What counts as occupied for the vacancy fee, and which homes are exempt?

The 183-day test

The Act sets the fee for each dwelling that was residentially occupied on fewer than 183 days in a vacancy year. The days can be any combination of the three situations below. In a 365-day year, that leaves up to 182 days on which the home can be empty and not available to rent without the fee applying. The vacancy year itself starts on the occupation day (settlement for an established dwelling, or the later of the fitness for occupancy certificate and the right to occupy for a new one) and rolls over every 12 months. See how to lodge the return.

Three ways a day counts

1. The owner or a relative actually lives there. The Act says this applies whether or not other people are living there too. "Relative" has the same meaning as in the Income Tax Assessment Act 1997.
2. The home is actually occupied under a lease or licence with a term of 30 days or more. A tenant who is living there on such a lease counts.
3. The home is actually available for occupation under a lease or licence with a term of 30 days or more. The ATO treats a home as available if it is on the rental market, advertised publicly, and offered at a market rent.

A home does not need a tenant to count under the third limb. It needs to be actually on offer, with the ATO's three marks above. The 183 days also do not have to be one block. The ATO says they can be made up of several periods of at least 30 days each.

Short stays and holiday lets

Both the ATO and Treasury say a home offered only on short leases of less than 30 days, including through web-based stay sites, is not residentially occupied. Treasury's example is an apartment that its owner listed on a short-stay website. Most bookings were under a week, and the owner spent only six weeks in Australia. The total number of booked days was above 183, but the owner was still liable, because the bookings were not 30-day periods.

The owner's own stays are a different matter. Days when the owner or a relative actually occupies the home as a residence count under the first limb. Treasury's examples count the months an owner lived in the property. The Act asks whether the owner or a relative actually occupies the dwelling as a residence on that day. The 30-day threshold appears only in the lease and availability limbs, not in the owner's own use, so records of when the home was used are what an owner relies on.

How the day count works in practice

These are illustrations of the rule, not ATO examples.

The exemptions

Division 4A of the Foreign Acquisitions and Takeovers Regulation 2015 (regulation 43D) says the vacancy fee does not apply for a vacancy year where the home was occupied on fewer than 183 days for either or both of two reasons, supported by evidence:

• The dwelling was incapable of being occupied as a residence. That includes a dwelling that is damaged, unsafe or otherwise unsuitable, one undergoing substantial repairs or renovations, and one where a court, a tribunal or a law prohibits or makes occupation impracticable.
• A person who ordinarily lived there was away for care. The person can be the owner or someone else, such as a tenant. The absence has to be to receive medical care, residential care, or funded aged care in a residential care home.

Treasury's guidance lists two more situations: legal ownership of the property changed during the year, and the registered owner has died with the estate still being administered. The ATO adds that a return is not needed if the dwelling is sold or legally transferred (including on the owner's death), though details must be updated. An owner who claims an exemption still lodges the return and declares which one applies.

What the exemptions do not cover

Two limits matter. First, an exemption is lost for any year in which the owner is taken to be liable because the return was not lodged on time (regulation 43D(4)). Second, Division 4A contains only the two grounds above. It has no ground for an owner who is overseas, or for a home that is empty but not advertised.

A fee waiver is a separate, discretionary route. The Treasurer may waive or remit all or part of a vacancy fee if satisfied it is not contrary to the national interest (section 115H). The ATO says waivers are granted only in limited circumstances, expects all returns to be lodged first, and lists evidence such as travel documents, tenancy agreements and evidence that the property was occupied for 183 days or more.

For evidence generally, Treasury suggests tenancy agreements, tax returns or notices of assessment, a title search, bank statements, insurance certificates, and records showing the home was available for rent. Records must be kept for at least five years after the end of each vacancy year. The vacancy fee page covers the wider picture.

Frequently asked questions

firbapproval.com.au is an independent guide. It is not affiliated with, endorsed by or connected to the Foreign Investment Review Board, the Australian Treasury or the Australian Taxation Office. We do not lodge or process applications. Applications are made to the ATO. General information only, not legal, tax, migration or financial advice.