Senator Roberts: Thank you for being here this morning. The Foreign Investment Review Board makes recommendations to the government about approving certain large investments in projects in Australia. One concern of Australians is the seemingly large number of Australian residential homes and residential land that is being purchased by foreign investors, to the exclusion of Australian homebuyers—are you aware of that?
Mr Writer: We are certainly aware that there are publicly reported concerns about the acquisition of property by foreign investors, yes.
Senator Roberts: Anecdotal evidence is of land banking, where properties are purchased by foreign interests and then held vacant, in the middle of a housing crisis where thousands of Australians are left homeless.
From 1 July 2020 to 30 June 2021, one year, there were 5,310 residential real estate purchase transactions by foreign buyers, with a total value of $4.2 billion. Eighty-six per cent of those were for new dwellings and vacant land. Minister, why does there appear to be no governance or restriction on overseas ownership of residential property in Australia?
Senator Gallagher: There is, and I’m sure officials can take you through it.
Mr Writer: There are restrictions. Generally speaking, foreign investors, in relation to residential real estate, cannot purchase existing properties. There is only one real exception, which is for temporary residents who need somewhere to live. Generally, they will only receive approval for the acquisition of newly built properties, not existing properties. That’s designed to encourage the construction of new residential properties in Australia.
Senator Roberts: So foreigners can’t buy existing property, but they can build new property?
Mr Writer: That’s correct.
Senator Roberts: Who gives the approval?
Mr Writer: In general, the residential real estate proposals are considered by the ATO under delegation from the Treasurer.
Senator Roberts: The Australian Taxation Office as designated by the treasurer?
Mr Writer: Yes.
Senator Roberts: Given that many countries do not allow foreign ownership of their residential properties, why does Australia allow foreign investment in residential property with little or no restriction?
Senator Gallagher: We’ve just gone through that there are restrictions. The other thing I would point to is the changes that we’ve put in place to double the penalties applicable to breaches of the foreign investment rules applicable to residential properties, which we implemented on 1 January. We’ve doubled the foreign investment application fees from 29 July 2022. Fees now start at $13,200 for acquisitions of residential property valued at $1 million or less and $26,400 for acquisitions of $2 million or less. The settings under the approval process are designed to increase supply, which is essentially the big challenge we’ve got in the housing market at the moment—we need more supply of housing, and that’s why the settings are targeted to increase that.
Senator Canavan: Can I ask a quick follow-up, Senator Roberts? I believe our foreign investors can buy established dwellings with approval from the FIRB. Is that correct?
Mr Writer: With approval from the ATO, yes.
Senator Canavan: How many approvals have you provided over the past year?
Mr Writer: I’d need to go to the ATO about that question, but what I can say is that in 2020-21 the total number of purchases of residential dwellings in Australia was 588,176. Of those, 4,355 concerned foreign investors.
Senator Canavan: Sorry, 355 in total?
Dr Kennedy: Yes, 4,355.
Senator Canavan: Sorry, 4,355.
Mr Writer: Yes. It’s still less than one per cent of the total.
Senator Canavan: Yes. It’s still quite a lot. That’s of established dwellings?
Mr Writer: No, that’s of all residential dwelling purchases.
Senator Canavan: Okay, so it includes, potentially, new ones. So you can’t tell me how many approvals. How many times did you reject somebody who wanted to buy an established dwelling?
Mr Writer: I’d have to take that on notice. The ATO will be here later this afternoon and may be able to answer that.
Senator Canavan: I thought it was FIRB that does that rejection.
Mr Writer: In relation to residential property, no. The ATO manages that.
Senator Canavan: Finally, the new penalties the minister mentioned—how many times has a foreigner been penalised for illegally purchasing an established residential dwelling over the past year?
Mr Writer: I couldn’t answer that. The ATO would need to respond to that.
Senator Canavan: Does it happen? Was there one?
Mr Writer: The ATO certainly took action, I think, last year, and were successful in obtaining a penalty against a foreign investor, yes.
Senator Canavan: The issue seems to be—notwithstanding your figures—anecdotally, that the foreigners are always turning up at auctions and buying established dwellings. It doesn’t seem to me that hard to get around our rules, to just get someone else to buy it in their name. Does that happen? How do we know? What sort of efforts do you put into making sure people aren’t trying to avoid these restrictions?
Ms Kelley: Again, the ATO is responsible for the compliance in that regard. I would also note that Australian citizens and temporary residents are able to purchase as well, regardless of their background.
Senator Canavan: Of course, but they could also do so on behalf of others. Is that illegal? Would it be illegal to do so on behalf of someone—
Mr Writer: That would be a scheme to avoid the application of the act. Yes, it would be.
Senator Canavan: I’m just asking. I know you’re saying the ATO is enforcing it, but presumably you’re the policy area.
Mr Writer: We are.
Senator Canavan: So how confident are you? You don’t seem to understand the details of the prosecutions that go on. How confident are you that this restriction is actually being implemented?
Mr Writer: We rely on the ATO to do this. It administers and enforces the law in accordance with the Foreign Acquisitions and Takeovers Act and the relevant policies that the successive governments have put in place around this area of activity.
Senator Gallagher: And I think the numbers that were read out before give you an indication that that—
Senator Canavan: That doesn’t go to my question, because it doesn’t capture people doing it illegally.
Senator Gallagher: No, but you were saying anecdotally, basically, that foreigners are out buying up all the houses, and I think—
Senator Canavan: You can’t even tell me how many people you prosecuted.
Senator Gallagher: It’s not about prosecution.
Senator Canavan: If you were taking this issue seriously, you’d know that, Minister.
Senator Gallagher: That doesn’t relate to prosecution, and we can deal with that through the ATO.
Senator Canavan: My question did.
Senator Gallagher: That deals to the scale.
Senator Canavan: Clearly people are not obeying the law.
Senator Gallagher: And that question has been answered, and obviously your anecdotal information is incorrect.
Senator Canavan: No, it’s not, because you don’t even have any evidence about how many prosecutions you’ve made.
Chair: Order!
Senator Canavan: You’re obviously not taking it seriously.
Chair: Order! I’d like to return to Senator Roberts, who I believe has the call. Senator Roberts.
Senator Roberts: I thank Senator Canavan for his questions. Minister, doesn’t it mean, though, with the current housing crisis, that the ability for foreigners to buy or to construct a new house crowds Australians out of the market or certainly raises the prices?
Senator Gallagher: Again, no, I wouldn’t accept that. Again, it goes to the numbers that Mr Writer has outlined. But the fact is that the settings are targeted, essentially without exemptions, to new housing supply. It’s focused on generating that new housing supply to be available for people to live in, and part of what we have to deal with in the housing market at the moment is a shortage of supply.
Senator Roberts: According to Mr Writer’s figures, 4,355 were bought by foreigners, out of 5,186. That’s almost 80 per cent.
Senator Gallagher: No. You’ve got that wrong.
Mr Writer: It’s 588,000.
Senator Roberts: I’m sorry. That’s my mistake.
Ms Kelley: It’s 0.74 per cent, to be precise.
Senator Roberts: Quite often, though, foreigners will lock up their houses rather than rent them out. So they’re vacant. They’re not available to Australians.
Mr Writer: I don’t think we can confirm that kind of statement.
Senator Roberts: That’s widely known. You won’t confirm it, because you haven’t got the exact numbers. I understand that and I appreciate that.
Mr Writer: I don’t think we have any actual evidence of that fact.
Ms Kelley: Part of the ATO’s responsibility is also around the amount of time a property is vacant and ensuring that it’s not left vacant as well. That is part of the compliance regime.
Senator Roberts: That’s the ATO’s responsibility, is it?
Ms Kelley: Yes.
Senator Roberts: So you’re just responsible for the policy?
Ms Kelley: In terms of residential real estate, Treasury has a policy responsibility. The ATO implements the policy.
Senator Roberts: Minister, wouldn’t the widening of the mandate of the FIRB to include residential purchases go a long way to slowing down the sale of residential properties to foreign speculators?
Senator Gallagher: If FIRB were assessing them?
Senator Roberts: If FIRB were extending their authority over all residential property.
Senator Gallagher: It would slow it down—is that what you’re saying?
Senator Roberts: Yes.
Senator Gallagher: I’m not sure how those two things go together. Essentially, we’ve got Treasury with the policy side of the work and the ATO then enforces those arrangements, so I’m not sure how FIRB extending reach into residential property would slow down the sale. As you’ve heard, it’s 0.75 per cent of residential sales.
Senator Roberts: So FIRB would have authority as to whether or not to approve or recommend—they don’t approve anything. They make recommendations.
Senator Gallagher: The ATO currently does. We have an approving entity that does that work—
Senator Roberts: Which basically has no teeth.
Senator Gallagher: I don’t accept that, but, by all means, put those questions to the ATO.
Senator Roberts: Isn’t it time, though, for the government to start buying back the farm and limiting sales of Australian land to Australian purchasers only, like China and several other countries do?
Senator Gallagher: No. That’s not the policy of the government. We have in place an arrangement that allows, under specific circumstances, foreign investors to purchase residential properties in this country. We’ve got those settings—they’re here; we can answer questions about them—but they are the arrangements that are in place.
Senator Roberts: I understand they’re here, but I’m saying why not change them so that only Australians can buy Australian land, not just Australian residential real estate but Australian land?
Senator Gallagher: That’s not the government’s policy. We are an open-facing economy. We are a country that has relied on foreign investment. We believe there need to be suitable controls in place to manage that, and those settings are the ones that we’ve been talking about this morning. That remains the government’s policy.
Chair: Last question, Senator Roberts.
Senator Roberts: This is not a radical thought, Minister, as many other countries protect their sovereignty by not selling their land to foreign interests. Why is it that Australians can’t buy land in those countries but foreigners from those countries can buy land in our country?
Senator Gallagher: I’m not sure of the countries that you are referring to.
Senator Roberts: China’s one of them. There are a number of countries.
Senator Gallagher: We’re here, and we do have arrangements in place, through FIRB and through the arrangements with the ATO, to put restrictions and limits on the sale of housing or, in FIRB’s case, on foreign investment matters. They are looked at and assessed against the national interest.
Senator Roberts: It’s a one-way street for foreigners. Australians can’t buy property in their countries, but they can buy it in our country.
