Australia Tightens Foreign Investment Property Rules

by Mary Swire, LawAndTax-News.com, Hong Kong

28 April 2010

Australia’s Assistant Treasurer, Nick Sherry, has announced a major tightening of the foreign investment rules as they relate to residential real estate, together with a package of tough new civil penalty, compliance, monitoring and enforcement measures.

The new rules are being introduced in response to reported concerns of high property price increases due to foreign investor demand that could be forcing Australian residents out of the domestic housing market.

"The government is acting to make sure that investment in Australian real estate by temporary residents and foreign non-residents, is within the law, meets community expectations and doesn't place pressure on housing availability for Australians," said the Assistant Treasurer. "The new provisions will mean that anyone trying to flout Australia's strict foreign investment rules will face tough new penalties that will be fully enforced."

Australia's foreign investment regime is administered by the Foreign Investment Review Board (FIRB). Sherry’s announcement includes important amendments to the regime that ensures foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock, and investments in established properties by temporary residents, including those in Australia on foreign student visas, are only for their use whilst they live in Australia.

All temporary residents seeking to purchase an existing property in Australia will now be brought within the same FIRB notification, screening and approval process as foreign non-residents. In addition, temporary residents who are approved will now have to: compulsorily sell the established property they have bought when they depart Australia; and be required, where undeveloped land has been purchased, to commence construction on that land within 24 months or have the land compulsorily sold.

"International investment that boosts the numbers of houses available for people to rent is a good thing, and temporary residents living here should, within very strict rules, have the opportunity to buy a home – that's how it's always been," the Assistant Treasurer added. "The re-imposition of compulsory notification, screening and approval at the front end, and the forced sale of properties when temporary residents leave Australia, will ensure that investment is in Australia's interests, and in line with community expectations."

The government will also work to put in place, for the first time, a full civil penalties regime that will apply to breaches of the FIRB real estate regime. This will include a special penalty to recapture any capital gain made through an illegal purchase and sale of a property.

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