On 27 November 2014, the House Economics Committee tabled its report on Foreign Investment in Residential Real Estate in Federal Parliament. This report was commissioned on 19 March 2014 by the Federal Treasurer in response to concerns about the impact of foreign investment in the Australian residential property market. Lawyer, Bahar Agar and Law Clerk, David Derbyshire, outline the report.
The Report found that the Foreign Investment Review Board (FIRB) suffers from a lack of timely data, inadequate investigation, weak penalties and a lack of resources.
It was concluded that these limitations have imposed a handicap on FIRB’s attempts to close a particular loophole through which foreign buyers purchase a home to live in as a temporary resident and fail to sell the property within three months of their departure. The report found that there have been no FIRB prosecutions since 2006 and no divestment orders since 2007.
The Report makes a total of 12 recommendations. The key recommendations are to:
- Retain the System - Retain the current residential real estate investment framework for foreign investors.
- Internal Administration - Improve the internal processes at Treasury and the FIRB to make it easier to audit purchases and enforce compliance with the framework.
- Administration Fee - Introduce an administrative fee for the screening of foreign purchases (of potentially $1,500).
- Civil Penalties Regime - Implement a civil penalties regime for breaches of the framework.
- Third Party Penalties - Penalise third parties (like lawyers and real estate agents) who knowingly assist a foreigner to breach the framework.
- Capital Gains Forfeiture - Require that any capital gains made from the sale of an illegally held property be forfeited to the government.
- Local Marketing - Require properties that are able to be sold off-the-plan overseas be marketed for an equal amount of time in Australia.
- FIRB Notification - Amend the Migration Act so that the Department of Immigration must inform FIRB when a temporary resident departs Australia upon expiry of their VISA.
- Citizenship + Residency Registry - Establish a national register of land title transfers that records the citizenship and residency of all purchasers of residential real estate.
It is unclear at this stage whether the recommendations will be adopted by the government and put into action. Piper Alderman will continue to remain informed of developments in relation to the Report and can be contacted via the numbers here.
To read the full Report, click here.