At present, the harshest penalty for real estate breaches is seen by some as a slap on the hand. Photo: Supplied
Foreign buyers face tough new penalties for flouting property ownership rules, as well as capital gains losses and cross-matching with immigration records, under likely recommendations by a parliamentary inquiry.
Foreign investment in residential property has been the subject of an inquiry, chaired by Coalition MP Kelly O’Dwyer, which has delayed handing down recommendations until late November to allow time for consultation with state governments about introducing a national property owners register.
Ms O’Dwyer told Fairfax Media the inquiry was considering beefing up penalties for foreigners who flout real estate laws, to make them proportional to the value of the property purchased.
“The largest penalty fee that can be imposed is about $85,000. We have been told by many witnesses that that is simply seen as the cost of doing business,” she said.
The inquiry was also likely to recommend that foreigners who are forced to divest a property lose the capital they have accumulated in the dwelling between buying it and selling.
The current system, which allows them to keep profits, was “clearly creating the wrong sort of incentive. It’s creating an incentive for bad behaviour,” she said.
Ms O’Dwyer renewed previous criticism about the performance of, and data collected by, the Foreign Investment Review Board, suggesting its information was flawed by assuming all foreigners followed the rules and submitted applications to buy property.
“I can’t see any explanation as to why it is that there have been no prosecutions since 2006. I’m a bit bemused at what processes exist there [in the FIRB],” she said.
Temporary resident visa holders are required by law to sell their dwellings once they leave the country.
But the Department of Treasury, under which the FIRB sits, submitted to the inquiry responses taken on notice suggesting it had not been able “in the time available … to determine the number of foreign investors who have voluntarily disposed of their properties”.
“We’ve gone back to them to say they’ve got a bit more time now, and we’re looking forward to their response,” Ms O’Dwyer said.
Treasury listed only three instances of foreigners – Russian, Bangladeshi and Swiss citizens – being prosecuted under the Foreign Acquisitions and Takeovers Act, all before 2006.
“Treasury is currently investigating the acquisition of foreign interests in 33 residential real estate properties. All of these properties are in the established residential category, with a small number involving very high-value established purchases,” it said.