Foreign investors forced to sell $100m of property

by Miklos Bolza07 Feb 2017
The government has forced a number of foreign nationals to sell 15 Australian residential properties after breaching the foreign investment framework.
 
“We’ve taken further action on ensuring that Australian home buyers get a fair go when it comes to buying whether it’s their first home or subsequent home by ensuring that our rules on foreign investment are enforced,” said Treasurer Scott Morrison in a doorstop interview yesterday (6 February).
 
In 2015, the government announced an amnesty for foreign investors who had purchased property illegally. From 2 May to 30 November, investors could notify the government and, although they would be forced to sell, would suffer no penalties as a result.
 
Since the end of the amnesty, the total number of forced sales has reached 61 with a combined total of $107 million. The 15 most recent properties were all located in Victoria and Queensland and have a combined purchase price of over $14 million, according to the Treasurer’s office.
 
“Over $100 million worth of residential real estate assets, owned and illegally acquired by foreigners, have been forced to divest. Another 15 properties today. And it’s not just at the high end of the market, it’s the low end of the market as well where many Australians are trying to get into the market,” Morrison said.
 
The foreign nationals – who come from countries such as China, India, Indonesia, Malaysia, Iran, the United Kingdom and Germany – purchased their properties without approval from the Foreign Investment Review Board (FIRB).
 
In some cases, foreign nationals held multiple investment properties in breach of regulations. These breaches were uncovered through data matching programs as well as information gathered from the public.
 
The Australian Taxation Office (ATO) has detected over 570 foreign nationals who have breached the rules, resulting in forced sales, self-disposals, amendments to previously approved FIRB applications and retrospective approvals with strict conditions.
 
Breaches result in civil penalties or criminal prosecution with the 388 penalty notices given to foreign nationals attracting penalties of more than $2 million.

Criminal penalties were increased on 1 December 2015 to $135,000 or three years imprisonment for individuals and $675,000 for companies. Additional civil penalties of up to 10% of the market value of the property can apply to foreign owners who purchased their property without FIRB approval after this date.

For those who purchased their property before 1 December 2015 without FIRB approval, criminal penalties include an $85,000 fine or two years imprisonment for individuals or $425,000 for corporate entities. Civil penalties of up to 25% of the market value of the property can also apply.

This new regime allows for a graduated approach to penalising foreign investors – ranging from issuing infringement penalties through to civil and criminal penalties. This lets the ATO match the penalty to the behaviours found.

“We’re trying to ensure, I think with some success, that our foreign investment rules are enforced on every occasion and for those who think they can creep in, and snatch away some property from the hands of Australian home buyers, well, we have got news for you, you will be forced to sell it and to do that forthwith,” Morrison said.
 
Related stories:
 
China injects $1 billion of “suspicious” funds into Australian property
 
How will China’s investment crackdown affect local property?
 
Foreigners continue to dominate commercial property

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