Australian Federal Government Treasurer Joe Hockey announces proposed new measures to crackdown on illegal foreign property purchases.Today 8 August 2015, Joe Hockey Federal Government Treasurer, announced that the law will be changed so that foreign investors breaking the law and purchasing established properties (instead of new properties) will be forced to forfeit capital gains on the property and will be fined 25% of the purchase price or 25% of the property value. Temporary residents can still purchase existing properties to live in whilst they are residing in Australia so long as they sell the property if they permanently depart Australia.
There is currently a moratorium on criminal charges for foreign investors self reporting that they have broken the rules. However, those that have broken the rules will still be required to sell the properties.
It has been reported that 400 Australian properties are under investigation for being illegally purchased by foreigners. However, it is acknowledged that the vast majority of (Chinese) foreign property investors are complying with the Foreign Investment Rules.
The rules on foreigners purchasing Australian property are quite simple and easy to comply with. Non-residents must obtain approval from the Foreign Investment Review Board (FIRB) and generally can only purchase new properties. If they are a temporary resident they may be able to purchase an existing property to live in whilst that reside in Australia. The Foreign Investment Review Board may grant permission to purchase existing property for the purpose of redevelopment to increase the supply of property. However, it is unlikely that the existing property will be able to be rented out / leased whilst it is waiting to be re-developed.
The Government has already announced that it is introducing a new fee/tax for foreigners applying to purchase property in Australia. However, this is not expected to reduce demand from foreigners for Australian property.
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