This article is written by John Morgan and was first published on the website taxtechnical.com.au. To subscribe to the Tax Technical newsletter and to keep up to date with all things tax related, please visit https://taxtechnical.com.au/newsletter/.
The Treasurer has issued a media release advising that penalties for investors who break foreign investment laws for residential property have been doubled, with effect from 1 January 2023.
Under Australia’s foreign investment framework, foreign persons seeking to purchase residential real estate in Australia generally need to apply for foreign investment approval. This applies to new dwellings, vacant residential land for development and in some circumstances, established property.
The changes to penalties, along with technical updates to the fee cap amount to incorporate indexation, were contained in Sch 1 to the Treasury Laws Amendment (2022 Measures No 3) Act 2022 (amending the Foreign Takeovers and Acquisitions Act 1975) and Sch 1 to the Foreign Acquisitions and Takeovers Fees Imposition Amendment Act 2022. (amending the FATA Imposition Act 2015).
[Treasurer’s website – media release; APH website: TLA Amendment: Digest, Bill, EM; Imposition Amendment: Digest, Bill, EM; LTN 1, 4/1/23]
Extract from the EM (p8)
- Comparison of new law and current law
| New law | Current law |
| The penalty for contravening section 88 of the FATA will be imprisonment for 10 years, or 30,000 penalty units (or 300,000 penalty units if the developer is a corporation), or both. | The penalty for contravening section 88 of the FATA is imprisonment for 10 years, or 15,000 penalty units (or 150,000 penalty units if the developer is a corporation), or both. |
| The maximum penalty for contravening sections 94, 95, 95A or 96 of the FATA will be the greatest of the following:(a) double the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land/established dwelling;(b) 50% of the consideration for the residential land/established dwelling acquisition;(c) 50% of the market value of the interest in the relevant residential land/established dwelling. | The maximum penalty for contravening sections 94, 95, 95A or 96 of the FATA is the greatest of the following:(a) the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land/established dwelling;(b) 25% of the consideration for the residential land/established dwelling acquisition;(c) 25% of the market value of the interest in the relevant residential land/established dwelling. |
| The penalty for contravening sections 97, 115D, 115DA or 115G of the FATA will be 500 penalty units. | The penalty for contravening sections 97, 115D, 115DA or 115G of the FATA is 250 penalty units. |
Under s4AA of the Acts Interpretation Act 1901, a ‘penalty unit’ is $210. This means that 30,000 penalty units is $6.3m.
About the Author: John Morgan is a tax specialist lawyer of more than three decades experience now practicing at the Victorian Bar.
