The Commonwealth Government has released an Options Paper setting out reforms it proposes to implement which considers charging a fee on all foreign investment applications to fund screening, compliance and enforcement activities and improve data collection around foreign investment.
Of particular concern, the Options Paper proposes to:
- introduce new civil and criminal penalties for breach of advanced off the plan certificates. For instance, the failure to market apartments in Australia or failing to comply with reporting requirements;
- introduce fees payable by the developer for obtaining an advanced off the plan certificate (note, no fees currently apply to applications); and
- limit the value of all apartments that can be bought by a single foreign investor to $3 million in any single development. However if foreign investors want to purchase apartments above $3 million they would have to seek individual approval.
The Government’s proposed introduction of fees for obtaining an advanced off the plan certificate would mean that purchasers who seek approval will need to pay:
Click here to view the table.
The Government’s proposed fee scheme would mean that foreigners who buy residential properties will have to pay a minimum of $5,000 and have the purchase approved by the Foreign Investment Review Board.
Will developers be able to pass on the cost of a pre-approval off the plan certificate or will they be required to absorb this new proposed cost? What if purchasers fail to pay this amount to obtain an approval?
The reforms also consider that if developers do not comply with the rules (such as failing to market apartments to domestic Australian buyers, failing to comply with reporting conditions or paying the application fee prior to processing a foreign investment application) they should not be allowed to profit from selling in breach of conditions imposed.
These proposed reforms have not yet been implemented and the Government welcomes submissions on the Options Paper, available on the Treasury website, by 20 March 2015.