Towards the end of last year, it looked like the jig was up for illegal foreign buyers of Australian existing property.
On 1 December 2015, the Australian Tax Office’s (ATO) new surveillance/enforcement regime came into effect, which meant that a foreign national found having purchased an established dwelling without prior Foreign Investment Review Board (FIRB) approval, or having failed to dispose of a property once they have left Australia (in the case of temporary residents), faced 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 assisted foreigners to illegally purchase Australian homes also faced penalties of $45,000 individually or $225,000 for a company.
To help enforce the new rules, the ATO was said to have been manned with 50 enforcement officers to go along with its sophisticated systems and detailed data matching capabilities.
Initially, it appeared like the ATO was serious in its efforts to track down and punish illegal foreign buyers. We were told in November that the ATO had launched investigations over 1,044 cases of potential illegal foreign investment of which 532 cases were under active investigation as at December.
The ATO also lodged a notice in the Government Gazette in December, which demanded 32 years of detailed transaction history from Australia’s state and territory land titles offices and rental boards, in order to create a new central depository of data on property ownership and to help enforce the rules.
In January, Treasurer Scott Morrison fronted the media stating that the Government had forced the sale of another 8 homes that were illegally purchased by foreign nationals in contravention of Australia’s foreign ownership rules, with 800 cases also under active investigation. Morrison also talked tough about identifying and prosecuting illegal foreign purchases:
“The Government is committed to enforcing our rules so that foreign nationals illegally holding Australian property are identified by authorities and their illegal holdings relinquished”…
“The Government’s transfer of responsibility to the ATO for compliance has enabled more active investigations and actions targeting illegitimate purchases.
“Since this transfer in May, over 1,500 matters have been referred for investigation. Through information provided by the public, together with the ATO’s own enquiries, over 800 cases remain under active investigation…
“I once again warn foreign investors in residential real estate that they must comply with Australian law. Australia welcomes foreign investment but at all times foreign investors must comply with our laws,” Mr Morrison said.
Since his statement in January, however, there has been no update on the ATO’s investigations or enforcement actions.
Worse, as noted by MB reader Gunnamatta yesterday, it appears that cases of potential illegal activity have fallen into a void when passed up the command chain within the ATO, and that surveillance resources are being cut:
My understanding is that the team of people in the ATO doing the data match which was notified last May have been handing up names and addresses and that from there they drop into a void with nothing further heard. I am also told ( having just called a mate working there) that the team is being reduced with some personnel moved to other projects.
Another reader, David, noted that he has nominated a bunch of suspect purchases to the ATO but has heard nothing back after FOI requests:
I have nominated to the ATO at least 19 properties in Melbourne’s eastern suburbs where the owner (some very recent / new and some long standing) does not appear on the electoral roll indicating they are most likely a temporary resident. The names of the owners are exclusively of Chinese origin and some of these individuals own multiple properties. When buying, the transfer paperwork often states that their current address on the transfer is the address of the newly purchase property indicating they either do not own a property here yet or they do and they do not want to disclose it. All of this information is available on the public record and I am doing this in my spare time. FOI requests for the ATO information about the investigation progress has been denied on privacy grounds so I have made another FOI request asking for all FIRB application information on the same group of properties. If they are temporary residents then I assume an application has been made and can be disclosed. If not, my random sample of properties is highlighting a systemic problem with the Victorian and most likely NSW established property markets. I am yet to receive a reply from the second FOI request because the matter I assume is receiving serious attention in case it highlights what the pollies and enforcement agencies do not what us to know.
We are all being dudded and someone needs to call it for what it is and back the powers that be into a corner.
We already know that the Turnbull Government has deferred indefinitely the promised implementation of anti-money laundering rules for real estate gate-keepers, despite warnings from the global regulator, the Paris-based Financial Action Taskforce, that Australian homes are a haven for laundered funds, particularly from China.
Now it appears that the ATO’s suveilance/enforcement actions against illegal foreign buyers has been put on ice, possibly due to political interference.
It is, therefore, time for Treasurer Scott Morrison to end his silence and deliver a status update to the Australian people.
