SIGNIFICANT CHANGES FOR FOREIGN INVESTORS
Changes to Australia’s foreign investment framework will make it much more difficult for foreign investors to acquire residential real estate and agricultural investments in our country.
If you have breached the rules you have until 30 November to come forward and fess up.
Depending on your circumstances, if you voluntarily come forward you will be given up to 12 months to sell the property and you will not be referred to the Director of Public Prosecutions for criminal prosecution….so you can see they are pretty serious about this issue.
Between now and 30 November the Government will be shifting the compliance and enforcement of the foreign investment rules to the Australian Taxation Office (ATO) and from 1 December 2015 the penalties increase. The ATO will improve compliance and enforcement through sophisticated data-matching systems and specialised staff with compliance expertise.
The announcements last month include the following:
1. Stricter penalties that will make it easier to pursue foreign investors that breach the rules.
The existing criminal penalties will be increased from $85,000 to $127,500 for individuals and divestment orders will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches of the residential real estate rules.
Third parties who knowingly assist a foreign investor to breach the rules will also now be subject to civil and criminal penalties.
2. Application fees for foreign investors will be imposed to ensure that Australian taxpayers no longer have to fund the cost of administering the screening of foreign investment applications.
3. Increased level of scrutiny around foreign investment in agriculture.
From 1 March 2015, the screening threshold for agricultural land was lowered from $252 million to $15 million (cumulative).
A $55 million threshold (based on the value of the investment) for investments in agribusiness will be introduced to capture certain downstream activities with links to primary production.
4. Increased transparency on the levels of foreign ownership in Australia through a comprehensive land register.
An agricultural land register with information provided directly to the ATO by investors will be established from 1 July 2015.
The Government is in negotiations with state and territory governments to use their land titles data to expand the register to include all land (including residential real estate).
5. A more modern and simpler foreign investment framework. The Government will undertake further consultation on options to simplify the system.
If you are a non resident or know of anyone who these changes may apply to, you are encouraged to voluntarily come forward to avoid the severe penalties that will apply. Penalties will ensure that any gains foreign investors illegally make on Australian property will be donated back to the Government.
Moving the compliance into the hands of the ATO means they will acquire even more data on property transactions. Big brother is watching closer than ever to ensure property owners are lodging and paying the correct amount of tax on property sales, rental income received from leasing properties and GST related issued where the property is developed or extensively renovated.
The lack of compliance with the foreign investment rules over the years means there may be a large number of foreign investors who are made to divest and sell their properties. The impact of these properties being put on the market with time limits on sale dates may provide purchasing opportunities and may change the state of the market. It will be interesting to see the impact.