Foreign Investor Fined $250,000 for breaching the Foreign Acquisitions and Takeover Act 1975

A foreign residential real-estate investor was recently fined $250,000 for breaching the Foreign Acquisitions and Takeover Act 1975 (“FATA”). The Federal Court found the individual to have purchased multiple Melbourne properties in Hoppers Crossing, Werribee and Aintree from 2016 to 2018 without notifying the Foreign Investment Review Board (“FIRB”), as required by the FATA. This investor has become the first person to be fined substantially for breaching Australia’s foreign investor laws.

An application to the FIRB and approval must be obtained first before non-residents are able to purchase Australian residential property. The FATA also restricts non-residents in the types of Australian residential property that they are able to purchase.

The Australian Taxation Office (“ATO”) lodged proceedings against the investor for six counts of breaching the FATA after a compliance investigation in July 2020, which revealed that the investor had purchased four properties without permission from the FIRB while also owning two other properties.

The illegal purchases were found to have amounted to $710,300 in capital gains. Justice Jonathan Beach of the Federal Court reasoned that general deterrence and the amount of these capital gains were factors which contributed to the hefty fine.

As of January 2021, new compliance and enforcement powers have dramatically increased the penalties and action that the FIRB is able to take in regard to non-compliance with the FATA. Foreign individuals can be fined by the higher value of either:

a)    up to 25 per cent of the value of the property; or

b)    have their capital gains recaptured.

As a part of their data driven approach to monitoring compliance with Australia’s foreign investment rules, the ATO uses extensive systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies and community referrals to flag potential breaches.

If you are a non-resident who is looking to purchase any property in Australia, please ensure that you approach a property lawyer or conveyancer who is not only experienced in property law, but one who is also experienced with foreign non-resident buyers.

At Titance Legal, we understand the importance of trust, reliability, expertise and competence for clients in their property needs. Whether it is purchasing or selling, our team will ensure you a seamless and stress-free experience through the provision of appropriate legal guidance and expertise throughout the whole conveyancing process.