The first penalty order for breaches of Australia’s Foreign Acquisitions and Takeover Act 1975 (FATA) has been issued by the Federal Court of Australia.
A foreign investor was fined $250,000 for purchasing multiple properties in outer Melbourne without permission. Another contravention of the FATA by this individual was simultaneously owning two established properties at once.
What restrictions are placed on foreign investors?
Under the FATA, foreign investors:
- Are limited in the type of residential property they can acquire in Australia.
- Must apply and receive permission from the Foreign Investment Review Board before acquiring property.
The role of the ATO
The Australian Taxation Office (ATO) is the co-administrator of the FATA and detects non-compliance by using systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies and community referrals.
The ATO has been responsible for monitoring compliance of foreign investment in residential real estate since 2015. Between 2015–2021, 434 properties have been disposed as a result of ATO compliance action.
Potential penalties
Foreign investors found to be in breach of the FATA face civil penalties to enable the government to recapture capital gain or 25% of the value of the property, whichever is greater.
The ATO’s message to foreign investors
The ATO has sent a clear signal that breaches of Australia’s foreign investments laws will not be tolerated.
“We welcome this decision as it is the first penalty decision under the FATA. This serves as a clear deterrent to other foreign investors who believe they can operate outside of the law.” ATO Assistant Commissioner Keir Cornish said.
“There are obligations under Australian law for foreigners that have invested in, or plan to invest in Australian residential real estate. The ATO promotes voluntary compliance of the rules by foreign persons, but where foreign investors resist compliance action, stronger enforcement action is taken.”
