Purchases of residential real estate by a foreign investor result in a penalty of $250,000

The first fines order for breaching Australia’s foreign investment rules was issued by the Federal Court of Australia, resulting in fines of $250,000. The foreign investor was penalized for buying several properties on the outskirts of Melbourne without receiving permission from the Foreign Investment Review Board (FIRB).

The Australian Taxation Office (ATO) identified purchases using its many data sources as part of a multi-faceted compliance approach to detect foreign investors in breach of the Acquisitions Act 1975 and foreign takeovers (FATA).

In July 2020, after a compliance investigation, the ATO initiated proceedings regarding six FATA violations by Mr. Vijay Balasubramaniyan, who purchased four properties without permission and simultaneously owned two properties established at the same time, in violation of FATA.

“We welcome this decision as it is the first sanctioning decision under FATA. It has a clear deterrent effect on other foreign investors who believe they can operate outside the law,” the deputy commissioner said. of the ATO, Keir Cornish.

“There are obligations under Australian law for foreigners who have invested or are considering investing in Australian residential property. The ATO encourages voluntary compliance by foreign persons, but when foreign investors resist compliance measures, tougher enforcement actions are taken.

Foreign investors are restricted in the type of residential property they can acquire in Australia and must apply before doing so. Foreign investors found guilty of violating FATA face civil penalties to allow the government to recoup the capital gain or 25% of the value of the property, whichever is greater.

The case shows the strength of ATO’s data-driven approach to monitoring compliance with Australia’s foreign investment rules. The properties were sold following an ATO compliance action, making these homes available to Australian residents.

You can anonymously report a violation of foreign real estate investment rules by completing a whistleblower form on our website or by calling 1800 050 377. Lower penalties may apply to foreigners who self-report a breach of the rules.

Background

Foreign investment is essential to Australia’s prosperity. It has helped build the Australian economy and will continue to improve the well-being of Australians by supporting financial growth.

The ATO is co-administrator of the Foreign Acquisitions and Takeovers Act 1975 (FATA) and has been responsible for compliance monitoring of foreign investments in residential property since 2015. During the period 2015-2021 , 434 properties were alienated as a result of the ATO compliance action.

The ATO detects non-compliance using systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies, and community referrals.

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