Under the reforms, which come into play from December 1, potential foreign investors will be required to pay fees of up to $100,000 depending on what type of property they wish to purchase.
Foreign investors will be required to pay $5000 for residential and rural land purchases valued under $1 million, with the fee to increase by $10,000 for every million dollars that an acquisition exceeds $1 million.
Annual programmes, off-the-plan purchases, developed commercial property purchases and business and corporation acquisitions valued at under $1 billion will attract a $25,000 fee, while deals worth more than $1 billion will carry a $100,000.
According to the government the fees will generate $735 million in revenue over the forward estimates period of their latest budget.
Of that figure, $200 million has been earmarked to found a special department within the Australian Taxation Office to oversee the real estate sided of the Foreign Investment Review Board.
Writing in The Australian Financial Review, David Friedlander, Nigel Hunt & Evie Bruce from law firm King & Wood Mallesons described the fees as some of the world’s more unfriendly actions towards foreign investors.
“To put this in a global context, it is one of the greatest and least investor-friendly fee grabs of the modern era,” they said.
“Investment Canada has no filing fee and FIRB itself had no fee until this measure. Even applications to the Committee on Foreign Investment in the United States (CFIUS) are a free filing.”
While Friedlander, Hunt and Bruce believe the fees will only have a “negligible” effect in deterring foreign investors, the government should still be wary of their effect.
“We think that cash-rich foreigners looking at Australian property are unlikely to sweat a $5000 to $25,000 fee,” they wrote.
“Even at the top end, the fees are likely to be bundled in with other (much larger) transaction costs and have a minimal net deterrent effect.
“Nevertheless, the imposition of the fees needs to be carefully handled by the government in its offshore messaging.
After all, Australia is in competition with other nations for the foreign investment dollar and Tony Abbott's consistent message is that Australia is ‘open for business.’”
