Foreign real estate buyers in the spotlight

While attention focused on the Federal Government’s proposed fees, fines and taxes to be introduced on foreign buyers of Australian real estate, Canberra has quietly increased its surveillance of foreign purchases of Australia agricultural land.

From March 1 the screening threshold for a foreign investor to buy agricultural land, either directly or indirectly through a company, will now be $15 million compared with the previously generous $252 million. It is believed that if a foreign entity already owns rural property worth more than $15 million, then additional purchases will also be scrutinized.

A foreign ownership register of agricultural land will also be established and from July this year the Australian Taxation Office will also begin a stocktake of existing agricultural land ownership by foreign interests.

This new regulation was quietly waved through at the same time that real estate agents and property development companies were having a seizure about the new rules and charges to be levied on foreign purchases of residential property, which has been subject of abuse, by buyers and agents during the recent property boom.

The proposed changes, still under discussion, are thought to be viewed favorably by the Prime Minister and the Federal Government.

The fees include a $5000 application fee for property purchases under $1 million, and a $10,000 fee for properties of $1 million or greater, increasing by $10,000 for every additional $1 million in value.

The involvement of the ATO as the collection agency is being this seen by the property industry as the introduction of a new tax or duty on foreign buyers and not just a funding vehicle to allow the FIRB to collate data on the extent of foreign investment in Australian real estate.

Revenue from the schme is expected to top $A200 million a year.

There is a also a sting in the proposed regulations, with real estate agents, solicitors, accountants and other professionals facing fines up to $42,500 for helping foreign investors circumvent the rules.

The main criticism of the new initiative  came from mid-sized apartment developers who said that any restrictions or confusion surrounding offshore purchasing could dent buyer confidence and increase development costs and their risk exposure.

Buyer advocates responded,  saying they thought the new rules did not go far enough (or charge enough) to stop foreign investors buying into the market for capital gain or as a safe haven in the event of a catastrophic event in their own country.

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