Kelly O'Dwyer (Higgins, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Hansard source

It gives me great satisfaction to rise today to speak on the government's legislative package that will strengthen Australia's foreign investment framework, enabling our current foreign investment rules to be properly enforced and providing greater transparency on the actual levels of foreign investment in land and residential real estate than ever before. Australia welcomes foreign capital and has always had a liberal regime that encourages investment unless contrary to the national interest. Foreign investment has played a vital role in the development of our modern and successful society and recognises that this will continue to be the case in the future. It is because we understand the benefits to our nation and to our region of open markets that this government is delivering the three North Asian free trade agreements, which independent analysis demonstrates will boost our economy by $2.4 billion every year for the next 20 years.

In 2013-14, there were 25,005 applications to the Foreign Investment Review Board, worth a total of $167 billion of investment into our country. When one excludes the residential real estate sector, only three applications were rejected in 2013-14. Against this context of welcomed investment, it has long been recognised that certain sectors were more sensitive and therefore subject to greater government scrutiny. Residential real estate is one such sector, and there is good reason for that. Homeownership—and the related issues of housing supply, investment and ultimately affordability—remains integral to the Australian dream. There is a sensible and reasonable rationale behind this personal aspiration. In truth, the availability of housing is fundamental to our wellbeing. It begins with the need to find stable, affordable shelter and follows a spectrum through to those that are in the market to purchase expensive accommodation. Whilst housing fulfils our basic need for shelter, it is ideally, and in reality for most Australians, so much more than that. It underscores our personal security and health; informs our sense of self through connection to family, friends, neighbourhood and community; and underscores our personal security. Housing underpins our financial security through access to services and work. For the majority of Australians who own their own home, it is their largest single asset and the physical and financial foundation from which they provide for their own families and those of the next generation. In Australia today the total estimated value of residential dwellings is around $5.4 trillion.

As the Parliamentary Secretary to the Treasurer I take special interest in housing affordability and believe that it underpins the wellbeing and capacity of every individual and family. These bills before the House will harness the benefits of foreign investment into residential real estate, ensuring that they continue to benefit Australians. In essence these bills seek to achieve the following four aims: to reinforce our longstanding focus on channelling foreign investment into increasing the overall supply of residential real estate through the construction of new dwellings for Australians to build, buy and rent; to improve the monitoring, compliance and ultimately enforcement of the rules surrounding foreign investment in real estate and to ensure that those who do flout these longstanding rules are dealt with commensurately and appropriately; to provide far greater scrutiny and clarity on the level of foreign ownership of land in Australia, both agriculture and residential, so that, as we move into this century, future Australian governments will be able to base their policies on holistic and accurate data rather than on piecemeal statistics or anecdote; and, finally, to provide a predictable and modern environment for investors.

My involvement in this policy area first began when, in March 2014, the Treasurer asked the House of Representatives Standing Committee on Economics, of which I was chair, to examine Australia's foreign investment policy as it applies to residential property, with its intended aim of increasing Australia's housing stock, and examine the economic benefits of the policy and its administration. The committee conducted six public hearings and received 92 submissions from organisations and individuals from across the country.

The committee's unanimous report made four key findings and 12 common-sense recommendations to government. The first finding was of the absence of timely and accurate data as to the true level of foreign investment in residential real estate. The Foreign Investment Review Board tracks applications to purchase but not actual transactions or compliance with the requirement to seek approval prior to purchase. The simple truth is that no-one actually knows the level of foreign ownership of residential or agricultural property in Australia.

The second finding was that, while all foreign persons are required to seek approval prior to purchasing property, monitoring, compliance and enforcement had been entirely insufficient to provide any level of confidence in overall adherence to the rules. The committee discovered that over the life of the previous government not one divestment order for illegally acquired property was issued nor one court action undertaken. It defies credibility that all foreign investors were compliant or indeed had cooperated with the foreign investment regime for this entire period. By comparison, 17 divestment orders were made between 2003 and 2007, at a time when foreign investment in Australia's residential real estate was at much lower levels.

I must say that compliance activity was further undermined by the previous government, who in 2008—under the then Assistant Treasurer, now shadow Treasurer, the member for McMahon—removed the requirement for temporary residents to notify FIRB of all residential purchases. This change caused damage—most likely to compliance with the legal conditions under which temporary residents are able to purchase a single home while in Australia, and certainly to the Foreign Investment Review Board's capacity to effectively monitor and enforce these conditions. It also sent a powerful message that the then government was not interested in ensuring that the rules were enforced. The member for McMahon's successor, Senator the Hon. Nick Sherry, recognised the ALP's error and reversed this policy change. In a media release he detailed a number of measures to improve monitoring and enforcement in the lead-up to the 2010 election. Regrettably, most of those announced measures remained just words and were not pursued by Senator Sherry's successor, the Hon. Bill Shorten, or by any of the subsequent assistant treasurers in the last Labor government.

If you are not prepared to enforce the rules then it is less likely that people will comply with the rules. This is especially true if the consequences of a breach are neither sufficiently adverse nor commensurate to the act. And, as a result, the committee's third key finding was that new, more flexible and ultimately stricter penalties were necessary for adequate enforcement. Finally, the committee found that the reliance on the Australian taxpayer to foot the bill had handicapped Australia's foreign investment regime by contributing to underinvestment in audit, compliance and enforcement activities.

I am delighted that the government accepted all of the committee's recommendations, and the legislation today acts upon their intent. From 1 December 2015, Australia's foreign investment framework will be simpler, more modern and far more effective. Our foreign investment rules have not been substantially revised since they were first introduced in 1975. The legislation today will ensure that the regime keeps pace with the development of international investment and capital and will place our nation in a strong position to monitor and enforce existing rules.

The government has already made strong progress on this issue. To encourage those in breach to self-report, the government has provided a moratorium on criminal sanctions for those who volunteer their illegal behaviour and they are given a longer period of time to divest their property—12 months rather than the usual three months. Concurrently, the Australian Taxation Office has begun using their sophisticated and extensive data-matching technology to crossmatch ATO data against data held by the Department of Immigration and Border Protection, the Australian Transaction Reports and Analysis Centre, AUSTRAC, amongst others. No-one who is breaking the rules should be under any illusion. If you do not come forward to the Australian government, the Australian government will come to you.

In addition to the five concessional divestments announced yesterday, the Treasurer has also required the divestment of six illegally held properties and has issued a formal divestment order to the owners of a Point Piper property earlier this year. This was the first divestment order issued in about 10 years. So since March of this year, under this government 12 divestment orders have been issued.

With the introduction of the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, changes will be made to simplify the system and strengthen the framework and ensure the rules are enforced. The bill introduces a range of new and stricter penalties that will enable breaches to be dealt with according to the severity of the breach. The existing criminal penalties will be increased from $90,000 to $135,000 for individuals and from $450,000 to $675,000 for companies. These will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches of the residential real estate rules. For the very first time, third parties such as real estate agents, migration agents, conveyancers and lawyers who knowingly assist a foreign investor to breach the rules will also now be subject to both civil and criminal penalties.

Lastly, this legislation will close outrageous loopholes that have seen those people who have illegally purchased property, and required to divest, able to keep the capital gain. The foreign acquisitions bill delivers on the government's commitment to lower the screening thresholds for investments in Australian agriculture. Since 1 March 2015, the screening threshold for foreign purchases of agricultural land has been lowered from $252 million to $15 million based on the cumulative value of agricultural land owned by that investor. The government is also introducing a $55 million threshold for direct interests in agribusinesses from 1 December 2015. With this measure, Australians can be assured that investments into agriculture will be scrutinised to ensure that they are not contrary to our national interest.

As part of the first major review, this bill includes a package of long overdue amendments that will modernise the regime by reducing unnecessary red tape. In particular, this bill includes raising the substantial interest threshold from 15 to 20 per cent to align the foreign investment framework with the takeover rules in the Corporations Act 2001.

The Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 enables the adequate resourcing of monitoring and enforcement of the foreign investment regime. No longer will the Australian taxpayer fund the cost of administering the regime. The imposition bill introduces fees on all foreign investment applications from 1 December 2015. For example, fees for residential properties valued at $1 million or less will be $5,000 and $10,000 for property over $1 million, increasing in $10,000 increments for every million dollars thereafter.

Applications fees will also apply to commercial real estate, business and agriculture applications. These fees will ensure that the Australian taxpayer will no longer fund the administration of the system, whilst providing additional resourcing to Treasury and the ATO to undertake their activities.

The final bill is the Register of Foreign Ownership of Agricultural Land Bill 2015. This register will provide information such as the location and size of the property and size of the interest acquired, and will enable better transparency around foreign investment into Australia's agricultural sector. All existing holdings of agricultural land held in foreign ownership must be registered with the ATO by 31 December 2015, with new interests subsequently registered within 30 days.

The government is also actively working with the states and territories to use their land titles data to expand the register so that it includes all types of land, including residential real estate, in the future. For the first time, this will enable a clear picture of the levels of foreign investment in residential real estate by capturing real transaction data. This empirical data will separate fact from fiction and enable policy formation on empirical data rather than 'best guestimate.'

There is no doubt that overseas investment has contributed to our nation's standard of living and represents an enormous opportunity for investment in Australia's future. We welcome foreign investment. With these bills, Australia will continue to welcome this essential foreign capital and ensure we remain best placed to harness this opportunity, deriving the maximum benefit possible for all Australians for generations to come. I commend these bills to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

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