• AST Tax confirmed first penalty order for breaches of Australia's foreign investments rules was issued by the federal court of Australia, and attracted $250,000 in penalties.

Background

• AST Tax is co-administrator of the Foreign Acquisitions and Takeover Act 1975 (FATA), and is responsible for the monitoring of all foreign investment in residential real estate.
• It detects non-compliance by using systems and processes like data matching, data analysis and monitoring, information sharing with agencies, and community referrals.
• Foreign investors are limited, by law, in the type of residential property that they can acquire in Australia and must apply to Foreign Investment Review Board beforehand.
• Those found to be in breach of FATA face civil penalties to enable the government to recapture acquired capital gain, or 25% of value of the property, whichever is greater.

Case Detail

• In July 2020, a compliance investigation had identified six breaches of FATA by Mr Vijay Balasubramaniyan, who had bought four residential properties without any permission.
• He had also owned two established properties at once, also in contravention of FATA.

Penalty

• The penalty of $250,000 was levied in relation to the rules set out under FATA and is the first penalty order made for such breaches of Australia’s foreign investments rules.

Comment

• AST Tax Assistant Commissioner Keir Cornish commented that this serves 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 residential real estate, and investors will face stronger enforcement action.