TREASURER:

Ladies and gentlemen, Australia welcomes foreign investment and Australia needs foreign investment but at all times foreign investors must comply with Australian laws. Today, I announce I’ve ordered the sale of six residential properties unlawfully held by foreign Nationals in Australia. The foreign nationals currently live in four different countries. The five different orders relate to six established residential properties with one investor owning two properties. One investor, the investor who owns two properties, owns those properties in Kewdale, a suburb of Perth in Western Australia. A further investor owns a property in Eight Mile Plains, a suburb on the outskirts of Brisbane. There are three investors in New South Wales that have been ordered to sell their properties in Eastwood, Fairfield and Mosman, which are suburbs in Sydney. The purchase price of the properties range in value from $152,000 to $1.86 million. Some of the five investors have purchased property with Foreign Investment Review Board approval, but their circumstances have changed and they have failed to comply with the divestment requirements. Some have simply broken the rules, by purchasing a property without approval and against the law. The investors linked to the five divestments voluntarily came forward to take advantage of the amnesty that I announced in May. They now have 12 months to sell the properties, rather than the normal three month period. And they will not be referred for criminal prosecution. Since transferring residential real estate compliance functions to the Australian Taxation Office in May, over 2,000 pieces of information relating to suspected breaches have come to light via data matching with third party sources, including the Foreign Investment Review Board, the Department of Immigration, AUSTRAC and state and territory land titles offices. Through the information provided by the public together with our own inquiries, we now have 462 cases under investigation for breaches of the law by foreign nationals in the purchase of residential real estate. I expect more divestment orders will be announced in the not too distant future. I once again warn foreign investors in residential real estate they must comply with the Australian law. Time is running out for foreign investors to voluntarily come forward if they illegally purchased existing residential real estate. They have until the 30th of November to come forward. They will still be forced to sell their properties if they are found to be in breach of the laws but, they will not be referred for criminal prosecution. I emphasise again they have until 30 November to come forward. Australia’s foreign investment policy for residential real estate is designed to increase our housing stock, but those who break the rules and purchase established property illegally are doing so to the detriment of all Australians. Unlike the previous Government, which didn’t take action, we are determined to enforce the rules and where appropriate make them even tighter. I will be introducing legislation into the Parliament in the next two weeks that will ensure the reporting requirements, enforcement and penalty regimes for foreign investors who break the laws are stricter and more significant. These new penalties are designed to ensure that no-one should be able to profit from breaking the rules. To you for questions.

JOURNALIST:

Can you go into more detail about what some of those stricter measures might be?

TREASURER:

I will be announcing significant penalties for those that are in breach of the rules, for example in relation to non-residents who hold existing real estate they will face a maximum criminal penalty of $127,000 or three years imprisonment. In relation to civil penalties, which I think will be the most significant and the newest part of the penalty regime, the penalty will be that they will lose the capital gain made on the property, 25 per cent of the purchase price or 25 per cent of the market value of the property. So that, of course, is a very significant penalty that does not exist under the current regime. It is also important to note that under the new regime, third parties such as real estate agents, financial advisers and so on may be prosecuted as well for assisting in the purchase of existing residential real estate or the unlawful activity of someone involved.

JOURNALIST:

How widespread is this problem? You foreshadowed further examples, but how many properties in Australia do you believe are illegally owned?

TREASURER:

In the May Budget I announced an extra $48 million for enforcement. Previously the rules had not been enforced in relation to residential real estate. We now have 50 investigators who are kept very busy with the amount of work that they are getting and the referrals, as I mentioned. The majority of the cases are in NSW, Victoria and WA but as you can see from the announcement today, they are all over Australia. Importantly, with the data matching that we have now enabled the Australian Taxation Office to undertake, we are able to look at around 600 million transactions a year. That’s not going to be the case in total number of real estate transactions, but there can be multiple transactions in the divestment orders that I’ve issued and announced today, there are in some cases company structures, in some cases there is direct personal investment. We are also able to look at financing of those purchases and the movement of money and so on.

JOURNALIST:

So are we talking millions of properties or hundreds or thousands?

TREASURER:

I can only reiterate we are currently looking at 462 cases. That’s significantly up on our previous estimate.

JOURNALIST:

In the last six months the Abbott Government spent half a million dollars on ghost flights…

TREASURER:

Can I come back to that in a minute? Are there other questions in relation to foreign investment? Then we will come back to that if that’s okay.

JOURNALIST:

Aussie John Symonds said yesterday said the APRA rules for investment loans could be leading to more foreign investors in the market. Is that a concern?

TREASURER:

Well, there is significant foreign investment in residential real estate. It has certainly increased over the last few years. Australia is open for business. We are open for business. Australia wants foreign investment, we need foreign investment, but we need to make sure that foreign investors comply with the laws. And that’s why I have announced divestment orders today. In relation to foreign investment in real estate more generally, the reason why we allow foreign investors in particular to go into new real estate is because that creates construction jobs. And what we’ve seen with the fall in the mining construction boom is the jobs of electricians and boiler makers and others have moved and we are seeing job take-up in relation to property construction, that’s been driven by foreign investment. We welcome that. My problem is in relation to existing real estate and specifically, in relation to that comment, I have a great deal of respect for John Symonds. I really do. He is a pioneer in many ways. But I see no evidence, no evidence at all, in fact quite the contrary, I see no evidence of any dissipation in foreign investment in residential real estate that complies with the rules.

JOURNALIST:

There were agents today that were very concerned that checks and balances are coming too late. Do you think that’s a major weakness (inaudible) these transactions to go ahead that might not comply?

TREASURER:

In relation to individual property contracts, I think there is no doubt it would be good if all states and territories had a provision in the contract where a purchaser asserts that they comply with the foreign investment laws. That varies at the moment from state to state, territory to territory. When I meet with the State Treasurers in the next fortnight, I will be raising this issue and asking them to change the pro-forma for a residential real estate contract, purchase contract, to ensure that there is a provision there for declarations in relation to foreign investment.

JOURNALIST:

Can you give an idea of how many are in New South Wales?

TREASURER:

The majority are in New South Wales, Victoria, as I mentioned, and to a lesser degree Western Australia, which is quite interesting because Queensland has also a number of cases but Western Australia currently with a smaller housing stock has more under investigation. But last year there was more foreign investment in residential real estate in Melbourne than there was in Sydney. Which many people in Sydney would probably not believe. Anything else?

JOURNALIST:

Is there any significance you are making this announcement on the 8th of the 8th?

TREASURER:

No, no. Any other questions? We can go to the other question.