The Assistant Treasurer, Senator Nick Sherry, announced on Saturday 24 April 2010 a major tightening of the foreign investment rules as they relate to residential real estate and temporary residents.

In addition, a package of tough new civil penalty, compliance, monitoring and enforcement measures were announced.

An update will issue once the amending legislation is introduced to Parliament.

Overview of changes

All temporary residents seeking to purchase an existing property in Australia will now be brought within the FIRB notification, screening and approval process.

Temporary residents will be required to notify, be screened or be approved by the Foreign Investment Review Board (FIRB). As a result of these changes, temporary residents are subject to the same compulsory notification, screening and approval requirements required of foreign non-residents.

In addition, temporary residents will now have to:

  • comply with the reimposition of compulsory notification, screening and approval prior to acquisition;
  • compulsorily sell the established property they have bought when they depart Australia; and
  • be required, where undeveloped land has been purchased, to commence construction on that land within 24-months or have the land compulsorily sold.

These changes undo many of the previous changes enacted the Federal Government in Dec 2008. An overview of the previous changes can be found at:

http://moorestephensresources.com.au/articles/128/1/Making-it-easier-for-foreign-persons-to-buy-Australian-real-estate/Page1.html

The Press Release makes no reference to the reintroduction of the restriction that prevented student visa holders from purchasing a property valued at over $300,000 being reintroduced.

New civil penalties regime

As part of the new civil penalties regime, the Government will introduce:

  • sanctions for purchasers, sellers and agents for being involved in transactions in breach of FATA;
  • an explicit compulsory divestment requirement where property has been purchased in breach of the real estate investment regime; and
  • an additional monetary penalty equivalent to any capital gain made by the breaching purchaser at the time of the forced sale, with the capital gain to be measured in accordance with the relevant tax legislation.

The FIRB will also undertake a significant new program of rolling three-way proactive data-matching using FIRB data, State and Territory lands and property office transactional data and Commonwealth Department of Immigration and Citizenship (DIAC) visa status data. This program has already commenced in Sydney and Melbourne.

Other issues

  • The Press Release makes no reference to the timing of these changes – however one would expect that the proposed changes are effective immediately.
  • Transitional rules:
    - Existing property owned by temporary residents - will it be subject to these new rules?
    - Property that has been purchased, but not yet settled - will it be subject to these new rules?

Questions

Please contact Michael van Schaik, Associate Director, Employment & Remuneration Services - phone: (03) 9614 1444