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As part of a consultation paper designed to restore confidence in the foreign investment review system, the Federal Government has flagged fees payable by foreign investors in Australian residential real estate. The measures are designed to ensure foreign buyers are on a level playing field with domestic buyers.
The proposed fees will include a $5,000 application fee for property purchases under $1 million and will increase by $10,000 for each additional $1 million spent.
While many foreign investors are not expected to baulk at fees of this size, of concern is the message being sent to foreign investors in a competitive global property market. Those currently marketing Australian properties to offshore investors now have the challenge of selling these additional charges, along with the threat of significant penalties when investing in Australia.
It is expected the fees will collect $200 million each year in tax, with heavy penalties for non-compliance. At risk are fines of up to 25% of the value of the property and forced sale by foreign or forfeit the property. We’ve already seen the Government’s first scalp in the headlines with the forced sale of Villa del Mare in Point Piper.
The Federal Government also announced a significant reduction in the notification threshold that applies to the purchase of agricultural land by foreign investors from 1 March 2015.
The previous notification threshold amount of $248 million has been reduced to $15 million, with the changes expected to significantly increase the number of foreign investors requiring Foreign Investment Review Board (FIRB) approval.
A new approach has been taken as the new notification threshold will be cumulative, taking into account the total value of the agricultural land owned by the foreign investor.
A foreign ownership register of agricultural land is to be established and is intended to strengthen its reporting requirements regarding foreign acquisitions and to gain a better understanding of the level of foreign investment in agricultural land in Australia.
The Government has announced it will take public submissions on its proposals until 20 March 2015.