Effective from 1 December, the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 provides the Australian Taxation Office (ATO) with greater powers to investigate foreign purchases and enforce harsher penalties, such as a $135,000 fine or three years’ imprisonment for individuals found to have breached the law, while companies face fines of up $675,000.
Under the new laws foreign buyers will also have to pay an application fee to the Foreign Investment Review Board (FIRB) of $5,000 for a home under $1 million or $10,000 for homes over $1 million.
Federal Treasurer Scott Morrison said the tougher laws are not designed to discourage foreign investment in Australian real estate, rather to ensure Australia’s interests are protected.
"The Government welcomes foreign investment that is not contrary to our national interest. Without foreign investment, production, employment and income would all be lower,” Morrison said.
“But it is important that foreign investment is appropriately monitored to ensure that it benefits all Australians," he said.
In the opinion of Simon Henry, co-founder of Juwai.com, there was little need to strengthen the legislation over foreign buyers, but as long as the government is transparent with the application of the rules he doesn’t believe it will stop foreign money heading to Australia.
“I wouldn’t say there was a need to do so, but the government has so far managed to avoid going too far and discouraging investment, so it appears no real harm has been done,” Henry said.
“I don’t think the new fees will discourage many buyers in the current environment. Offshore buyers appreciate that Australia is a well-managed, rules-based economy. As long as the rules are transparent, fair and consistently applied, that’s a good thing,” he said.
While there have been some high profile cases of foreign buyers having been found to have breached the laws previously, Henry believes the new legislation has been introduced to placate the Australian public, rather than as a result of widespread corruption.
“Well, we haven’t seen any widespread circumventing of the rules. So far I think the government has only found a handful of cases,” he said.
“It seems like the biggest benefit will be to reassure some of the Australian public, rather than actually change foreign buyer behaviour, since the large part of foreign buyers have always followed the rules.”
Though he disagrees with the government’s claim there is a need for the new laws, Henry does agree that foreign investors, such as the Chinese ones Juwai.com is aimed at, are an important part of the Australian economy.
"Most Chinese find Australia a welcoming, attractive and friendly place to visit, live and invest in. China is the biggest consumer of all our top-five exports except natural gas – including iron ore, coal, education and tourism.
“They have also created jobs for hundreds of thousands of Australians in the construction industry. We’re a very lucky country to have such an investment-minded neighbour."