18 March 2015
Transcript - #2015017, 2015

In the role of: Parliamentary Secretary to the Treasurer [23 December 2014 - 20 September 2015]

Interview with Alyse Edwards, PM, 2CN

SUBJECTS: Fall in home prices on Sovereign Island; QLD; Foreign Investment

EDWARDS:

As part of the Government’s option paper, the proposed changes on the table, you are looking at changing at changing the foreign investment legislation, are you looking at changing in anyway the way foreign buyers come in to purchase existing dwellings?

O’DWYER:

We’re not looking to make any changes to the existing restrictions that are currently in place for non-resident foreign investors not being able to purchase existing dwellings. We are going to keep the current framework as it applies today. That framework means that if you are a temporary resident, you can apply to the Foreign Investment Review Board. If it is going to be your principal place of residence, you can purchase one existing dwelling for the period of time that you are in Australia, but you need to sell that dwelling within three months of leaving the country. The prohibition on non-resident foreign investors being able to purchase an existing home, we think that that framework is right, we’re not going to be making changes to that. We believe our foreign investment framework should encourage foreign investment into new dwellings, which is building new stock for people to purchase and to rent. We see that as having a huge economic dividend. But there will be some changes to legislation and that will be to do with people who breach the framework, those people who make illegal purchases, where we will be increasing penalties.

EDWARDS:

So you are in fact looking to tighten or to make it more difficult for those foreign investors to come in for those residential dwellings?

O’DWYER:

We are going to make sure that if people make illegal purchases, that those illegal purchases have a real economic impact on those people who are doing the wrong thing. We found, when the House of Representatives Standing Committee on Economics was conducting its Inquiry, that the current penalties of $85,000 were simply seen as the cost of doing business. We think that the penalties need to be strengthened so that people making illegal purchases of existing homes can’t make windfall gains but instead, have to comply with the law as it exists in Australia. So we are going to strengthen the law in that regard and we are also going to strengthen our ability to conduct auditing and enforcement and compliance activity through a crack unit that is being set up in the ATO.

EDWARDS:

Do you sympathise with these high end property owners who have not recovered their full property costs after purchasing, they haven’t got the same value on sale and they say foreign buyers are a solution. Do you see that?

O’DWYER:

Well, anybody who undertakes a property purchase does it for a whole variety of reasons and there is some risk when you undertake that purchase. The Government doesn’t guarantee a floor in your property price. There are some people who are very happy when property prices go up but there are some people who are also locked out of the market when property prices go up. It is not for the Government to interfere in that market process and we don’t propose to interfere in that in any way.

EDWARDS:

This proposal that the residents on Sovereign Island have to open up the market, the high end market, to foreign investment, is that something you could bring into being?

O’DWYER:

Well as I’ve said we are not looking to change the framework. We do have an options paper. Anybody can make a submission to that paper. It is due by the 20th March and I’m sure if they’ve got a submission to put, they will put it to the Government. We are not proposing to change though, the existing framework that is in place. Someone who is a temporary resident and has applied to purchase an existing home, there are current provisions that will allow for that if it is screened by the Foreign Investment Review Board and approval is granted. But, as I have said to you before, that approval comes with conditions, and that is that person sells that property when their temporary residency expires and when they leave the country.

EDWARDS:

But you are talking about application fees as well, that’s one of the proposed changes for foreign investors purchasing new dwellings. But would those application fees also apply to existing dwellings?

O’DWYER:

The application fees apply to both new and existing dwellings. At the moment, the taxpayer currently funds the work of the Foreign Investment Review Board and we would be funding the new measurers that we would like to put in place if there is no fee – which is to have a full register of who owns what when it comes to residential property, a national register. Plus the Australian taxpayer would have to fund the new crack unit at the ATO if we did not have a modest application fee that is instead charged to the foreign purchaser. We are proposing that there be fees of around $5,000 for properties worth under one million dollars, $10,000 for properties worth over one million dollars and every time you hit a million dollar mark, that property fee would go up by another $10,000.

EDWARDS:

So, for example, if a Chinese buyer were to come in and purchase one of these existing properties on Sovereign Island, they are multi-million dollar homes, they would be up for a pretty big application fee – is that right?

O’DWYER:

Well as a percentage of the value of the property it would be quite modest, but certainly it would depend on the value of the property as to what the application fee would be. But, that application fee, let’s not forget, is going to fund the work of the Foreign Investment Review Board, is going to fund putting together a national register, is going to fund the crack unit that we are setting up within the ATO and is going to fund the enforcement action that will be undertaken by that unit, including court proceedings – as we will need to do when we do find people who have made illegal purchases.

EDWARDS:

And will this take the burden off Australian taxpayers?

O’DWYER:

Absolutely, the Australian taxpayer won’t have to fund it because it will be funded by a user pays system.

EDWARDS:

Thank you.