Buying an Australian farm or residential apartment is about to get more tricky and expensive for offshore investors, with the Abbott government set to raise more than $200 million in new fees on foreign purchases of local real estate.
Prime Minister Tony Abbott has released details of a new framework for regulating foreign purchases of Australian properties amid heightened concern that the residential property market is overheating.
Mr Abbott said the government wanted to strengthen the restrictions on foreign ownership to make it easier for Australians to realise the dream of owning a home.
The reforms were unveiled by Mr Abbott in Sydney which he said was “the epicentre of real estate pressures”.
While insisting that foreign investment was in the national interest, Mr Abbott said “it can’t disadvantage Australian home buyers”.
The reforms aim to address public concerns that foreign investors are ignoring ownership restrictions in the residential property market and might be fuelling the rapid rise in property prices.
“Australia’s foreign investment policy for residential real estate is designed to increase Australia’s housing stock,” Mr Abbott said.
“This policy remains appropriate, but a lack of compliance and enforcement of the rules over recent years is threatening the integrity of the framework.
“We need to make sure that all foreign investors are following the rules, and that those foreign investors who break the rules are not able to profit from breaking the law.”
Under the government’s planned changes, foreign investors who breach the tightened restrictions will be exposed to higher civil and criminal penalties running potentially into millions of dollars.
Mr Abbott said the government was also tightening the approval process for foreigners wanting to acquire rural land.
From March 1, all rural property valued above $15 million will need to be approved by the Foreign Investment Review Board.
This is a big change because the current threshold for FIRB approval of rural land purchases is $252 million.
The government is proposing to establish a special team of investigators within the Australian Taxation Office to enforce the new compliance regime.
The reforms also include a new national register that will identify the foreign-based individuals and companies that own farms and residential properties in Australia.
A raft of new application fees will be imposed on foreign buyers of most types of real estate. Treasurer Joe Hockey said the government expected to raise an additional revenue of $200 million a year from the new fees.