Australia’s foreign investment rules are supposed to limit the type of residential property that non-residents can purchase.
However, a residential real estate buyer has been penalised $250,000 after he was found to have purchased multiple properties in outer Melbourne without being authorised to do by the Foreign Review Board (administered by the Treasury & the Australian Taxation Office).
Six breaches of the Foreign Acquisitions and Takeover Act 1975 (FATA) were filed against the individual in July 2020, following an investigation that concluded four properties had been purchased without permission from the Board, while simultaneously owning two established properties. This is the first fine issued under the non-resident property purchase rules.
New compliance and enforcement powers that came into effect in January 2021 dramatically increased the penalties and action FIRB is able to take for non-compliance with the FATA.
Foreign individuals who are found to be in breach of the FATA can be penalised up to 25 per cent of the value of the property or have their capital gains recaptured, whichever is greater.
Under Australian law, foreign investors have obligations surrounding the residential real estate that they are investing in or looking to invest in. The ATO monitors this through FATA.
The ATO is the co-administrator of the Foreign Acquisitions and Takeover Act 1975 (FATA), and has been responsible for monitoring compliance of foreign investment in residential real estate since 2015. In the period 2015–2021, 434 properties have been disposed of as a result of ATO compliance action.
The ATO detects non-compliance by using systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies and community referrals.
Foreign investors generally require approval before acquiring an interest in residential land, regardless of value.
They can generally purchase newly constructed dwellings with few restrictions, whereas approvals for established dwellings are generally limited to the following and will normally be subject to conditions:
- Temporary residents can apply to purchase one established dwelling to use as their place of residence while they live in Australia.
- Foreign persons can apply to purchase an established dwelling for redevelopment if the redevelopment will genuinely increase Australia’s housing stock.
- Foreign controlled companies can apply, in limited circumstances, to purchase an established dwelling to house their Australian based staff.
Some exemptions that can apply to these requirements include
- Acquisitions of Australian land by Australian citizens not ordinarily resident in Australia.
- Foreign nationals purchasing residential property as joint tenants with their Australian citizen, New Zealand citizen, or permanent resident spouse (does not include purchasing property as tenants in common).