Judgement day arrives for illegal foreign buyers

By Leith van Onselen

Today is 1 December, which means that the amnesty on illegal foreign buyers of Australian residential real estate is over and the Government’s new penalty regime comes into effect.

From today, a foreign national that has been found to have purchased an established dwelling without prior Foreign Investment Review Board (FIRB) approval, or has failed to dispose of a property once they have left Australia (in the case of temporary residents), faces increased penalties, including:

  • Criminal penalty of $135,000 or 3 years imprisonment; or
  • Civil penalty of the capital gain made on divestment of the property or 25% of the purchase price or market value of the property (whichever is greater).

For the first time, third parties that knowingly assist foreigners to illegally purchase Australian homes will also face penalties of $45,000 individually or $225,000 for a company.

The new penalty regime is outlined in the below tables:

ScreenHunter_8168 Jul. 07 08.07
ScreenHunter_8169 Jul. 07 08.07
ScreenHunter_8170 Jul. 07 08.08
ScreenHunter_8171 Jul. 07 08.09
ScreenHunter_8172 Jul. 07 08.09

To help enforce the new rules, enforcement responsibilities were shifted from FIRB to the Australian Taxation Office (ATO) in May. The ATO has also been manned with 50 enforcement officers, and has sophisticated systems and detailed data matching capabilities at its disposal.

Already, the ATO is actively pursuing illegal foreign buyers. According to Treasurer Scott Morrison last month, “over 1,044 matters have been investigated [by the ATO]. Through information provided by the public, together with our own enquiries, we now have 532 cases under active investigation”.

The ATO has also already issued seven divestment orders on the below homes:

ScreenHunter_10416 Nov. 18 15.12

For too long, foreign buyers have been illegally hoovering-up established homes, which has helped create acute price pressures in places like Melbourne and Sydney, in particular:

ScreenHunter_10012 Oct. 29 12.24

Now that the amnesty is over, illegal foreign buyers and their accomplices have nowhere to hide. Bring on the penalties and divestment orders.

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Comments

  1. SoMPLSBoyMEMBER

    Can’t wait to hear the pleas for leniency and /or innocence. Wearing handcuffs can often encourage the most ‘creative’ phrases.

    • Can’t wait to see Lawyers and Real Estate agents get locked up. But we all know, despite the laws…. this won’t happen…………

      • Spot on Kurt. There is no way a single Real Estate agent will do a day in jail. We all know how you get away with fraud in this country.
        You do it out in the open in plane view of the authorities and they don’t prosecute because it suits them not to.

  2. I hope a few high profile RE agents get done

    blackdiamondz would be a start

    http://www.blackdiamondz.com.au/

    also…

    http://www.shawgroup.com.au

    We first met Mr Shaw in Hong Kong when we were considering investment in Australia, he made time in his tight schedule to meet with us briefly and form the groundwork for what has been a wonderful relationship to this day. Our company is one where analytics play a large role in the day to day decision making and to find a professional who could speak with considerable product knowldege as analytically and transparently as we required was a relief however the ingrained ability Lewis has to establish common ground and build a genuine partnership is what has stuck with us. Literally dozens of Skype conference calls later, at all hours of the night, we purchased our first riverfront home in Brisbane, every aspect from FIRB to international financing and arranging the right solicitors, inspectors and more was taken care of by Mr Shaw personally and for this, we cannot thank Lewis enough. We have since embarked on the purchase of further properties in Sydney, a location the Shaw Group doesn’t directly service, however Lewis personally introduced us to colleagues he has strong connections with who have been wonderful. Our highest recommendation is bestowed upon Lewis and his company, with our deepest thanks.

    and this disgrace…

    The property was sold, as promised to an international buyer without ever reaching the open market, which we couldn’t have been happier with.

    how could be dob these guys in to the ato for blatantly violating Australian law???

      • +1 As far as I know, ATO means business.
        We have been waiting for this day to come, it is a matter of delivering on their promises.
        It is time to show some integrity in decision making and promise keeping.
        C’mon ATO, do it for the sake of our kids.

    • If the riverfront home in Brisbane was “new”, then there is nothing illegal about the foreign purchase. If second hand and the buyer has or had approvals from the local council for demolition with a subsequent new build…then FIRB also saw this as fine and above board. This has been happening all over the country since the rules were changed in 2010. Current FIRB interpretation of the “new for old” rule is making this sort of scam much harder to get away with.

      • I understand that in a kind of rearguard action, councils in leafy areas are now refusing to give demolition permission if they find out there’s a foreign buyer in the picture, due to some especially blatant misuses in the past.

  3. ” The ATO has also been manned with 50 enforcement officers” and if they’re incentivised with an appropriate banker-style bonus scheme, then something might really happen!

  4. FiftiesFibroShack

    Looks like HighRiseHarry’s propaganda department is working hard over at Business Spectator. Seems to be a bit of panic setting in.

  5. funny they found that poor German dude who bought cheap place in the middle of nowhere just to look non-racist

      • Ixnay on the Races of Men thing… the correct nomenclature is ethnic group[s…

        Skippy… Races of Men is in the same box as flat earth thinking…

    • ErmingtonPlumbingMEMBER

      Bellingen is kinda remote, maybe he was a moslem Turkish German, setting up a terrorist training camp.
      Either that or he likes to grow dope, my mates mum used to grow heaps of it in that region in the late 80s, early 90s like all the other hippies up there.
      Undercover policing and Hydroponics just completly evaporated enormous amounts of Sydney money that used to flow freely to all those northern rivers communities, such a shame.

      • Theres a real wacko “christian” german church group that has a big compound up in that area …wonder if someone is killing two birds with one stone.
        Apart from that I’d also guess it’s something to do with dope, I remember taking a drive along the Bello river after the main road splitts off …beautiful countryside but the smell of dope was just hanging in the air everywhere…hippy heaven…compared with Bello, Nimben’s like a church choir

  6. ErmingtonPlumbingMEMBER

    I wonder if we will see Anti racist protests in the streets like we did when Abbott unleashed his brown shirts on illegal immigrants?.

    Instead of uni students and inner-city trendies it will be property investors and boomers defending these investor minority groups being victimised by the facist, I wana a house crowd.

  7. Lets hope the ATO fires off some paperwork today.
    Surely they would have had some suspect purchases ready to be prosecuted on day 1

    • A tax credit scheme would encourage the masses to join the fun. If you bring something to their attention and a conviction comes through then you get tax credits.

  8. I still say that the Australian Government is complicit in allowing illegal Chinese Yuan enter Australia, and is only bowing under bilateral pressure from China.

    The Chinese buyers are doing a great job in helping balance our National Account and as Bronwyn Bishop has shown, it’s only illegal if they get caught.

    Call me cynical, but unless China applies more pressure through TPP, these measures will make the wet lettuce look like the Rattan.

    They will just use trusts and other measures to shield from the ATO.

    • You could have a point Swiz.
      I mean, what took the government so long to introduce this crackdown when foreign purchases without permission has been illegal for years?

    • “They will just use trusts and other measures to shield from the ATO.”

      Perhaps but it’s a big step up in complexity to have a trust that the ATO can’t decipher versus previously just buying opening as an individual. Not to mention that it will be far harder to argue ignorance if they’re busted using such a structure.

    • Word man. I wish I was naïve enough to believe this will change anything. The company structure is still a loophole – so this is great policy to placate the masses with the idea that the Gov is doing something. All they are doing is getting the stupid mum and dad foreign investors, while the big cash sophisticated ones are still able to effectively investment in “existing” property.

      • “The company structure is still a loophole…”

        And what loophole is that? It may be possible to bypass it but breaking the law is hardly a loophole.

        http://firb.gov.au/files/2015/11/05_GN_FIRB_Nov_15.pdf

        A corporation is considered to be a foreign person if:
        • an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest in the corporation; or
        • two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest.

        A trustee of a trust is considered to be a foreign person if:
        • an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest in the trust; or
        • two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest in the trust.

      • So you have greater than 5 people as directors of beneficiaries of a trust which holds the company. Get around 20% rule. Easily done with families.

        Don’t forget the Robert Doyle (Melbourne Mayor) rule – use many different family members to buy properties in your name, the same way Doyle funds his campaigns from property developers, the get around the donation rules by having the large family units all donate to their threshold.

        http://www.theage.com.au/victoria/donations-fine-if-rules-followed-says-doyle-as-he-announces-hell-stand-again-20151112-gkxl76.html

      • I find your lack of faith disturbing.

        A local (company) can essentially be a silent partner holding the paperwork while the foreigner enjoys the property. That’s probably the way the Point Piper mansion was offloaded – Chinese billionaire gets caught so transfers the title to a ‘trusted’ local but still enjoys use of the property. Local pays rates, etc. and collects a small fee for being a ‘property manager’. Win win while Bazza and Shazza think the government is actually doing anything.

        The system will still be gamed until tigers and flies end up behind bars and assets confiscated.

      • Exactly MrMedved. No one is playing by the rules, if you think life works that way you are one of the people who are playing by them and getting angry wondering why people are getting away with murder. Our PM has tax havens, people play the game………… the rules are there to placate…… and stop the honest thief, but there numbers are pretty small in comparison……… welcome to the new world for those just waking up to it now………..

      • “A local (company) can essentially be a silent partner holding the paperwork while the foreigner enjoys the property.”

        Of course they can but whoever is involved locally is breaking the law (civil and criminal as of today) and the “true” foreign owner has no legal recourse to the property if there is a dispute.

        I’m not denying that some people will do this but I’m willing to bet my house that the vast majority won’t.

      • AB – you couldn’t prove illegality. If I was an ‘agent’ I’d purchase the property (in a company or trust – or foundation if possible) and ‘rent’ it to the foreigner. How would you prove the illegality?

        And you do really want to mess with a billionaire and rip them off? Fair chance they’ve been involved in criminal activity so wouldn’t be too shy of ‘knocking you off’ if you stiffed them.

      • Yes – just ask Uber.

        Come to think of it, will this whole saga create more activities / revenue / profits for SGH?

    • Companies and trusts are no loophole. They just make enforcement more difficult. This is something that could be in part cured by amendment requiring a reverse onus to be satisfied, were it that the current tools are inadequate. The amnesty and a corporate structure make the sentencing options much more unpleasant for those involved. This was cleverly done. Credit where credit is due, especially given the change in the conveyancing rules

      • Split into over 5 pieces in a trust / and or Co…… form a syndicate…….. simple….
        Or just use proxy residents…….hmmmm… there’s a business idea 😛 Selling out’s an Aussie value – won’t feel so bad about doing that 😛

      • Reverse onus and deeming provision-fixed. They are trying to do it with the conveyancing rules with the legal advisers having to advise as to the legalities of entering into a conveyancing transaction, and if not, an independent establishing of the identities of those 5 parties you postulate. A failure to do so could be gaol for all concerned.

  9. Not much MSM coverage. Odd. Should be of vital interest to anyone interested in the value of they live in now or want to live in in the future.

  10. The timing of this, the TPP, IMF reserve, none of it is a coincidence. It’s underhanded multilateral pressure on China to float her currency and open trade.

    • It’s got more to do with Joe Hockey being annoyed at the rorting by the Chinese in his locality.

  11. Why not bring in the death penalty?

    The Chinese are already quite accustomed to having this.

    Since we are going to be another province of China anyway, the way things are being allowed to unravel, why not bring it in now??

    Id bring it in for:
    1.Illegal property investment in Australia
    2.Real estate agents who are found to be complicit
    3.Any seller who knowingly sells to illegals.

    Robbing our kids futures in Australia – this deserves the death penalty.

    And before all the sheep scoff at such a thought, killing our kids dreams to me is akin to murdering part of their spirit.

    It would be really comforting to see more Aussies grow some balls and advocate for our children instead of the masses sitting on the sideline in fear of what……

    We are seen as a weak, pitiful nation in the eyes of those countries who have targetted us with such fervour, devouring what we have, with such opportunistic elegance and efficiency, but not willing to inject anything of positive nature domestically. Instead they offshore back to the homeland, and undercut our locals in competition for their jobs, and our local businesses are falling for it.

    And before you all call me alarmist, take a good close look at companies like 7/11 and spotless etc.

    Have a look at the stark change in our suburbs and where our local Aussies now reside in that landscape. All for the better?

    Now Ill be accused as racist. Ahh political correctness from those that live in a parallel universe, untouched, bubblized by insular mentality and comforts that real people can only point at…but not in envy, but pity.

    Over the bbq, our elders ponder, with verbage typical of that same cohort, with inaction at the fore.

    And we wonder why our youth have the disconnect?

    God help our kids.

    • ErmingtonPlumbingMEMBER

      From Northy, “It would be really comforting to see more Aussies grow some balls and advocate for our children instead of the masses sitting on the sideline in fear” and “Why not bring in the death penalty?”

      I’m hearing ya Northies, for symbolic reasons, I’d personally like to call for the adoption of Guillotining , for these ostentatious, poor driving, price haggling vampires, who are devouring the hopes and dreams of our youngins, although the coming budgetary crisis may make the construction of enough Guillotines difficult, so in that case, maybe, pitchfork wielding militia’s might be a more pragmatic option.

      It wasn’t only the morally just revolutionaries of French egalitarianism that liked these head chopping off machines.

      http://www.dailymail.co.uk/news/article-2538973/How-Nazis-slaughtered-16-000-people-guillotine-Found-Munich-cellar-death-machine-reveals-forgotten-horror.html

      God help our kids, Indeed.

      • Hi Erm,

        I can only hope others share my views.

        But given the growing political influence of overseas interests in local Australian policy, Im dubious.

        We need some serious, assertive, aggressive policy that binds Australians together, that identifies us and what we want for our kids, and what we see their future to be, WITHOUT pandering like pussies to overseas vested interests.

        It makes me sick to the stomach.

      • ” How can we expect righteousness to prevail when there is hardly anyone willing to give himself up individually to a righteous cause? “

        (Sophie Scholl, from that link EP).

        So, what’s changed today? We all want change, but no one wants to be the bunny to make the necessary sacrifices….
        And a telling comment in the section at the end:

        “I am almost 80 years old and never could understand how a country with citizens of such higher education could support a government that could do this to its people…”

        That applies equally to the economic destruction that is being wrought on our countries, every day….

      • ErmingtonPlumbingMEMBER

        @ Janet
        I was being a little sardonic in my reply to Northy. I do Not believe “the state” should have the right to execute its own citizens, even when so many, seem so deserving.

        I found a telling comment to be
        “It is often forgotten that, when the Nazis took office, they were initially cautious about using the death penalty. Their grip on power was not as firm as it would come to be and they were aware that public opinion might turn against them if they executed too many of their own citizens.”- the author here is referring to 1936-38 Germany,.. how fast things can change in only a short period of time eh.

        Thats where I think we are now globally (like Germany in 36). For sure Lots of Violence abroad to ensure the political supremacy of Neo-liberalism, but at home in the “Liberal Democracies” it’s a highly sophisticated system of indoctrination and propaganda that prevents a person “willing to give himself up individually to a righteous cause” from being effective in bringing about change.
        People need to learn what and who their enemy is before any “victory” can be achieved in the name of “Righteousness”.
        Our “True enemy” is not the Chinese middle class or Realestate agents, it’s a Global Institutional Process that’s taking over the world and setting the political agenda everywhere.

        https://www.youtube.com/watch?v=gsn-cMLs1O0

        We need an Aussie Norm Chomsky!

  12. A gaol sentence, a fine and a civil penalty for a wealthy multiple property owner would change the perception in an instant. (Should be in reply to Steernorth.)

  13. Andrew WilliamMEMBER

    With the foreign kleptocrat buyer pool drying up rapidly, the Government will make more money from pursuing the illegals than letting them purchase. Estimate is $9 billion of fines and levies are out there to be imposed.

    …as an aside…has anyone reported the suspicious purchase of 7 Wattle Street, Killara, 2071 at the weekend – $7 million and someone from mainland China bought it?? Could be legal….or not

    • I read that too. The Domain reports these ‘overseas Chinese buyer’ sales regularly.
      FIRB approval must be a cinch to get. Or did they even apply?

      “The biggest result of the day was the $7 million sale of a grand five-bedroom, five-bathroom house at 32 Wattle Street, Killara, which went to an overseas Chinese buyer. “It was $650,000 over the reserve,” said McGrath agent Philip Waller”

  14. Forrest GumpMEMBER

    is there a hotline where you can dob in an illegal overseas investor? I have a few addresses of where this has happened.

  15. It will be interesting to see if these divestment orders go to auction. If so, they could shift the clearance rate up, while prices continue to fall. Distressed selling at its best.

  16. Too late guys.
    The news is, an anonymous Chinese buyer just bought Parliament House – along with the contents. It was part of the Port of Darwin deal….

  17. So cue Shorten and wong declaring racisim at this legislation, like when the cattle station sale was denied, after a whisper in the ear from Kaptain Krudd reminding them he and they have a significant property portfolio to look after. And of course political donations from certain quarters to fund the next election campaign.

    “According to Treasurer Scott Morrison last month, “over 1,044 matters have been investigated [by the ATO]. Through information provided by the public, together with our own enquiries, we now have 532 cases under active investigation”.”

    The problem with this is that the ATO could be inundated with thousands of “tip offs” from the public, because the neighbor who moved in next door or the purchaser at auction dosnt look australian. So they will waste resources chasing many many tip offs that have no merit.
    If they would just enforce proof of citizen ship at the titles office before transfer of title.

    • Andrew WilliamMEMBER

      I am hopeful that with their sophisticated data matching which they have used successfully for tax evasion that they will know quickly whether it is an illegal purchase or not.

  18. To Steve (early post) and others who are sceptical about what the authorities have done and will do, do what I have been doing and do your bit. The illegals are easy to spot. Firstly, many have their homes on the market now in Balwyn, Balwyn North, Mount and Glen Waverley and other areas that have been popular. Giveaways include the use of an agent of foreign background, a re-sale after a recent settlement etc. Google the address and check the sales history and then inquire with agent via email and ask for a contract. If you follow this advice, my experience is that 8/10 contracts will have a Vendor of foreign background. Check the electoral roll…9/10 times I do this they are not listed. Bang. Most likely a temporary or non- resident and therefore highly likely this is an illegal ownership. Using that data….go to the link below and complete the form using the information gathered.

    http://compliance.firb.gov.au/compliance-reporting/

    You will receive a file number such as “D500”.

    You will also often read a contract that is deficient in some way including where names and details change depending on the document which could be designed to make structures opaque and levies such as Land Tax hard to administer. There are also links between conveyancy and legal firms and property spruikers…who’s have thought.

    Go on. Do it for your fellow Australian.

    • ErmingtonPlumbingMEMBER

      “Go on. Do it for your fellow Australian.”

      I like where you’re going with this Dav, Id like to add the need to form local militia’s that force their way into dodgy looking foreigners homes and force them each to individually scull down half a case of VB (12 beers),… if they Spew,… its immediate deportation back to where ever they came from.

      Australia, Love it , or leave it.

      • A tad harsh EP. What about judgement based on the appropriate use of ‘yeah, nah’ in a sentence.

    • What do you mean ” inquire with agent via email and ask for a contract”? Are agents in any way obliged to provide the details of a previous sale to random members of the public? How exactly do you ask them? “Hi I’d like to see a copy of the contract of sale for property x”?

  19. So here we are.
    1 Dec 2015
    The Big Day has come and gone
    Judgement Day for illegal foreign buyers.
    lol
    Nearly 2yrs since the KO’D inquiry into foreign investment in Australian dwellings was announced .
    Almost a year to the day since KO’D announced her recommended “crackdown”.
    1. We still don’t know how many Australian dwellings are owned by foreign nationals.
    2. There is still nothing preventing an unapproved foreign national from registering the illegal transfer of title of an existing Australian dwelling in their own name.
    3. There have still been zero prosecutions commenced in the last 9yrs
    4. The proven incompetent “asleep at the wheel” Brian Wilson is still Chair of the FIRB.
    5. The share of existing Australian dwellings being purchased by foreign nationals has INCREASED
    As predicted:
    The appalling lack of data continues
    The appalling lack of enforcement continues
    The sham continues

  20. I guess it all comes down to the ATO’s `Terms of Reference’ as dictated by the federal government who runs the money laundering service for dirty foreign funds into Australian real estate, that is the big ?.
    No doubt very limited powers.

    • Speaking of money laundering, where are the “include RE transactions” AML/CTF amendments at?
      2 sitting days to go.

  21. Pingupenguin…you simply act as if you are interested in buying the property and ask for a copy of the contract of sale. This will tell you who the vendor / owner is, when thye bought it etc and you can do your research form there…

    • Ah, so this would only apply to properties that are on the market and not after the fact?

      The reason I ask is that I know of houses in my area that have sold in the past year or two that are suspicious (not currently on the market) but without paying to get access to the title I have no way of checking on who the owner is.

  22. Yes, true. You may have to pay a small fee for that information. Small price to pay I think. I have been doing it. I have also been finding other ways to identify the owners, like accidentally seeing what the mailbox contains…you know by accident.