Prime Minister Tony Abbott will announce his plan to crack down on illegal foreign buyers of Australian real estate on Saturday.
From December all foreign buyers will be slugged with a $5000 fee to apply to buy property in Australia. That fee will be used to fund the policing of the new rules.
Mr Abbott said the tighter controls and fees are necessary to ensure Australians are competing for property on a level playing field.
“I know from personal experience how tough it is to get into the housing market,” Mr Abbott said. “I’m determined to crackdown on any illegal activity that could be putting upward pressure on property prices.”
The new fees are just one of a raft of reforms to Australia’s foreign investment framework to be announced by Mr Abbott and Treasurer Joe Hockey on Saturday.
Foreign buyers who breach the rules can expect to face stiffer penalties and possible three-year jail terms under new rules set to be introduced to Federal Parliament in Spring.
“We will ensure stronger enforcement of new and existing foreign investment rules by transferring all residential real estate functions to the Australian Taxation Office,” a statement from the government said.
“The ATO will use its data-matching systems to identify possible breaches and the Commonwealth will pursue those foreign investors who break the rules.”
The announcement comes just two days after a report from the Foreign Investment Review Board showing that foreign buyers of Australian real estate had doubled in one year.
On Friday, Mr Hockey let slip that the $39 million Point Piper mansion Villa del Mare had been sold to an Australian resident. In March Mr Hockey ordered the sale of the home because it had been illegally bought by a Chinese-owned company.
The sale by the owner of the company, Chinese billionaire Xu Jianyin, is set to be followed by more divestment orders, with about 100 other cases currently being investigated.
Among other changes to the foreign investment rules are stiffer civil pecuniary penalties for any breaches and infringement notices for less serious cases. The existing penalty is expected to be increased from $85,000 to $127,500, or face three years in jail.
Foreign companies found to have breached the rules could be hit with a $637,500 fee.
Third parties, such as lawyers, accountants or real estate agents, who knowingly assist in any breaches will also face civil and criminal penalties, including fines of $42,500 for individuals and $212,500 for corporate breaches.
When the $5000 application fee was flagged in February it was slammed by industry bodies for being too high and potentially deterring foreign investment in Australia.
Simon Henry, co-chief executive of the Chinese language website Juwai.com where many offshore buyers look to buy Australian property, said: “There is no other country that charges fees to foreign investors that is actually seeking foreign investment.”
CBRE executive director of residential Justin Brown said the higher fees would have a negative impact on Australia, in particular on the construction of new dwellings.
Figures from the Foreign Investment Review Board’s annual report released on Thursday show investment in residential real estate almost doubled to $34.7 billion in the 2013-14 financial year, up from $17.2 billion the 12 months prior.
The story Tony Abbott and Joe Hockey announce crackdown on illegal foreign buyers first appeared on The Sydney Morning Herald.