‘There are still ways around it’: Foreign buyer crackdown not working, expert says

A house in Melbourne's Hawthorn East that was bought by a Chinese investor at auction last year for $5.2 million, is seen pictured Wednesday, 18 Nov 2015. Source: AAP

The government’s crackdown on foreigners illegally buying residential real estate is not working and investors are still exploiting loopholes, a property expert says.

Stricter penalties for violations of laws governing ownership of residential real estate by non-resident foreign nationals will come into effect on December 1.  

Under changes announced by the federal government in May, the Tax Office will also take over responsibility for residential foreign investment from the Foreign Investment Review Board - a non-statutory advisory body.

A period of reduced penalties for overseas owners who suspect they are in breach of Australian laws, and report themselves to the government, expires on November 30.

Melbourne-based property expert Michael Yardney said uptake of the offer has not been substantial.

He doubts whether this or other measures being implemented by the government will effectively address the problem of overseas investors trying to bypass Australian property rules.

"It hasn't worked up until now. The whole system hasn't worked. There hasn't been enforcement," he told SBS World News.

"Sure, the penalties are going to deter some people, but there are still ways around it. Foreign investors are now getting local family members to buy properties in their own names - people who are Australian residents - or they're getting other locals to become directors of the companies owned by foreign nationals."

The latest seven homes subject to forced resale come on top of an earlier six forced divestment orders in August.

Treasurer Scott Morrison said they bring the total number of forced divestments of foreign-owned residential properties under the Coalition government to 19.

He said since the Australian Tax Office - which was given greater powers in this area in May - 1,044 matters have been investigated, arising from information provided by the public and the government's own enquiries.

He said another 532 cases are currently under investigation.

Michael Yardney said closing the loopholes would require more extensive checking of who the beneficial owners are of the companies listed as purchasing the property. 

"That would take a massive exercise because a lot of properties are bought in company and trust names by local people as well. But that is one way you could find out - looking at who the beneficial owners are as opposed to the person who is signing the contract."

 

Source SBS News

Stay up to date with SBS NEWS

  • App
  • Subscribe
  • Follow
  • Listen
  • Watch