There’s been a lot of fuss recently about the effect of foreign buyers on the Australian property market.
So it is interesting that over the weekend there have been a number of thought-provoking announcements.
You’d have to be living under a rock not to know what all the fuss is about, but if you want more details Pete Wargent wrote a great blog a few days ago about how Asian capital is driving our property markets.
Anyway… here’s a summary of these new initiatives:
ATO crackdown includes criminal penalties
Australian homes purchased by foreign investors over the past 10 years will be randomly audited by the ATO as part of the crackdown on foreign investment announced by Prime Minister Tony Abbott, saying:
“I’m determined to crack down on any illegal activity that could be putting upward pressure on property prices.”
From December 1, criminal penalties will be increased to $127,500 or three years imprisonment for individuals and to $637,500 for companies who are found to breach Australia’s foreign investment rules.
The government is also introducing a civil penalty to capture any capital gain made on divestment of a property to ensure people who break the rules will not profit.
Real estate professionals who knowingly assist a foreign investor to breach the rules will now also be subject to civil and criminal penalties, including fines of $42,500 for individuals and $212,500 for companies.
Investors will have until November 30 to come clean and sell their properties or face potential prosecution.
Australia’s investment regime generally does not allow foreign investors to purchase existing homes. For people who break the rules, penalties will be tougher under the crackdown, including possible jail terms.
“Those foreign investors have until November 30 to come forward and self identify. They will be forced to sell their properties, but they will not be subject to criminal prosecution.”
It will cost foreign buyers more to buy properties
Foreign investors will now also pay an application fee of $5,000 for residential properties valued at $1 million or less and higher fees will apply to more expensive residential properties as well as business, agriculture and commercial real estate applications.
Interestingly responsibility for foreign investment residential applications will be transferred from the Foreign Investment Review Board to the Australian Taxation Office, who will use data matching technology to check against databases held by the Department of Border Protection and Immigration and the Australian Transaction Reports and Analysis Centre.
The ATO will be issuing letters to individuals and companies suspected to be involved in breaches of the foreign investment framework, and will also conduct investigations of property sales reported to them by the public.
Foreigners buying houses in Victoria will be be required to pay new taxes
Also the Victorian state government wants to introduce a new tax in the upcoming state budget equivalent to 3 per cent of the purchase price of the property which is expected to raise $279 million over the four year plan.
Foreign housing investors will also pay an extra 0.5 per cent in land tax from 2016 on new and existing properties, raising $53.5 million over four years.
Permanent Australian residents and New Zealand citizens are exempt from the new taxes.