From 1 January 2023, the Foregin Investment Review Board (FIRB) have advised that harsher penalties will apply to foreign investors who fail to comply with the residential land provisions in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).
HopgoodGanim has an experienced legal team with foreign investment and FIRB compliance expertise, as well as a commercial property practice. In this article, we discuss the changes to the penalties and the importance for individuals and Australian resident developers to be mindful of when dealing with interests in Australian residential land.
This was initially flagged by the Labor opposition in the lead up to the 2022 election. The amendments aim to alleviate pressures in the domestic housing market, whilst also generating an additional $2.3 million in government revenue.
In a press release, Treasurer Jim Chalmers noted that “anybody who flouts the foreign investment rules should be penalised”. Chalmers believes that doubling penalties “will make it less likely that foreigners break the rules, and enable stronger enforcement action if they do”. It is clear that the Labor Government is now seeking to crack down on foreign investors and as such has imposed greater penalties to be handed down by the FIRB.
The changes to the penalties can be summarised as follows:
| FATA Provision | Old Maximum Financial Penalty | New Maximum Financial Penalty |
|---|---|---|
A person (or developer) failing to advertise a dwelling in Australia and disposing of their interest in the dwelling to a foreign person. | 15,000 penalty units ($3,300,000) or 150,000 penalty units if the developer is a corporation. | 30,000 penalty units ($6,600,000) or 300,000 penalty units if the developer is a corporation. |
A foreign person:
| The greatest of either:
| The greatest of either:
|
A foreign person who is a temporary resident holding an interest in more than one established dwelling. A foreign person who is not a temporary resident acquiring an interest in an established dwelling. | The greatest of either:
| The greatest of either:
|
A foreign person taking an action in relation to a residential land acquisition when prohibited by FATA. | The greatest of either:
| The greatest of either:
|
A foreign person breaching conditions specified in a notification relating to a residential land acquisition. | The greatest of either:
| The greatest of either:
|
A foreign person breaching a no objection notifications, conditions requiring notice or advertisement of sale of residential land. | 250 penalty units ($55,500.00). | 500 penalty units ($111,000.00). |
A foreign person failing to pay the vacancy fee return to the Commissioner of Taxation within 30 days after the end of the vacancy year for a dwelling on the land. | 250 penalty units ($55,500.00). | 500 penalty units ($111,000.00). |
A foreign person providing a false or misleading vacancy fee return. | 250 penalty units ($55,500.00). | 500 penalty units ($111,000.00). |
A foreign person failing to must keep records explaining transactions relevant to the vacancy fees for each dwelling in each year for at least 5 years after the end of each vacancy year (in English). | 250 penalty units ($55,500.00). | 500 penalty units ($111,000.00). |
Retrospective application?
For any contravention of section 95(1) of FATA, which prohibits foreign persons who are temporary residents from holding an interest in more than one established dwelling, the amendments apply as follows:
- If the contravention started before 1 January 2023, and did not end before 1 January 2023, the amendments apply; and
- If the contravention starts on or after 1 January 2023, the amendments apply.
In respect of all other provisions of FATA, the amendments only apply to breaches occurring on or after 1 January 2023.
Take home
Chalmers’ sentiment indicates that FIRB will have an increased appetite for imposing penalties on foreign investors. We caution foreign investors to be mindful of their obligations under FATA when considering residential investment in Australia. It is also important for individuals and developers in Australia to be mindful when disposing of their interests in a dwelling to a foreign person.
Foreign investment and FIRB compliance expertise
HopgoodGanim is an award-winning Australian law firm with a strong track record of obtaining foreign investment approvals and interacting with the FIRB. Our expertise includes providing FIRB legal advice, with FIRB lawyers experienced in FIRB approvals, FIRB applications, negotiating FIRB fees and applying legislation for businesses and investors.