Australian Government Forces Foreigners To Sell Real Estate

The Australian Government has forced foreign nationals to sell over $100m worth of illegally acquired Australian real estate amounting to 61 forced sales. In February 2017, the Treasurer Scott Morrison ordered the forced sale of a further 15 Australian residential properties held by foreign nationals in breach of the foreign investment framework, taking the total number of forced sales to 61, with a combined value of $107 million.

See the list here.

The 15 latest properties are located in Victoria and Queensland, with a combined purchase price of more than $14 million. The foreign owners come from a range of countries including China, India, Indonesia, Iran, Malaysia, the United Kingdom and Germany.

Mr Morrison said, “The Turnbull Government is committed to enforcing our rules so that foreign nationals illegally holding Australian property are identified and their illegal holdings relinquished.”

A further 36 foreign nationals have sold properties during the course of Australian Taxation Office (ATO) investigations, showing improved compliance with the rules and a strengthening of the enforcement program.

The foreign nationals in the latest group of forced disposals purchased their properties without Foreign Investment Review Board (FIRB) approval and in some cases held multiple established properties in breach of the rules. The ATO identified these breaches through data matching programs as well as using information provided by the public.

Mr Morrison said, “The ATO has detected more than 570 foreign nationals who have breached the rules. This has resulted in forced sales, self-disposals, variations to previously approved FIRB applications and retrospective approvals with strict conditions. Breaches of these conditions will result in civil penalties or criminal prosecution.

“Under the Government’s enhanced penalty regime the ATO has issued 388 penalty notices to foreign nationals in breach of the rules, attracting penalties of more than $2 million. Penalty notices have been issued to people who have failed to obtain FIRB approval before buying property as well as for breaching a condition of previously approved applications.

“Another aspect of the foreign investment reforms announced by the Coalition Government was the introduction of fees for applications to the FIRB to ensure Australian taxpayers no longer foot the bill for screening foreign investment applications. Since introducing the new fees on 1 December 2015 more than $140 million has been collected to assist with this important program of work.

“The Government’s policy to channel foreign investment into new dwellings creates additional jobs in the construction industry, increases housing supply and supports economic growth.

According to Chinese property website Juwai.com CEO Charles Pittar, out of the $343 billion worth of property purchases approved by the Australian Foreign Investment Review Board (FIRB) since 2010, only $140 million worth of investments have had to be divested. “What does it mean? These new divestments mean that, out of more than 2,000 investigations of potential illegal home-buying since the process started, there have been only 61 forced sales. Just 3 percent of investigations find wrongdoing that forces divestment,” said Pittar. He further adds that the Australian Tax Office has estimated that 5 percent of rich Australians attempt to evade paying their taxes, and that when taken into context, foreign investors have behaved extremely well. Investigations are often started when a neighbour reports a property owner to a hotline. They might see someone has bought a house nearby, don’t seem to speak English or are new to the country.

The FIRB has a button on its website allowing a person to report a breach on line (including anonymously and there is a 1800 number: 1800 050 377.

For established dwellings, the FIRB guidelines state:

Non-resident foreign persons are generally prohibited from purchasing established dwellings in Australia. However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia. The purchase of an established dwelling in these circumstances would normally be conditional on the foreign person selling the property when they leave Australia, or cease being a temporary resident and do not become a permanent resident or an Australian citizen. Temporary residents cannot acquire established dwellings to rent out or for use as a holiday home.

Foreign controlled companies are generally prohibited from purchasing established dwellings, although foreign companies with a substantial Australian business may be permitted to acquire established dwellings for the purpose of providing housing for their Australian based staff.

Consistent with the aim of increasing the housing stock, foreign persons (both temporary residents and non‑residents) can apply for approval to purchase an established dwelling for redevelopment (that is demolishing the dwelling and constructing new residential dwellings in its place). These applications are normally approved on the condition that at least two dwellings are built for the one demolished.