Foreign investors who have illegally bought Australian real estate have until November 30 to come clean and sell their properties or face potential prosecution under a new Abbott government crackdown.

Australia's investment regime generally does not allow foreign investors to purchase existing homes and Prime Minister Tony Abbott has announced tougher penalties, including possible jail terms, for people who break the rules.

People who don't come forward will face the full force of the law, Treasurer Joe Hockey said. Credit:Daniel Munoz

Under legislation to be introduced later this year, penalties will be increased to $127,500 or three years' imprisonment for individuals, and $637,500 for companies. The government wants the new regime in place by December 1.

But Treasurer Joe Hockey has announced a moratorium to encourage people who have made unlawful purchases to turn themselves in.