The Australian government is to introduce stricter enforcement of the rules controlling non-residents’ purchases of residential property. It has for some time been illegal for non-resident foreign persons to buy ‘established’ dwellings in Australia as investment properties or as holiday homes. They are however allowed to buy new build dwellings and vacant residential land for development. Also, temporary residents can apply for permission to buy one established dwelling to occupy while they are in Australia, but they have to sell it when they leave. This regime is intended to preserve the existing housing stock for permanent residents, while still allowing foreign investment in the construction sector. However, a report from the federal parliament’s Economics Committee has found that the rules are being circumvented by some foreign investors. It has made several recommendations to improve compliance, all of which the government has accepted in whole or in part: The Australian Taxation Office (ATO) is to take over responsibility for enforcing the residential property ownership rules. Civil penalties will be introduced for foreign investors who breach the rules. These will be in addition to the existing criminal sanctions, which are to be made heavier and will include prison terms of up to three years. These criminal penalties will also apply to third parties that knowingly assist foreign investors to breach the rules. Significant penalties will apply to foreign persons who are ordered to divest a property, and those who breach the foreign investment rules will not be allowed to profit from property disposals. This stops slightly short of the committee’s proposal that any capital gain from the sale of illegally owned property should be forfeited. Temporary residents will be forced to sell an established property within three months if it ceases to be their primary residence, even if they remain resident. The government is to set up a foreign ownership register of all land. The ATO has already begun collecting information on foreigners’ farming investments and will soon start collecting existing agricultural land ownership by foreign persons. An alert system for the expiry of temporary visas will be set up, so that the ATO can issue property divestment orders in cases of non-compliance. The government will consider extending Australia’s anti-money laundering legislation to cover residential estate agents. It will also enable greater sharing of foreign investment information with regulatory and law enforcement agencies.
Moreover, starting 1 December this year, all prospective foreign buyers will have to pay application fees. These fees will be collected by the ATO, and will also apply to business, agriculture and commercial property applications as well as residential property.
It will be interesting to see, if this action prompts further enhancements to the compliance regime operative in Canada.