Frydenberg launches fake crackdown on illegal foreign property sales

In December 2018, a parliamentary committee into Managing Compliance with Foreign Investment Obligations for Residential Real Estate slammed the Australian Tax Office (ATO) for failing to enforce rules precluding foreign nationals from purchasing established Australian homes:

Despite at least 877 breaches of the country’s foreign ownership laws being uncovered in Victoria, the Australian Taxation Office has failed to land a single criminal prosecution since tough new laws came into effect more than three years ago…

Labor MP Julian Hill, the deputy chairman of the Public Accounts and Audits Committee, said it was “astonishing that there had been no prosecutions”…

This followed a parliamentary committee’s finding that not one intermediary facilitating illegal foreign sales (e.g. real estate agents, developers or conveyancers) had been prosecuted by the ATO.

Fast forward two years and Treasurer Josh Frydenberg is talking tough on stopping illegal foreign purchases of Australian homes:

The Morrison Government will launch a new Tip Off and compliance campaign, to ensure foreign investors purchasing residential real estate in Australia are doing the right thing, and those that breaking the rules are subject to appropriate penalties…

The Tip Off campaign continues to build on the Government’s reforms to strengthen Australia’s foreign investment framework. This follows legislation passed by the Parliament that introduces higher infringement notice penalties for residential land valued over $5 million to support more effective enforcement, as well as new civil penalties and infringement notices for providing false or misleading information…

Australians expect their Government to maintain a high standard of enforcement in order to safeguard Australia’s national interest, businesses and the economy.

If you have information about someone who may be breaking the foreign investment rules or you have concerns about suspected illegal behaviour and activities by foreign persons relating to their ownership of Australian residential real estate, you can make a confidential tip off by calling the Australian Tax Office’s hotline on 1800 060 062 or completing the online tip off form.

If you are a foreign person and you have not followed the rules you should also contact the tip off hotline. There are strict penalties including criminal prosecution resulting in large fines or up to three years’ imprisonment for breaching foreign investment rules. Lower penalties may apply for foreign persons who come forward voluntarily.

This is pure tokenism on Josh Frydenberg’s part. How do we know?

First, Australia has refused to implement global anti-money laundering (AML) rules pertaining to real estate gate keepers (e.g. real estate agents, accountants, conveyancers, etc), despite promising to do so 14 years ago.

This has left Australia with the weakest property AML rules in the world, and has opened the way for illegal money to gush through Australian real estate:

Second, despite having the ability to financially penalise illegal investment in established housing by foreign nationals, as well as third parties that knowingly assist foreigners to illegally purchase Australian homes, the ATO has failed to prosecute.

It is astonishing that the ATO can vigorously pursue small businesses and individuals for minor avoidance or errors in tax returns, but turn a blind eye to illegal foreign buyers scooping-up Australian homes, along with their enabling real estate agents.

When combined with its soft touch on AML rules, it is clear the Australian Government has little interest in actually policing illegal foreign buyers of real estate, and is complicit with the dirty money flooding into Australia’s homes and robbing young Australians of a housing future.

Unconventional Economist
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Comments

  1. GunnamattaMEMBER

    It is now nearly 8 Years since Mr Chodley Wontok slapped in an application to FIRB to buy a slice of Australiana out Vermount South way in the burbs of Melbourne.

    The initial impulse to go through and slap in an application came from a regular discussion at Macrobusiness about just how bullet proof the FIRB review process was.  The RE sock puppets said it was foolproof, a number of RE insiders and public servants said there was not a hope in hell it was foolproof.  I was told from within Treasury there was a Part Time EL1 and 2 APS4s going over real estate applications.  There were youtube videos of Chinese guys rocking up at auctions in Balwyn and opening suitcases full of cash after blowing bidders out of the water, there were regular reports of Non English speaking peoples blowing ordinary everyday Australians out of the water, and there was an endless supply of anecdotal evidence that housing was being pushed beyond the reach of ordinary Australians and that foreign buying was a factor in this……

    That led to the Macrobusiness post

    Understanding foreign property purchases
    https://www.macrobusiness.com.au/2013/03/understanding-foreign-property-purchases/

    and Mr Wontok went in…….(on a Friday afternoon)

    On the Monday Morning the reply came through, and led to a piece at Macrobusiness

    FIRB’s foreign property buyer fail
    https://www.macrobusiness.com.au/2013/03/firbs-foreign-property-buyer-fail/

    and it went up as the lead story for about 3 hours on the Age website before it was buried as the Real Estate lobby phoned in to hush the news

    Non-existent man granted leave to buy $598,000 house

    https://www.domain.com.au/news/nonexistent-man-granted-leave-to-buy-598000-house-20130327-2gu0p/

    Since then there has been a Senate inquiry (where Mr Wontok was asked to appear but declined), then came the Kelly O’Liar Review, and out of that review came the Joe Hockey ‘dob in a foreign buyer’ promo piece.  Then came an ATO request for all real Estate sales data for circa 30 years – which would be the basis for auditing Negative Gearing Claims and Foreign Purchases of residential real estate – in 2015.

    In all that time the only thing which has changed is that FIRB now charge circa 5K AUD for making an application to buy Australian real estate.  That precludes irritating members of the public from making faux applications.  But in all that time there has only been one forced sale of illegally foreign owned Australian abode, some Chinese Millionaire who had bought up big for a Sydney waterside mansion.  He was forced to sell, but sold it to a company and nobody ever did establish who controlled the company.

    So essentially in the 8 years that Macrobusiness – almost alone – has been raising this issue Sweet FA has happened to the actual process by which foreign corruption beneficiaries can buy Australian residential RE no questions asked.  Everywhere else it gets raised it gets raised as a throwaway.  It gets raised only in such a way as the media outlet can point to it to show it was raised, but since Chris Vedalago there has been almost no investigative journalism effort into exposing what surely is a disgraceful sellout of younger Australians by Australian politicians (both LNP and ALP) and no political accountability as a result. We have Royal Commissions into bank malfeasance and property developer corruption (both toothless admitedly), but we cant even acknowledge the corrupt money laundering our residential real estate market enables.

    It is time to put this issue completely to bed and insist that no purchase of Australian property can be completed without the purchaser being required to provide a passport or visa to prove right to own Australian real estate, and for the funds enabling the purchase of Australian real estate by foreign nationals to be certified as being free from corruption by Austrac or the ATO, as part of the conveyancing process.

    • I’m hoping that this charade goes on long enough for me to get some pension cash that will represent some return on taxes paid. France ASAP

    • Display NameMEMBER

      A friend of one of my sons said about 5 years ago that his father’s development company developed 150 to 250 acres at a time around Penrith specifically for Chinese sale. In fact the house designs were Feng Shui’d to ensure they appealed to Chinese buyers. These buyers would appear once the development was close to complete by the bus load and often buy more than one house and not infrequently for cash. When I was speaking to him they had completed at least Two developments previously and they had sold out in days. Hundreds of houses almost exclusively to Chinese buyers.

  2. robert2013MEMBER

    The people running this country are in fact a mafia. The only way we can beat them is by hitting the streets in large numbers and doing some damage.

  3. Reus's largeMEMBER

    I am sure that this is to expose the CCP by having people call in when they see “reds under the bed” or “the yelllow peril” moving in next door !

  4. Totes BeWokeMEMBER

    Report Matt Damon and Zac Efron, along with all the elites buying for insane amounts around the harbour.

    No wonder Turnbull, Wilkinson, Plibersek etal llloooovvvveeee immigration.

    When money is your God, you’ll even throw your country under the bus.

  5. I wouldn’t be surprised if the “hotline” was established just to alleviate FIRB employees boredom

  6. All the people in a position to dob have their fingers (and whole arm) in the pie. Haha, onward and upward potemkin Australian ‘government’. Mafia.

    Recently tried to acces the FHB Supersaver Scheme after a few years of saving. ATO process required pre-notice you were going to buy (with 1 year expiry) – yeh right, we have been looking for years. Making the fatal mistake of signing a contract (in a rush) first and not doing this we have copped the full red tape power of the ATO and despite it being our money and we are def first home buyers we are denied access to our own savings to help with deposit! If you manage to get the money out and validly use it for the house but in breach of the process they have established they hit you with 20% penalty tax on top of assessing it for tax at your marginal rate.

    Lesson: if you a small and not rich the ATO will whack you. If you are big or have friends in high places the ATO will look the other way everytime.

  7. Have a look at the forms you’ve got to fill in.

    See the ATO website: https://www.ato.gov.au/General/Foreign-investment-in-Australia/Report-a-breach-of-the-foreign-investment-real-estate-rules/

    It’s not anonymous and you’d have to be pretty intimate with the person you are dobbing in – ATO wants you to tell them the phone number and social media handle status of the person …. I mean WTF???

    That’s as stupid as asking a 000 caller to get the first and last name of an armed assailant so the police know who to arrest when they get there …. in this case if they get there at all.

    • Display NameMEMBER

      This is the current LNP to a Tee. All those grants relief funds etc available under onerous qualifications. Designed to not be used. sh!tfcukery 101.

    • Not that I support this as the only method but you could do it via paper with no return address

      writing to us – mark your letter ‘in confidence’ and post it to:

      Australian Taxation Office
      Tax Integrity Centre
      Locked Bag 6050
      DANDENONG VIC 3175

      Provide as much factual detail as you can, so we can fully assess the information.

      Remember to make note of the reference number when you submit your tip-off form. You will need to quote it if you want to add any information later.

  8. Frydenberg is a miserable weasel blowing hot air with zero intention to take any real action.

    They don’t need anyone to dob in anyone.

    The tax office receives detailed information about every land transaction from the states and territories.

    They know exactly who is buying what and they can identify those without an entitlement to buy in seconds.

    https://theglass-pyramid.com/2017/03/04/australian-property-investors-beware-the-tax-mans-new-powers-cometh/

    https://theglass-pyramid.com/2017/03/11/nsw-secrets-gladyswho-is-buying-all-the-property-in-nsw/

    No surprise that the ATO also has done nothing about all those “secret” landlords who are not declaring income from rentals.

    It would be very simple to use the average tax return to detect all the rental income that is being paid but has not been declared.

    But we all know that when it comes to rorting there is nothing better than punting on Australian property.

  9. Since China has started confiscating iron ore licences held by Australian companies in Africa, it makes sense to start confiscating Chinese assets in Australia. Two can play this game.

  10. Jumping jack flash

    None of this would be necessary if the debt grew fast enough. The problem occurs when poor old Bob has a mega mortgage and needs to find someone with bags of cash/debt eligibility to transfer it to. If nobody in Australia qualifies for the amount of debt Bob needs to pay out his debt and recoup his equity and generate his expected amount of capital gain, then he needs to look overseas.

    The solution is to allow quiet Australians access to the correctly sized piles of debt to help poor old Bob out and make him a winner in the New Economy.

    There’s no risk to do it, so why not?

    Frydemburgers should focus on that side of the equation rather than patching up symptoms of the actual problem.

    • If mass Third World immigration were slashed, house prices will tumble down and the people won’t need a mega mortgage debt.
      However immigration must not be discussed… that’s the immediate problem.

      • Jumping jack flash

        In an economy based on debt, debt growth equals ecomomic growth, and the biggest container available for an ordinary quiet Australian to fit a load of debt into is a mortgage.

        If you want to fill an economy with debt you use the biggest container available.

        Mega mortgages are here to stay. The alternative is a drop in house prices which would be catastrophic for LVR due to the valuation methodology which would cause risk to spike and interest rates to rise and a cataclysmic destruction of the entire economic system.

        • Debt is fine, a house is too expensive to save the money, however house prices are exorbitant and the debt is no longer fine.
          A start needs to be made to the reduction of the mass Third World immigration program because it is the root cause of the massive household debt via house prices.
          There is no alternative, to continue the mass Third World immigration ideology will mean we become a Third World nation racially and economically.

      • Property prices were heading out of control (mid-late ’90s) before immigration skyrocketed (mid-00s).

        As with pretty much everything, while high immigration makes the consequences (much) worse, it is not the root cause.

        • smithy you are a ‘brown man’ apologist, zealots like you never fault mass Third World immigration to the West.
          Why don’t you go and live in China or India or one of the many other sh#thole countries, instead of advocating a replacement Third World population in Australia.

          There is a direct connection between Australia’s mass Third World immigration program and soaring house prices.

          https://en.wikipedia.org/wiki/Australian_property_market#:~:text=The%20average%20Australian%20property%20price,of%20a%20contracting%20economic%20bubble.&text=
          “The Productivity Commission Inquiry Report No. 28 First Home Ownership (2004) also stated, in relation to housing, “that Growth in immigration since the mid-1990s has been an important contributor to underlying demand, particularly in Sydney and Melbourne.”[18] This has been exacerbated by Australian lenders relaxing credit guidelines for temporary residents, allowing them to buy a home with a 10 percent deposit.”

          • Jumping jack flash

            Immigration, skilled and non-skilled, is a symptom of the debt economy not growing fast enough. The alternative is outright deflation.

            Once the debt is in the economy it is important that it stays there (and grows). To repay the debt faster than it grows is deflationary in a debt economy. The effect is to “remove” money from the economy by redirecting it to the banks where it cancels out portions of debt that was created in the past.

            Ideally new debt is created to repay the old debt, and the new debt amount is larger than the old amount so the total volume of debt in the economy increases, and that’s the growth.

  11. PalimpsestMEMBER

    It is puzzling. Once the ATO sets up a process pipeline for seizing and selling property or fining ‘owners’, the revenue stream should be cost-effective unless there are Australian Banks holding the mortgage.

    • Ahhhh yes, I’ll bet Australian banks are holding mortgages against these places. Westpac as a primary money laundering channel especially.

    • Yeah, it is PR issue management bullsh*t,
      At best it is irrelevant at worst it a active misdirection as they actively open up housing to foreigners.

  12. Yes–the number of scandals following one after the other suggests that a bit of nudging and winking is going on.

    But the table is a bit misleading: it seems to suggest that the UK, for example, is taking action on this stuff. Private Eye, for example, has repeatedly supplied evidence for the case that London is the money laundering capital of the world.