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A property investor has become the first person to be issued with a penalty for breaching of Australia’s foreign investments rules.
Vijay Balasubramaniyan, a residential real estate buyer, has been penalised $250,000 after he was found to have purchased multiple properties in outer Melbourne without being authorised to do so by the Foreign Investment Review Board (FIRB), which is administered by the Australian Treasury and the Australian Taxation Office (ATO).
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The ATO filed proceedings in relation to six alleged breaches of the Foreign Acquisitions and Takeover Act 1975 (FATA) by Mr Balasubramaniyan in July 2020, following an investigation that found he had purchased four properties without permission while simultaneously owning two established properties.
The first penalty order for breaches of Australia’s foreign investments rules has now been issued by the Federal Court of Australia, attracting $250,000 in penalties.
ATO assistant commissioner Keir Cornish welcomed the penalty decision, saying it would serve as “a clear deterrent to other foreign investors who believe they can operate outside of the law”.
“There are obligations under Australian law for foreigners that have invested in, or plan to invest in Australian residential real estate. The ATO promotes voluntary compliance of the rules by foreign persons, but where foreign investors resist compliance action, stronger enforcement action is taken,” Mr Cornish said.
New compliance and enforcement powers that came into effect in January 2021 dramatically increased the penalties and action FIRB is able to take for non-compliance with the FATA.
Foreign individuals found to be in breach of the FATA can be penalised up to 25 per cent of the value of the property or have their capital gains recaptured, whichever is greater.
Indeed, in 2020 Treasurer Josh Frydenberg announced that the federal government was launching a new “tip off and compliance campaign” to ensure foreign persons purchasing residential real estate in Australia weren’t breaking foreign investment rules.
It also aimed to ensure that those who were found to be breaking the rules were "subject to appropriate penalties”.
Under Australia’s foreign investment framework, foreigners seeking to purchase residential real estate in Australia generally need to apply for approval through the Foreign Investment Review Board (FIRB).
This applies to new dwellings, vacant residential land for development and, in some circumstances, established property. Applications, which come with a fee, need to be approved before foreign persons can purchase residential property.
Strict penalties (including civil and criminal prosecution resulting in large fines or up to three years’ imprisonment) may apply for breaches of Australia’s foreign investment rules.
[Related: Government calls for informants to flag illegal foreign buyers]
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