Govt targets third parties in foreign investor crackdown

“Through the information provided by the public, together with our own enquiries, we now have 481 cases under active investigation,” Mr Hockey said.

Yesterday the treasurer announced that he had ordered the sale of five additional residential properties unlawfully held by foreign nationals.

The properties are located in Ardross (in Perth), Elizabeth Bay (in Sydney), Underdale (in Adelaide), Stretton (in Brisbane) and Labrador (on the Gold Coast).

The purchase prices of the properties range in value from $265,000 to $8.1 million, Mr Hockey said.

“The foreign investors involved either purchased established property without Foreign Investment Review Board approval, or had approval but their circumstances changed meaning they were breaking the rules,” he said.

“The investors linked to the five properties voluntarily came forward to take advantage of the amnesty I announced in May.

“They now have 12 months to sell the properties, rather than the normal three-month period, and will not be referred for criminal prosecution.”

Mr Hockey yesterday gave a press conference with Tax Commissioner Chris Jordan, who confirmed that the ATO has an army of 50 people “devoted” to the investigation of illegal foreign property purchases.

“The majority of these are community referrals, community dob ins,” Mr Jordan said, citing examples of foreign nationals on student visas who have never lodged a tax return, yet are buying $5 million properties.

Third-party facilitators including lawyers, accountants, mortgage brokers, real estate agents and buyer’s agents are at the centre of the investigation, he added.

The ATO will be targeting those who knowingly facilitate the illegal ownership of Australian real estate. No longer will the accountants, the lawyers, the buyer’s agents, the real estate agents be immune from activity because there will be very strong civil and criminal penalties after 1 December, he said.

Mr Jordan said intermediaries can create complex structures to hide the real owners of these properties and “a lot of these foreign nationals don’t understand these trusts … that the lawyers are putting them into to hide [the real ownership].”

Yesterday’s news follows the federal government’s recent response to a parliamentary report into foreign investment in residential real estate.

Under the new regime, mortgage brokers and real estate agents who help overseas buyers flout foreign investment rules will face severe penalties under a tougher compliance regime.

The government has proposed civil penalties for mortgage brokers, property buyers, real estate agents and other third parties who “knowingly assist foreign investors to breach foreign investment rules”.

“Provisions currently exist under the Criminal Code for knowingly assisting another person to commit a criminal offence,” the government said.

As a result, NAB recently warned brokers about foreign investment.

Speaking at the NAB and Advantedge ‘Knowledge is Everything’ event in Sydney last month, NAB Broker general manager Steve Kane said “massive changes” in the Australian mortgage market mean brokers need to take special care with the loans they write for foreign property investors.

“It is very important that you understand, particularly in the Sydney market where you’ve got rapidly increasing investment lending and rapidly increasing property prices, that if you’re dealing in those markets, particularly around foreign investment, that you understand the rules and regulations,” he said.

“It is important because as the person involved in the transaction, it just doesn’t go to the bank or to the customer, it will come to you as well if you haven’t adhered to the rules and regulations that have already been in place, particularly around foreign investment and investing by foreign nationals.”

[Related: Real estate body backs foreign investment reforms]