The federal government said that although it welcomed foreign investment, strong rules are needed to maintain community support and a welcoming investment environment.
Tonight’s Budget revealed new and stricter penalties to ensure that foreign investors and intermediaries – which include agents – do not profit from breaking the rules.
The maximum criminal penalty has been increased to three years’ imprisonment or a $135,000 fine.
The maximum civil penalty has been increased to either the capital gain or 25 per cent of the value of the property – whichever is greater.
Company penalties in those instances would be up to five times severe.
The government also confirmed a new fee structure in tonight’s Budget, which will apply to all proposed purchases of residential real estate by foreign investors.
Investors will have to pay a $5,000 application fee for properties valued at less than $1 million.
Properties valued above $1 million will attract a base fee of $10,000 plus an incremental increase of $10,000 for each additional $1 million in value.
The government also revealed tonight that it will create a comprehensive land register to “provide for greater scrutiny and transparency around the level of foreign ownership in Australian agricultural land and real estate”.
Another measure announced tonight is that the Australian Taxation Office will have a role to play in the government’s strengthening of the foreign investment framework.
“The ATO will be given responsibility for regulating foreign investment in residential real estate, including stronger enforcement, audit and compliance of the existing rules,” the Budget revealed.
“Greater enforcement will be supported by enhanced data matching systems to pinpoint possible breaches.”
The government said the foreign investment system has failed to keep pace with changing demands and community expectations due to a lack of substantive reform in the past 40 years.
“There has been growing community concern around transparency and enforcement of the rules over recent years,” according to the government.
“The introduction of application fees on all foreign investment applications from 1 December 2015 will provide improved service delivery for investors and ensure Australian taxpayers are no longer funding the administration of the system.”