Purchase of Residential Real Estate by Foreign Investors
May 09, 2022The Australian Federal Court has issued the first penalty order for breaches of Australia’s foreign investment rules, resulting in $250,000 in penalties: Commissioner of Taxation v Balasubramaniyan [2022] FCA 374.
A foreign investor has been penalised for purchasing multiple properties in outer Melbourne without receiving permission from the Foreign Investment Review Board (FIRB).
Foreign investors are limited in the type of residential property they can acquire in Australia and must apply before doing so. Foreign investors found to be in breach of the Foreign Acquisitions and Takeover Act 1975 (FATA) face civil penalties to enable the government to recapture capital gain or 25% of value of the property, whichever is greater.
The Australian Taxation Office (ATO) identified the purchases using its extensive data sources as part of a multi-faceted compliance approach to detect foreign investors in breach of the FATA.
The case shows the strength of ATO’s data driven approach to monitoring compliance with Australia’s foreign investment rules. The properties were sold as a result of ATO compliance action, making these houses available to Australian residents.
ATO Assistant Commissioner Keir Cornish said: “There are obligations under Australian law for foreigners that have invested in, or plan to invest in Australian residential real estate. The ATO promotes voluntary compliance of the rules by foreign persons, but where foreign investors resist compliance action, stronger enforcement action is taken.”
Before purchasing property it is important to ensure that you are not considered a foreign person for the purposes of the Foreign Acquisitions and Takeover Act 1975 and if you are considered a foreign person, that you confirm with FIRB whether approval is required.
Contact the Shire Legal team if you have any questions.
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