The Australian government has unveiled plans for tough penalties against foreign investors who illegally buy properties, and real-estate agents or developers who knowingly help them.

If convicted, they will face three-year jail terms and fines of more than 650-thousand dollars.

However, buyers can avoid prosecution if they declare themselves before December and sell the property.

The measures are being introduced because the government says authorities have failed to properly police laws making it illegal for foreigners to buy established homes in Australia.

The government is also set to confirm that foreign buyers forced to sell a property will be prevented from profiting from the sale.

Australia's prime minister said there was no doubt foreigners who illegally buy properties there are driving up house prices.

The federal government has announced that from December, foreigners who break the rules will face three years in jail and fines of up to 660-thousand dollars.

Tony Abbott said he believed there was broad community support for the tough new measures.

Higher taxes in Victoria

Foreigners buying houses in the state of Victoria are to be required to pay higher taxes.

Next week's state budget will include moves to make overseas investors pay an extra three percent stamp duty and 0.5 percent land tax surcharge.

The state government said buyers had unfairly benefitted from the services and infrastructure that Victorians had paid for over many years.

It said the new measures would raise an estimated AU$330 million over four years and ensure foreign buyers pay their fair share of taxes.