Foreign investors will be slapped with new administrative costs and exposed to higher penalties if they fall foul of ownership laws, under proposed legislation announced by the federal government.
Treasurer Joe Hockey has announced legislation aimed at overhauling Australia’s foreign property investment laws, following the government agreeing to all recommendations from a parliamentary inquiry into the issue.
The proposed legislation reflects changes outlined during this year’s federal budget, as well as outcomes arising from consultations with the property industry and the recommendations of the House of Representatives Inquiry into Foreign Investment in Australian Real Estate.
Under the draft legislation, foreign investors will pay a $5000 administrative fee on applications for residential and agricultural property purchases, with the funds set to maintain the new scheme.
More expensive properties will attract a higher fee.
Reacting to the announcement, the Property Council of Australia noted that this administrative fee is likely to raise far more than the scheme cost.
“We note that the new foreign investment fee regime is set to raise $200 million annually, three times the cost of administering the enhanced compliance measures,” chief executive Ken Morrison said.
The draft legislation also includes new civil penalties for agents and other third parties who “knowingly assist foreign investors to breach foreign investment rules”.
“Provisions currently exist under the criminal code for knowingly assisting another person to commit a criminal offence,” the government said in its response to the inquiries recommendations.
“Tougher penalties together with the increased compliance and enforcement regime will help deter non-compliance with Australia’s foreign investment rules.”
The maximum criminal penalty for individuals found to be in breach of foreign investment laws would be increased to three years’ imprisonment or a $135,000 fine, up from $90,000.
The maximum civil penalty was also increased to either the capital gain or 25 per cent of the value of the property – whichever is greater.
Other components of the draft legislation include transferring supervisory responsibilities to the ATO, the government confirmed yesterday.
The ATO will use its “sophisticated data-matching systems” to detect rogue foreign investors and agents, as well as its “experience in pursuing court action” to punish them.
The government also announced that it is working with the states and territories to establish a foreign ownership register of land, which is designed to better monitor foreign investment.
“Once the state-based data collections are established, these will replace information sourced directly from property owners,” said the government.
While acknowledging the government’s consultative approach when drafting the legislation, Mr Morrison made it clear that the changes would be unlikely to improve housing affordability in Australia.
“The proposed land register will be very beneficial to inform policy in the future and should be augmented by better data on housing supply,” he said.
“Stamping out illegal foreign investment activity isn’t the main game when it comes to issues around housing affordability.”