The fine handed down in this case is the first example using the new enforcement powers introduced from January 2021. This was to provide Treasury with new powers to prevent, identify and respond to instances of non-compliance with our foreign investment laws. In the past, the FIRB has only been able to enforce disposal of unauthorised properties or prohibit acquisitions, but didn’t have enough teeth to deal with non-compliance.
Foreign buyers generally require foreign investment approval before acquiring an interest in residential property, regardless of value – this approval is sought via lodgement of an application along with the relevant fee. The general guidance prohibits the acquisition of established residential properties – except under limited circumstances – however, encourages the addition of new (or near new) housing stock. Substantial renovations or knock downs and rebuilds will not qualify as new stock. Any acquisitions must also be notified to the Register of Foreign Ownership of Residential Land and disclose annually any liability for Vacancy Fees which may be payable if the property is unoccupied for more than half the year.
A foreign person (or entity) seeking to acquire or already holding residential property in Australia should consider the following:
- Review the FIRB Guidance Notes to understand the restrictions in place, and note significant penalties (including infringement notices, civil and criminal penalties) may apply for breaches of the foreign investment law.
- Foreign persons who think they may have breached the law by making unauthorised acquisitions are strongly encouraged to self‑disclose as lower penalties are likely to apply if a breach is self-reported.
- Foreign persons who are in breach may seek to apply for retrospective approval of the acquisition (particularly for acquisitions prior to 2015 when fees were applied to the application process).
- The FIRB encourages any person that suspects that foreign investment laws have been breached to report this through their anonymous tip off hotline.
In handing out its first penalty of this kind, the FIRB is sending a message to non- resident buyers that they need to comply with the foreign investment rules and undertake the application process before making any purchases.
In a prior article we explored how many Discretionary Trusts in Australia may inadvertently trigger the requirements of a Foreign Person when acquiring residential property.