The Foreign Investment Review Board (FIRB) recently announced that the Treasury is enhancing its compliance arrangements for foreign investment.
“These arrangements are designed to provide strengthened assurance that foreign investors are meeting their obligations while minimising the regulatory burden,” the FIRB said in its official announcement.
“Recent years have seen a significant change in the foreign investment environment, including the size of investments being undertaken and the sectors in which investments are focused,” the FIRB said. “This has led to a higher proportion of applications being subject to conditions to ensure they are able to proceed without being contrary to the national interest.”
Ensuring that there is strong compliance with Australia’s foreign investment laws is a priority for the federal government.
“Treasury will be placing additional resources into foreign investment compliance, and will develop a revised compliance framework, undertake a rolling annual compliance audit program, and establish a clearer enforcement policy,” the FIRB said. “This is separate to the Australian Taxation Office’s delegated responsibilities for foreign investment, which focus largely on residential real estate.”
Because the language in the announcement is not entirely clear, Jane Lu, head of Australia for Juwai.com, a Chinese-language international property website, reached out to the FIRB to better understand its latest initiative.
According to Lu, foreign investors are not required to provide any new documentation or reporting as a result of this initiative. “There will simply be added post-transaction scrutiny to be sure that conditions have been met,” she said. “The initiative is focused on business mergers and acquisitions – not on real estate investment.”
“The FIRB apparently considers oversight of real estate investment to already be properly managed. In sum, on real estate, there is no impact from the new announcement,” she added.
The Australian Taxation Office (ATO) has been closely examining foreign real estate transactions to ensure that the investment framework is being adhered to.
“About 3% of scrutinised foreign real estate investments in Australia have been found to be improper. That reveals an extremely successful enforcement process,” Lu said. “In fact, wealthy Australians are believed to cheat on their taxes at twice the rate that foreigners knowingly or unknowingly break the FIRB real estate investment rules.”
“Chinese are the biggest foreign real estate investors in Australia and last year bought more than $31 billion of property. Even so, the Chinese still own a relatively small amount of property here because they have been in the market for less than a decade. American, British, and other foreign buyers own far more Australian property. In the years to come, we expect strong Chinese investment to continue as this investment gap is gradually closed.”
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Approved Foreign Investment Rises To $248bn
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