Foreign investor buys multiple residential properties, fined $250,000 after ATO orders re-sales

THE FIRST penalty order for breaches of Australia’s foreign investments rules -- a foreign investor was penalised for purchasing multiple properties in outer Melbourne without receiving permission from the Foreign Investment Review Board (FIRB) -- has been issued by the Federal Court of Australia, attracting $250,000 in penalties.

The Australian Taxation Office (ATO) identified the purchases using its data sources as part of a multi-faceted compliance approach to detect foreign investors in breach of the Foreign Acquisitions and Takeover Act 1975 (FATA).

In July 2020, after a compliance investigation, the ATO filed proceedings in relation to six breaches of the FATA by Vijay Balasubramaniyan, who purchased four properties without permission and simultaneously owned two established properties at once, in contravention of the Act.

"We welcome this decision as it is the first penalty decision under the FATA. This serves as a clear deterrent to other foreign investors who believe they can operate outside of the law." ATO Assistant Commissioner Keir Cornish said. 

“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.”

Foreign investors are limited in the type of residential property they can acquire in Australia and must apply before doing so. Foreign investors found to be in breach of the FATA face civil penalties to enable the government to recapture capital gain or 25 percent of value of the property, whichever is greater.

Mr Cornish said the case showed the strength of ATO’s data driven approach to monitoring compliance with Australia’s foreign investment rules. The properties were sold as a result of ATO compliance action, making these houses available to Australian residents.

The ATO is the co-administrator of the Foreign Acquisitions and Takeover Act 1975 (FATA), and has been responsible for monitoring compliance of foreign investment in residential real estate since 2015. In the period 2015-2021, 434 properties have been disposed as a result of ATO compliance action. The ATO detects non-compliance by using systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies and community referrals

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