A foreign investor from the UK could be the second person forced to divest an Australian residential property following the Abbott government’s crackdown on home ownership rules in May.
The Foreign Investment Review Board (FIRB) has 195 investors under investigation for potential breaches of the foreign investment rules regarding residential real estate.
Of those, 24 are foreign investors who came forward voluntarily to flag they may have breached the laws.
One of the foreign investors, from the UK, is negotiating with the government to divest a property purchased for about $700,000 in Western Australia.
If the investor sells, it will be the second divestment since March when Joe Hockey foreshadowed the crackdown by forcing the sale of the $39m mansion known as Villa Del Mare in Point Piper, one of Sydney’s most expensive suburbs.
Villa Del Mare was owned by one of China’s richest men, the billionaire Xu Jiayin. He subsequently sold the house to businesswoman Lola Wang Li, in May, with a reported price tag of $41m.
The treasurer released an update of cases under investigation on Tuesday. Almost one fifth of the cases under investigation have come about as a result of tip-offs from the public.
Hockey said: “Another 40 cases relate to referrals from the community where members of the public suspect foreign investors may have broken the rules by using complex structures and illegal leasing arrangements to hide foreign ownership.”
Under Australian law, foreign investors are allowed to purchase only new residential properties, a policy which is purportedly designed to increase the housing supply.
In May, Hockey urged foreign investors to come forward ahead of a new regime of increased fines and criminal penalties to be introduced in December this year. Foreign investors who approach authorities before December will not face fines but will still be forced to divest.
From 1 December, foreign residents who illegally invest in residential real estate face criminal penalties of up to $127,500 or three years’ imprisonment for individuals and up to $637,500 for companies.
The government will also introduce a civil penalty to stop foreign investors capturing any capital gain made on divestment of a property.
Third parties who knowingly assist a foreign investor to breach the rules will also be subject to civil and criminal penalties, including fines of $45,000 for individuals and $225,000 for companies.
Following the transfer of real estate investigations from the Treasury to the Australian Taxation Office, inquiries have identified a foreign investor who appears to be linked to more than 10 properties ranging from a $300,000 unit to a house worth $1.4m.
