Foreign investors who purchase existing residential dwellings illegally, and third parties who knowingly assist, will face increased penalties under a new bill to be introduced into Parliament this Spring.
Coinciding a day after the Foreign Investment Review Board’s (FIRB) annual report showed a 95 per cent increase in applications by foreigners legally purchasing Australian real estate (‘Foreign investment propels Sydney, Melbourne property bubbles‘), Prime Minister Tony Abbott announced the strict new penalties. Foreign individuals breaching the law will face 3 years jail time and fines up to $127,500. Corporations could be fined up to $637,500.
Real estate agents, developers and third parties assisting with the illegal transaction will be hit with civil and criminal penalties up to $42,500 for individuals and $212,500 for companies.
While legal transactions have surged, it is unclear just how many illegal transactions are taking place. Part of the problem, according to the current government, is the Foreign Investment Review Board is under-resourced in the enforcement area with a lack of specialist investigative staff. The result – not one prosecution during the past 6 years.
Consistent with the consultation paper released in February (‘Australia set to tackle Foreign Investment Surge in Residential Real Estate‘), the Foreign Investment Review Board will be relieved of all residential real estate functions. The Australian Taxation Office with strong compliance and enforcement skills, sophisticated data-matching and a proven track record in pursuing court action will get the job.
The taxpayer will no longer foot the bill for screening and compliance operations, with a levy being placed on applications. Residential properties valued up to $1 million will attract a token fee of $5,000, with no further details released for more expensive properties. The February consultation paper suggested properties over $1 million would attract a fee of $10,000, with $10,000 increments for every 1 million dollars thereafter.
The Foreign Investment Review Board may not be entirely at fault, but rather a scapegoat for bad policy. In December 2008, three months after the collapse of Lehman Brothers and with Australia’s house prices down 4.7 percent, the Rudd Labor government ‘streamlined’ the administrative requirements of the Foreign Investment Review Board. With widespread economic panic, you would expect the government would have better things to be doing than streamlining administrative requirements, but as Australian’s would later find out, the legislation was designed to strategically open the flood gates for foreign buyers to purchase property unhindered and put a floor under Australia’s housing bubble. (‘Real Estate Investment by Foreign Residents : Top Secret‘)
Time will tell if the bill makes it into legislation, or if it’s just window dressing. The current government hopes these reforms will commence on the 1st December 2015.
» Government strengthens foreign investment framework – Prime Minister of Australia, 2nd May 2015.
» Australia set to tackle Foreign Investment Surge in Residential Real Estate – Who crashed the economy, 25th February 2015.
» Transparency returns to foreign investment in Real Estate – Who crashed the economy, 21st April 2012.
» Real Estate Investment by Foreign Residents : Top Secret – Who crashed the economy, 4th January 2012.
» Australia for sale – who crashed the economy, 27 March 2010.
i remeber reading a few years ago,foreigners are always the last investors befor a property crash
@ Karl
Doesn’t that make sense? The guys with the knowledge of the asset class know when to bail?
It’s that old saying “If the cab driver has stock tips, you know it’s time to sell”
Surely, to most, it seems crazy to be buying property thousands of miles away in a foreign land. We all know a few landlords that can’t maintain a property when it’s around the corner….but from thousands of miles away?????
When you look at foreign home owners in that light, it’s pretty obvious that this money is ‘hot to drop’ and using Australian property for wealth protection as much as it is for gain.
It will be interesting to watch how this pathetic “show of power” goes.
Presumably Brian Wilson could not be sacked, so he’s just been emasculated by transferring FIRB responsibility for RE to ATO.
@karl, in a way that’s good for Australia. They can take the losses from sudden price falls rather than local Australian. Poor foreigners impact the economy less than poor Australians. Sadly this is the “best case scenario” in my opinion.
BETTER LATE THEN NEVER…….LOL….
@karl, it does indeed reek of desperation from the government. They seem to be playing with this pay-for-residency idea too, which could somehow be tied into it. Shifting the deckchairs perhaps?
Pathetic effort by the Gov to catch only the really stupid. Asian crime syndicates using Aust. RE to launder money are not going register with the ATO so they can be investigated. They fly completely under the radar & never show up in the official stats. Perhaps using the Australian Federal Police might prove more fruitful, but then again their judgement seems to be a little off when it comes to “capital punishment”
True Karl. Who can ever forget the myriad of Poms who were handed their arse when the Spanish market collapsed. To their credit and despite the spruik, the UK property programs regularly repeated their warnings about the risks of buying internationally and this was during the midst of the boom! The punters always know best though.
Good part mentioning the also corrupt Rudd (Labor Party) administration. Many people would tend to often blame the also corrupt Abbott Liberal/NP Party) for the reason behind Australia’s property bubble. Both are guilty of gross incompetence and corruption along with those who vote for them.