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Foreign Investment and Housing Affordability
The Coalition Government takes the issue of housing affordability seriously. In the 2017-18 Budget handed down in May 2017, we introduced a number of initiatives aimed at improving supply, giving first home buyers a leg up and imposing stronger restrictions on foreign investment.
Under the new system we are allowing first home buyers to build a deposit inside superannuation by voluntarily contributing up to $15,000 a year and $30,000 in total. This contribution will attract concessional tax treatment under the First Home Super Saver Scheme which commenced on 1 July 2017 with contributions and deemed earnings made available for withdrawal from 1 July 2018.
We are also providing incentives for older Australians to downsize their properties by allowing individuals aged 65 and over to make a non-concessional contribution of up to $300,000 in proceeds from the sale of a principal residence, held for at least 10 years, into their superannuation. These contributions will be in addition to other voluntary contributions people are able to make under the existing concessional and non-concessional caps and contribution rules.
The Coalition Government is introducing new measures to reduce demand for Australian housing from foreign investors. We are changing the Capital Gains Tax (CGT) rules by no longer allowing foreign or temporary residents to claim the main residence CGT exemption. To further increase access to housing for Australians we are imposing a 50 per cent cap on pre-approved foreign ownership in new developments and applying an annual charge of at least $5000 to foreign owners who leave their properties unoccupied or unavailable for rent for 6 months or more each year.
More information on the changes announced in the 2017-18 Budget can be found at http://budget.liberal.org.au/costofliving.html.
In addition, the Coalition Government’s robust foreign investment regime will impose stronger penalties for investors who breach the residential real estate rules. As part of the changes, criminal penalties have been increased to $135,000 or three years’ imprisonment, or both for individuals; and up to $675,000 for companies, in addition to new fees being levied on all foreign investment applications. The Coalition Government believes these will prove to be substantial deterrents. For further information about restrictions and rules surrounding foreign investment, you can visit the webpage of the Foreign Investment Review Board (FIRB), at https://firb.gov.au/real-estate/.
The Coalition Government is taking serious measures against individuals who breach Australian residential real estate rules. On the 6th February 2017, the former Treasurer, the Hon. Scott Morrison MP, announced that he had acted on the divestment of a number of additional properties in relation to residential owned investment. A further 16 Australian residential properties where issued divestment orders by the Treasurer, bringing the total number of properties divested to 61 - to the cumulative value of around $107 million. Of the 15 properties most recently divested the combined purchase price was over $14 million and they were in Victoria and Queensland. They ranged in value from $140,000 up to $5.9 million. Those nationalities that were involved were from a range including the United Kingdom, Malaysia, China, Iran, India, Germany and Indonesia.
This demonstrates the effect which the compliance measures that have been put in place under the Coalition Government, particularly with regards to the ATO, are having. Since the new penalty regime was introduced more than 388 penalties notices have been issued, totalling more than $2 million in fines.
If you are aware of a case which you think involves a breach of the regime, I would encourage you to contact the Foreign Investment review Board (FIRB) directly. The best way to report a possible breach in compliance is through the FIRB’s website, which can be found here: http://compliance.firb.gov.au/compliance-reporting/.