The media is abuzz today with reports about how the Government is coming after foreigners that have illegally purchased existing Australian homes.
A month after announcing its new surveillance/enforcement regime, which includes stiff new penalties to both buyers and third parties that facilitate illegal transactions, Treasurer Joe Hockey has released a statement calling on foreigners that have illegally purchased property to take advantage of an amnesty and declare their purchase before the new regime comes into effect on 1 December:
“Foreign investors who think they have broken the rules should come to us before we come to them. They will still be forced to sell the properties but will not be referred for criminal prosecution if they voluntarily come forward before 30 November”…
The statement warns that foreign residents who unlawfully purchased established homes face criminal penalties of up to $127,500 or three years imprisonment for individuals and up to $637,500 for companies, whereas third parties who knowingly assist a foreign investor to breach the rules will also be subject to civil and criminal penalties, including fines of $45,000 for individuals and $225,000 for companies.
The statement also notes that the ATO is investigating 195 cases where foreign investment rules on residential real estate may have been breached, including both the “prestige market” and “real estate in the suburbs of our capital cities”.
24 of those 195 cases being investigated are foreign investors who voluntarily came forward to the Foreign Investment Review Board (FIRB), whereas “another 40 cases relate to referrals from the community where members of the public suspect foreign investors may have broken the rules by using complex structures and illegal leasing arrangements to hide foreign ownership”.
The Australian Tax Office’s (ATO) data-matching program is reported to have identified one foreign investor linked to more than 10 illegally purchased properties, including a unit worth $300,000 and a $1.4 million house.
Meanwhile, the ATO is also targeting the 1.8 million domestic property investors who may be unlawfully deducting expenses and, in the process, reducing their tax bill.
According to a report in Domain, the ATO is most concerned about property investors in holiday areas who are deducting expenses when the home is not genuinely available for rent; investors claiming maintenance or renovation costs immediately, rather than over a number of years; as well as husbands and wives that split income and deductions so that the lion’s share of the tax benefit goes to the higher-earning spouse, even when the property is owned 50:50.
It’s good to see some action from the ATO, as opposed to the do-nothing approach taken by the other regulatory agencies, most notably FIRB.
