Foreign Investment Review Board Update
Foreign Investment Review Board Update
Foreign investment in the Australian property market is a vexed issue. While some have suggested that foreign investment is to blame for Australia’s high house prices, others believe that it it is unfair and unrealistic to point the finger at foreign investors for this issue. Regardless of your view, there can be no denying that Australia is more popular than ever for foreign investors, and particularly those from China.
The Gold Coast and Brisbane are among the top 10 international cities that are most attractive to Chinese property buyers. The value of foreign owned land acquired in Queensland during 2013/14 exceeded $1.6 Billion, with Chinese interests buying more that $450 Million of that.
The Government has targeted foreign ownership and investment of residential property as a key issue issue, and a number of recent announcements mean that foreign investors must ensure that they are aware of, and comply with, foreign investment laws.
Crackdown on illegal purchases
In late 2014 a parliamentary inquiry into foreign ownership recommended that the Government crack down on illegal purchases. To that point, only 17 foreign home buyers had faced sale orders pursuant to the Foreign Acquisitions and Takeovers Act (1975) Cth (FATA). It seems that this crack down has begun.
Treasurer Joe Hockey announced yesterday that the owners of the mansion “Villa del Mare” at Point Piper, bought for $39 million last year, had been the subject of a divestment order requiring the property be sold within ninety days. The order was made pursuant to the FATA, which requires foreign investors to notify the Treasurer (through the Foreign Investment Review Board (FIRB)) before purchasing real estate. While the property was purchased by an Australian company, that company was allegedly ultimately owned by a Hong Kong listed company.
Change to FIRB review system
In addition to the crack down, last week the Prime Minister announced a discussion paper including a number of proposed new changes to the FIRB review systems, such as:
- a $5,000.00 application fee for any foreign investor wising to purchase residential property under $1 Million;
- an additional application fee of $10,000.00 for each $1 Million of the purchase price above $1 Million;
- a new register of foreign residential and agricultural property owners;
- a new fining regime for illegal purchases;
- shifting the enforcement activities to a new unit within the Australian Taxation Office.
Interestingly, the proposed new application regime is significantly higher than the one recommended in last year’s parliamentary inquiry.
What should you do?
Breaching the FATA could have significant consequences for both buyers and their advisors. If you are a foreign buyer (temporary or non-resident), act for foreign buyers or are involved in the sale of property, you should speak to us about the requirements for buying property in Australia.
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