The Real Estate Institute of Australia (REIA) has welcomed the Government’s resolve to strengthen compliance and enforcement of foreign investment in Australian residential real estate following the release today of its Options Paper.
REIA CEO, Amanda Lynch says, “The strengthening of compliance and enforcement as well as an increase in penalties for non-compliance were recommended by REIA in our submission to the Inquiry into Australia’s foreign investment policy as it applies to real estate.”
“What is important is that the revenue gained from these penalties will provide the Australian Taxation Office with more resources to ensure all investors are complying with the regulations.”
“Of concern, however, is that the Options Paper also proposes an application fee of $5,000 for properties under $1M, $10,000 for properties valued between $1-2Mand $10,000 increments for each additional $1M in value. These fees will be used to finance increased compliance, which is what the industry has been calling for but it also means that properties over $1M will attract a fee of approximately 1%.”
“While the proposed fee is less than that applicable in Hong Kong or Singapore, it is higher than that in other countries such as Switzerland and Austria. The UK, the USA, and Canada do not have any residential property application fees. In setting the fee level for Australia, REIA encourages the Government to consider the equivalent global rates and not discourage foreign investment that has been proven to increase the supply of new housing at a time of a severe shortage.”
“The Options Paper has supported REIA’s proposal that a more effective deterrent, and one that reflects changing market conditions, is to set penalties as a percentage of the property value. The paper proposes 10% and REIA feels this is a fair penalty for foreign investors if a breach occurs.”
“For other breaches such as a non-resident acquiring an established dwelling or if a temporary resident fails to sell their property after it ceases to be their place of residence, the proposed penalty is to be the greater of either the capital gain made, 25% of the purchase price or 25% of the property’s market value.” concluded Ms Lynch.
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REIA News – March 2021