The Assistant Treasurer, Senator Nick Sherry, has announced a tightening of the foreign investment rules as they relate to residential real estate and a package of new civil penalty, compliance, monitoring and enforcement measures.

Amendments are being proposed to the Foreign Acquisitions and Takeovers Act 1975, the Foreign Acquisitions and Takeovers Regulations 1989 and Government Policy to ensure that foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock, and that investments by temporary residents in established properties are only for their use whilst they live in Australia.

All temporary residents seeking to purchase an existing property in Australia will now be brought within the FIRB notification, screening and approval process. Temporary residents will be required to notify, be screened or be approved by FIRB in the same way currently required of foreign non-residents.

In addition, temporary residents who are approved will now have to:

• compulsorily sell the established property they have bought when they depart Australia; and
• be required, where undeveloped land has been purchased, to commence construction on that land within 24-months or have the land compulsorily sold.

These changes will also be strictly applied to temporary residents who are here on foreign student visas.

As part of a new civil penalties regime, the Government will introduce:

• sanctions for purchasers, sellers and agents for being involved in transactions in breach of FATA;
• an explicit compulsory divestment requirement where property has been purchased in breach of the real estate investment regime; and
• an additional monetary penalty equivalent to any capital gain made by the breaching purchaser at the time of the forced sale, with the capital gain to be measured in accordance with the relevant tax legislation.