The Australian Federal Government has been cracking down on loop holes in foreign investment with stricter foreign investment rules in place since December 2015. Under the new regime, the penalties for breaking the rules are tough. Compliance to the new rules and its enforcement has been strengthend with the ATO aiming to cover more than 600 million transactions annually.
So how do you avoid getting on the wrong side of the ATO?
Do the new rules apply to you?
The Foreign Investment rules apply to ‘a foreign person’ who is defined as someone who is not ordinarily a resident in Australia. This includes overseas investors and businesses, student visa holders, corporations and trustees of a trust estate.
What has changed?
If you are a Non-Resident Foreigner, you are limited to buying new property in Australia with permission. Failure to acquire permission or acquiring established property instead of new property may result in criminal penalties of up to $134,000, 3 years imprisonment or both. New civil financial penalties are also attached to divestment orders.
If you are a temporary resident, you are allowed to buy established property in Australia to be used as your place of residence subject to approval. However, failing to seek approval or buying more than one established property will result in similar criminal penalties of up to $135,000 in fires, 3 years imprisonment or both.
For the first time, property developers and other relevant third parties will face fines if they help others in breaching foreign property investment rules. Individuals face fines of up to $45,000 while companies could be fined up to $225,000.
Check the table below to see a side by side comparison of the foreign investment rules and their penalties
New Application Fees
A new application fee has been introduced. Applicants will pay a fee starting from $5,000 for purchase of property valued at $1million or less before their foreign investment application is processed.
New Dwelling Exemption Certificates
New dwelling exemption certificates allow property developers to sell new dwellings in a development of 50 or more residences to foreign investors. Single foreign investors are now limited to a purchase of $3million dollars in value of all apartments that can be bought in one development. If foreign investors want to purchase apartments above $3million, you will have to seek individual approval.
What steps should you take?
Always check your residential status and the type of property you are allowed to invest in. Check out Verity Law’s handy checklist for foreign investment property to get a better understanding of how to navigate your investment property purchase or contact us for professional legal advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.