While the release of the 2015 Federal Budget displayed a strong focus on small business, child care and a crackdown on tax avoidance by multinationals, there are also considerable changes for foreign investors involved in the property market.

KEY ASPECTS

On 2 May 2015, the Federal Government announced a package of reforms to strengthen the foreign investment framework. This followed the release in February 2015 of an Options Paper which received 192 responses. At the time of this newsletter the Foreign Investment bills have been introduced to Parliament and are expected to apply from 1 December 2015. Key aspects include:

  • The Australian Taxation Office will be given responsibility for regulating foreign investment in residential real estate, including stronger enforcement, audit and compliance of the existing regulations.
  • Greater enforcement will be supported by enhanced data matching systems to detect instances of potential non-compliance.
  • A foreign ownership of land register will be established to monitor the level of foreign ownership of Australian real estate and land.
  • Application fees for foreign purchases of real estate will be introduced.
  • Additional and more stringent civil and criminal penalties will be introduced for breaches under the Foreign Acquisition and Takeovers Act 1975 (Cth).

NEW APPLICATION FEES

Application fees on all foreign investment applications will be introduced from 1 December 2015.

For residential real estate, the fees are as follows:

  • $5,000 for property valued under $1 million
  • $10,000 for property valued over $1 million
  • $10,000 incremental fee per additional $1 million in property value.

Other application fees for business and agriculture include:

  • $25,000 for commercial real estate
  • $100,000 for business acquisitions where the value of the target's assets are greater than $1 billion
  • $5,000 for rural land valued under $1 million
  • $10,000 incremental fee per $1 million in property value for rural land equal or greater than $1 million.

NEW CIVIL AND CRIMINAL PENALTIES

Tougher penalties for individuals, companies and third parties (including lawyers and real estate agents) who knowingly assist breaches will be introduced.

For residential real estate, the maximum criminal penalty for individuals will increase to $135,000 or 3 years imprisonment and for companies an increase to $675,000. The maximum civil penalty will be the greater of capital gain or 25% of the value of the property.

For business and agriculture investments, the maximum criminal penalties mirror those for residential real estate and the maximum civil penalty is $45,000 for individuals and $225,000 for companies.

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.