ATO goes soft on illegal foreign home buyers

By Leith van Onselen

Yesterday, a Senate hearing into Managing Compliance with Foreign Investment Obligations for Residential Real Estate heard that Victoria (read Melbourne) is the nation’s hotbed for illegal foreign purchases of Australian property. It also heard that the ATO has gone soft on enforcement. From Domain:

Victoria has seen 877 breaches in foreign investment regulations since 2015… The state makes up 55 per cent of the national total.

Some 18 of the top 20 postcodes for breaches are in Victoria, with Glen Waverley and Box Hill among the Victorian areas to make the top 10.

Education of investors – and “intermediaries” such as conveyancers – was highlighted as an issue, after deputy chair of the Joint Committee of Public Accounts and Audit Julian Hill asked why Victoria was leading the charge…

Questions were also raised over why developers, real estate agents or conveyancers were not being fined for breaches, or for not reporting “dodgy deals.”

“We do seek … to make sure that we have an intermediary sector than can assist rather than punish people for a lack of knowledge,” Ms Robinson said.

Nationally, 1067 financial penalties had been handed out for breaches to laws totalling more than $5 million.

There were also 316 forced property sales in the past two years.

Here’s more from The ABC:

Since May 2015, when the Federal Government announced a package of budget measures aimed at making it harder for people offshore to invest in Australia, there had been forced disposal of 316 properties worth about $300 million.

Mr Konza said this was a “significant amount of action”.

But Julian Hill, deputy chair of the Joint Committee of Public Accounts and Audit, said: “I’m not getting that sense of confidence that you interrogate this data in a proactive way,” adding that the agency needed to go after intermediaries, such as property developers, who are facilitating illegal purchases.

“Why out of all those breaches have you not prosecuted anyone?” Mr Hill asked…

Mr Hill noted, “The average $5,000 penalty is not much of a deterrent”.

He also asked whether so far, in the cases of the 316 forced disposals, the investors were able to keep the capital gain. Mr Konza responded, yes if there was a capital gain, but said he would take the question on notice to be sure.

That Victoria is leading the way in illegal activity is not surprising, given it has also led the NAB residential property survey for the past four years:

More importantly, this is pathetic enforcement by the ATO. $5,000 average fines and allowing illegal buyers to keep their capital gain is hardly a deterrent and represents a tiny cost of doing business.

Moreover, there has been not one prosecution of third parties (e.g. real estate agents, developers or conveyancers) for facilitating an illegal sale.

This comes despite 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), facing the following penalties under the legislation:

  • 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).

Third parties that knowingly assist foreigners to illegally purchase Australian homes are also supposed to face penalties of $45,000 individually or $225,000 for a company, under the legislation.

We already know that the Coalition Government has shelved 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, and similar warnings from AUSTRAC.

Now the ATO’s surveillance/enforcement actions against illegal foreign buyers have gone missing in action as well.

Clearly, the Australian Government has little genuine interest in policing illegal foreign buyers of real estate, and is tacitly complicit with the dirty money flooding into Australia’s homes and robbing young Australians of a housing future.

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  1. I don’t think anyone has been prosecuted. I don’t know how they can justify pulling a wage. Sack the lot of them. Why bother having any laws at all?

    • Why bother being a hard working Australian citizen who pays tax to the Government? Why bother working 9-5 like a slave, when working for an honest crust continues to get you nowhere?

      • Meanwhile ABC reports that over 1 Million Australians are suffering from unaffordable housing stress because of high house prices pushed up by these corrupt ATO officials letting foreigners push locals out of the market.

    • FiftiesFibroShack

      It’s obvious that the government and regulators (and previous governments, to be fair) essentially run protection for white collar criminals in sectors that are good for GDP.

      • +1…….Yep our pollies are deliberately running a protection racket for foreign white collar criminals in sectors that support our GDP. The vast families of Chinese triads associated with banking, drug and RE development money desperately needing to be laundered into countries such as Australia that protect them. Our rent-seeking politicians wonder why their falling in the polls….. “debt-slavery” for citizens, “protection rackets” for international criminals.

      • Fifties,
        You know that if I run over a crowd of people in my car I have “added to the GDP”. How much depends on how badly they are injured and how much time they spend in hospitals/physiotherapists/etc. Even the 20yrs I spend in jail will “add to the GDP”. It is a terrible way to measure “economic activity” as is following the US around the world and joining in their conjured up wars.

  2. So, our taxes are paying for an organisation with coercive powers (for us), which are not applied to foreign illegal actors.

    That p!sses me off a little.

    • They’ll pick on the people who pay their wages over a trifling laundry allowance, but laundry allowance for foreign money? Sure, no problem.

    • +many!
      In fact it’d p1ss me off a lot if I could find the emotional energy to be outraged. Sadly I can’t. This country seems to produce something everyday I should be outraged at and it is just too exhausting and depressing.
      In the lead up to the Vic election I got into several conversations with strangers, ala MB and his street talk series, all in their 60s-80s. The level of disillusionment with our pollies and governing bodies was astounding.

    • Glad I’m not the only 1. Especially since I’m forced to cough up quarterly installments of $3k or more to the ATO because of stocks that vest, yet same stocks got hammered this year. ATO don’t care, they just want their money, but foreign granny’s are too hard to prosecute apparently.

      Yet we have no problem issuing out robodebt to Australia’s who are on Centrelink. This country..

    • TailorTrashMEMBER

      Yes and when I owe the tax office a few hundred bucks they are quick to send notices printed in red threatening me with debt collectors …….
      Perhaps they are too busy and concerned with squeezing citazens for easy money to actually enforce our laws on foreigners who treat them with contempt.

  3. The ATO couldn’t give a f*ck about foreign purchases, they got what they wanted; data on who owns property going back 20 yrs enabling them to data match who’s not be honest on their returns for rental income and CG.

    • As far as I know they have never done anything with that data. When they collected it they could have nailed every last over milking negative gearer, most illegal foreign buyers, and a load of other tax avoiding types

      But what I was told was that they assembled a tream of people to start going through the data and then pulled most of the team members off to do other things a short while after they announced they were collecting the data.

  4. Wait till they need the $
    Don’t worry illegal foreign buyers will be paying big time
    They are keeping those juicy little babies for later
    It’ll be the same as “bottom of the harbour” from 1970s
    My mate I went to school with old man went to jail
    I caught up with my mate for a beer recently
    Every QC said there is no way you can be in trouble
    don’t worry they’ll be paying
    My mate said he never knew the gov would change rules and backdate them
    Now I know why he stayed in church for an extra hour while we waited in the car on a Sunday

    • Not being a smart arse, but do you know what “bottom of the harbour” involved; I have no problem with what Howard did.

  5. It’s OK, because they’re cracking down on normal taxpayers who make a mistake whilst complying with increasingly byzantine tax rules.

  6. It’s like living in Canberra and paying taxes to town planners who do nothing but tick developer plans and doodle in one playground.

  7. The same govt that dismissed a proposed Royal Commission into banks as a populist whinge and wouldnt establish a Federal ICAC. These are big factors in its unpopularity and are just free kicks for a new Labor Govt. Any inquiry into real estate, the public service or extending the Bank Royal Commission may well find more evidence of serious neglect from a Coalition Govt that repeatedly said nothing to worry about. Or in the case of illegal foreign purchases of real estate, said look at the great job we are doing. To listen to Kelly O Dwyer this area was mission accomplished years ago. Doesn’t look that way! I remember in the mid 80s, Keating and Hawke used to taunt the Liberals on tax evasion exposed under the Fraser Govt, the so called bottom of the harbour schemes and the Liberals struggled to avoid the embarrassment of that, was a major problem for their credibility as an Opposition. Likely to happen again

      • Correct. Never give a bludger an even break. OTOH, your scofflaw lawyers, RE agents and foreign kleptocrats who are just trying to get ahead deserve encouragement for their modeling of LNP values.

    • Nyleta,
      For those that cannot be bothered checking the link it is a report that the powers of FinCEN ( Financial Crimes Enforcing Network) have had their powers expanded to include all properties over $300K (wouldn’t buy a lot in Aust.). It came into effect Nov 15 2018. It is handy to remember that Al Capone (and many others) only went to jail for tax avoidance – not for murder and the other serious crimes they may have done.

    • Nyleta,
      For those who cannot be bothered clicking the link it is about expanding the powers of FinCEN (Financial Crimes Enforcing Network) to include all properties over $300K. It is worth remembering that Al Capone ( and many others ) only went to jail for tax avoidance, not for murder or other crimes they may have committed. It came into force 15/11/2018.

  8. ‘Nationally, 1067 financial penalties had been handed out for breaches to laws totalling more than $5 million.

    There were also 316 forced property sales in the past two years.’

    So on average each offending scumbag paid a $5K fine and out of the 1000 or so nailed, nearly 700 got to keep the property. Those who were forced to sell also got to pocket the CG! Some teeth.

  9. I grew up in Glen Waverley. We used to get Chinese people constantly knocking on the door and handing us business cards saying someone wanted to buy our house. There would be people in the driveway photographing our house every day. I once thought I’d get my own place near my parents but then every joint in the area went from a couple hundred thousand to multiples of millions. People there now talk about $1 million loans like it’s nothing, because that’s exactly what it gets you.

    • Jumping jack flash

      “A million (debt) dollars” just rolls off the tongue doesn’t it?

      Debt, laundered money (which could have been debt), whatever. Who knows or cares where it came from once its sitting in my bank account?

    • Across the road from where I used to live stood a 60s-style crap house in inner eastern suburbs. A Chinese couple offered $1.5m for it, probably half a million above market prices at the time; now about what it would go for, still insane.
      Public policy is to sell established suburbs to Chinese criminals and make you pay ridiculous amounts of a postage stamp-sized block in Tarneit or Pakenham and be told you’re living the Australian dream. Suck it up, princess – or as the fat bastard once said, get a better job!!!

  10. FiftiesFibroShack

    In 2016, when Treasurer Scott Morrison introduced this supposed crackdown on illegal foreign ownership, it looked like a political solution to growing public anger over obvious rorting. Another political ruse funded by the taxpayer to the detriment of the taxpayer.