodged for each relevant dwelling. If several dwellings are constructed on land, each dwelling may need to be considered separately.
A return is required even if no vacancy fee is payable
A common misunderstanding is that a return is only needed when a property has been vacant. That is not how the regime operates.
A foreign owner who is within the regime is generally required to lodge a vacancy fee return after each vacancy year. The return records the property’s residential use during that period, including days when it was:
- genuinely occupied by the owner or a relative as a residence;
- genuinely occupied by a tenant under an eligible lease or licence; or
- genuinely available for occupation on the rental market under an eligible lease or licence.
The return allows the Australian Taxation Office to determine whether a vacancy fee is payable. It is therefore possible to have no vacancy fee liability but still have a lodgment obligation.
Failing to lodge can have serious consequences. If the Commissioner is satisfied that a required return was not lodged, the owner can be treated as liable for the vacancy fee regardless of the actual number of days the dwelling was residentially occupied. The legislation also provides for civil penalties in relation to late or missing returns, false or misleading information, and inadequate record keeping.
The practical lesson is simple: do not wait to see whether a fee notice arrives. Treat the annual return as a separate compliance task.
How the 183-day occupancy test works
A vacancy fee may arise when a dwelling is residentially occupied for fewer than 183 days during its vacancy year. The relevant days do not need to be consecutive, but the type of occupation matters.
A dwelling is treated as residentially occupied on a day where one of the following applies:
- the foreign owner or their relative genuinely occupies it as a residence;
- it is genuinely occupied as a residence under a lease or licence with a term of at least 30 days; or
- it is genuinely available for occupation as a residence under a lease or licence with a term of at least 30 days.
This means a property can potentially meet the occupancy requirement through a combination of owner occupation, long-term rental occupation and genuine availability for qualifying tenants.
Short-term accommodation arrangements need particular care. Offering a dwelling for stays shorter than 30 days will not, by itself, satisfy the residential occupation test. Similarly, a property may not be treated as genuinely available for rent merely because it appears online. The availability should be real, public and commercially credible.
For example, an owner who lists a property at an unrealistic rent, imposes highly restrictive conditions, or repeatedly declines suitable tenants may have difficulty demonstrating that the dwelling was genuinely available to the rental market. Keep the evidence needed to support the position taken in the return.
The vacancy year is also important. It is a rolling 12-month period linked to the dwelling’s occupation day, not automatically the period from 1 July to 30 June.
For an established dwelling, the occupation day is generally the first day the owner has the right to occupy it. For a new or near-new dwelling, it is generally the later of the date a certificate of fitness for occupancy or use is issued and the first day the owner has the right to occupy the dwelling.
When an exemption from the fee may be available
There is an important distinction between being exempt from the vacancy fee and being exempt from lodging the return. In many cases, an owner still needs to lodge the return to establish that an exemption applies.
An exemption may be available where the dwelling was residentially occupied for fewer than 183 days because it was incapable of being occupied as a residence. The regulations give examples that include where the dwelling was:
- damaged, unsafe or otherwise unsuitable for residential occupation;
- undergoing substantial repairs or renovations; or
- unable to be occupied because occupation was prohibited or made impracticable by a court or tribunal order, or by Commonwealth, state or territory law.
An exemption may also be relevant where a person who ordinarily occupies the dwelling is absent to receive supported medical care or residential aged care. Evidence is required to support this type of circumstance.
The facts matter. Cosmetic work, a brief maintenance issue or a preference to keep a property empty may not be enough to show that a dwelling was incapable of being occupied. Owners should retain documents that demonstrate the nature, duration and impact of the issue.
Useful records may include:
- builder contracts, invoices and project schedules;
- photographs and insurance correspondence following damage;
- council, strata, court or tribunal notices;
- reports from qualified tradespeople or building professionals;
- medical or residential care documentation, where relevant;
- property manager correspondence;
- rental advertisements and listing histories;
- tenancy agreements, rental ledgers and inspection records; and
- utility records where they help explain the property’s actual use.
The law requires relevant records to be kept for at least five years after the end of the relevant vacancy year. Records must be in English, or readily accessible and easily convertible into English.
Ownership changes, co-owners and newly built dwellings
Changes during the vacancy year can alter the reporting position. If a dwelling is sold or otherwise legally transferred before the end of the vacancy year, the annual return requirement does not apply for that incomplete vacancy year. The owner should nevertheless ensure their foreign investment registration details are updated promptly.
Similarly, if an owner is no longer a foreign investor, they may not need to lodge a vacancy fee return for the relevant period, although the change in status should be updated through the appropriate foreign investment reporting process. The facts and timing of the change matter, so it is sensible to obtain advice where the position is unclear.
Co-ownership also needs attention.
Where foreign owners hold a property as joint tenants, one return can generally be lodged for the dwelling, provided the relevant co-owner lodges correctly for the same vacancy year. Where owners hold separate shares as tenants in common, each owner may have a separate reporting obligation.
Owners of vacant land do not need to lodge a vacancy fee return before a dwelling has been constructed. However, once a dwelling is completed and capable of occupation, reporting obligations may begin. If multiple dwellings are built, the owner should not assume that one return covers the whole development.
Lodgment timing, fee exposure and a practical example
The vacancy fee return must be lodged within 30 days after the end of each vacancy year. This deadline is based on the property’s individual occupation day, which is why relying on EOFY reminders can be risky.
The ATO administers the return through its online services for foreign investors. Owners should make sure their property and personal details are current before lodging, particularly after a sale, ownership restructure, change in foreign person status or construction completion.
If a vacancy fee is payable, the amount is determined under the foreign investment fee rules. For vacancy years beginning on or after 9 April 2024, the relevant vacancy fee is generally calculated as double the applicable foreign investment application fee amount. The precise outcome can depend on how the acquisition was made, whether an exemption certificate applied and the fees that would otherwise have been payable for the acquisition.
Consider a generic example. A foreign investor buys a newly completed apartment and becomes entitled to occupy it during the year. The property is advertised through an agent for long-term tenants, but the advertising only runs intermittently, the rent is set well above comparable local properties, and the owner also uses it for occasional short stays.
The owner should not assume that every day on the listing counts towards the occupancy test. They would need to assess whether the property was genuinely available for an eligible residential tenancy, retain evidence of the campaign and be ready to explain the rental terms. Regardless of the final fee position, the annual vacancy fee return should still be lodged by the deadline.
Keep the reporting obligation separate from your tax return
The vacancy fee return is separate from an individual income tax return, company return, trust return, BAS or rental property schedule. It is part of Australia’s foreign investment framework, although it is administered by the ATO.
That distinction matters for investors and advisers. A property accountant may have rental income and deductions records, while a conveyancer, property manager or foreign investment adviser holds other documents needed for vacancy fee compliance. Bringing those records together before the return is due can reduce the risk of inconsistent reporting.
The key takeaway is that eligibility to lodge is not the same as eligibility for a fee exemption. If you are a foreign owner of Australian residential property and your acquisition falls within the regime, plan to review the property’s use after every vacancy year and lodge the required return on time. Occupancy, genuine rental availability, ownership changes and supporting records can all affect the outcome.
This article is general information only and is not personal financial or tax advice. Vacancy fee obligations can depend on ownership structure, residency status, approval conditions and property use. Speak with a registered tax agent or accountant, such as, for advice tailored to your circumstances.