Foreign investment in residential real estate: our compliance approach

On this page

• Foreign investment rules
• Our compliance strategy
• Our compliance actions
• Report a breach of the foreign investment rules
• Where to get help

Foreign investment rules

Maintaining strong compliance with Australia’s foreign investment laws is a priority for the Australian Government to ensure that foreign investment is in line with the national interest (or national security). Compliance is the degree to which foreign investors observe or fail to observe relevant tax and foreign investment laws.

Together with the Treasury, we aim to ensure the obligations of those seeking to invest in Australia are clear and easy to understand. These obligations are set out in the Foreign Acquisitions and Takeovers Act 1975 (FATA 1975).

Our general information will help you understand the responsibilities that foreign persons have when investing in Australian residential real estate.

If you are considering investing in Australian residential real estate, you may have to notify us, or request approval from the Treasury, before you purchase. See:

• Residential real estate application – instructions
• Land and water register and instructions.

If you have received approval from us – including a no-objection notification or an exemption certificate – you must follow and comply with the conditions listed on this the approval.

Generally, you must register your investment with us and, each year, lodge a Vacancy fee return.

You must also keep your contact details up-to-date with us at all times.

Visit the Treasury's Foreign Investment Review Board (FIRB) website to learn more about compliance and reporting requirementsExternal Link.

Our compliance strategy

The government remains committed to strengthening Australia’s foreign investment framework. We will continue to assist the Treasury and the FIRB to ensure foreign investors meet the foreign investment rules and comply with their obligations.

Our strategy and goals in compliance

We are committed to making compliance easy for foreign investors.

Our goals of promoting voluntary compliance and identifying non-compliance with the foreign investment rules and the Foreign Investment Policy include:

• using developed data, systems and sources to detect non-compliance of foreign persons
• improving our understanding of the drivers of non-compliance to identify opportunities to improve voluntary compliance
• using tailored, targeted and informed approaches and outcomes when we engage foreign investors and their representatives
• providing clear and easy-to-understand communication to foreign persons to enable them to comply.

Making compliance easy – our education and information focus

To achieve our goals of making compliance easy, we use a multi-faceted and multi-channel approach. We:

• positively engage and assist foreign investors and their representatives in meeting their foreign investment obligations and provide them with an opportunity to voluntarily disclose, either before or during an investigation
• detect non-compliance using systems and processes such as data matching, data analysis and monitoring, information sharing with other agencies and community referrals
• tailor our compliance approaches and outcomes for individual instances of non-compliance, to promote sustainable voluntary compliance
• provide a simple and easy-to-use service to make and receive payments electronically
• engage with intermediaries, agents and industry bodies to provide education on changes in the foreign investment policy and the ongoing obligations with investors
• use up-to-date technology, modern and efficient processes, and provide the convenience of self-service lodgment forms through our online portals
• use a comprehensive website with detailed and tailored information on foreign investment obligations, including fact sheets
• provide a subscription service in which professional advisers and foreign investors can register to receive newsletters on relevant updates
• provide a series of webinars and presentations on foreign investment obligations, published on atoTV
• have highly skilled and knowledgable staff committed to educating and assisting foreign investors to identify and meet their obligations
• provide a customer service hotline to answer less complex enquiries.

Our compliance actions

We recognise that most foreign investors are willing to do the right thing and meet their foreign investment obligations.

We also acknowledge there is a small proportion that either don’t want to comply or have decided not to. Accordingly, we adopt a compliance approach that:

• is responsive to various categories of foreign investor behaviour, and
• seeks to influence that behaviour by encouraging and assisting voluntary compliance.

We use a compliance model which shows a continuum of client attitudes towards compliance. At the base of the continuum, clients have the desired attitude of being 'willing to do the right thing'. At the top, clients display the opposite attitudes of deciding not to comply.

The compliance model also summarises the different types of support and intervention we may need to provide to collect the required revenue.

Compliance model

The model suggests that we can influence client behaviour through our response and interactions.

Accordingly, we undertake a tailored, and differentiated approach in our compliance actions, with 3 levels of enforcement:

• Low touch – for clients who want to comply but need to access information, services and tools to meet their particular needs. This level provides more services, and few corrective approaches.
• Medium touch – for clients who seek our support and advice when they encounter something new or complex, or who need increased assistance to get things right. This is a mixture of services and some corrective approaches.
• High touch – for sophisticated clients who don’t want to comply or are reckless in their obligations. At this level, there is increased attention from the ATO, with fewer services and firmer corrective approaches.

In addition, we share data with a wide range of organisations and government departments, including the Australian Securities and Investment Commission (ASIC), Home Affairs, AUSTRAC, local councils, and state revenue offices.

Visit the Treasury's FIRB website to learn more about compliance and reporting requirementsExternal Link.

What to expect

Using our multi-faceted and multi-channel approach, we undertake a number of compliance investigations:

• Covert data matching and detection – We regularly undertake data matching and sharing with other agencies and organisations to detect instances of non-compliance. During this process, we will covertly monitor foreign investors and their agents.
• Reviews – We regularly undertake reviews of foreign investors affairs that occur after routine checks, information received from other sources including data matching and community tip-offs. During this process, we will use our third-party sources such as other government agencies to verify details.
• Audits – During an audit, we will use our third-party sources, such as other government agencies, to find out more details on your affairs. We may need further information and will engage foreign investors in an audit.

In most instances, our case officers will contact you by phone or email to advise why we are conducting an investigation and explain the investigation process. They may ask you to provide additional information about your investments.

As a result of our investigations, we may:

• direct a foreign investor to take an action or actions that will result in compliance, where they were previously breaching the foreign investment rules
• issue infringement notices or penalties to foreign investors for instances of non-compliance
• issue disposal orders, requesting a foreign investor to dispose of their investments in Australian residential real estate
• take further action by applying to the relevant court or tribunal to enforce compliance (see Litigation - our policies).

Our first civil litigation outcome

In 2022, we welcomed the decision handed down by the Federal Court of Australia in relation to breaches of the FATA 1975.

Using sophisticated compliance data-matching systems, our investigations into tax evasion and fraud identified several concerning activities by some investors.

In this instance, an individual investor purchased 4 properties without first applying for and receiving FIRB approval. The investor also held 2 established residential properties. These actions are considered serious breaches of the law and warranted a 'high touch' approach in treatment.

The landmark decision handed down in the Federal Court attracted penalties of $250,000. It sent a strong message to investors on the importance of understanding and complying with their foreign investment obligations.

This outcome highlights the effectiveness of our compliance measures and the ATO compliance model. Our intention is to use the full force of the law to address any malpractice that exploits or damages the integrity of the tax system.

For more information on the Federal Court outcome, see:

• our media release
• Commissioner of Taxation v Balasubramaniyan [2022] FCA 374 (8 April 2022)External Link (austlii.edu.au).

You can also refer to FIRB Guidance Note 14: Compliance and penalties with respect to residential landThis link will download a file – download the Word document or PDF.

Have you received a letter from us?

You may receive correspondence by email, SMS or post regarding your foreign investment in Australian residential real estate.

The table below lists some examples of correspondence you may receive and their delivery channel.

Expected outcomes

As an outcome of our compliance actions, we have observed:

• improved behaviours of clients and increased voluntary compliance
• increased understanding and knowledge of foreign investment obligations
• opportunities for future compliance actions
• improvements in our processes and systems, including data quality and accuracy.

Report a breach of the foreign investment rules

To report a suspected breach of foreign investment rules you can:

• complete the tip-off form
• phone us on the ATO tip-off hotline on 1800 060 062.

We investigate all reports of suspected breaches if enough information is provided.

If you suspect you’ve breached your foreign investment conditions, contact us as soon as possible.

For more information, see Report a breach of the foreign investment real estate rules.

Where to get help

If you need help you can:

• phone the Foreign Investment Enquiry Line on 1800 050 377
• email FIRBResidential@ato.gov.au.

If you don't speak English well and want to talk to an officer, you can phone the Translating and Interpreting Service on:

• 13 14 50 within Australia
• +61 3 9268 8332 outside Australia.