An audit of compliance with laws governing overseas ownership of Australian residential properties has found it to be ineffective.
In his report Compliance with foreign investment obligations for residential real estate, Auditor-General, Grant Hehir assessed the effectiveness of the Australian Taxation Office’s (ATO) and Treasury’s management of the compliance.
“The ATO has developed processes for compiling a land register of residential real estate but faces considerable challenges in populating the register with reliable data in coming years,” Mr Hehir said.
“It needs to overcome (this) in order to be effective,” he said.
Mr Hehir said Australia attracted a large volume of foreign investment applications for residential real estate, with 40,149 applications in 2015–16, and approvals that year totalling $72.4 billion in proposed investments.
He said responsibility for residential real estate under the foreign investment framework was transferred from the Department of the Treasury (Treasury) to the Australian Taxation Office (ATO) in 2015-16.
“The ATO has assessed and addressed compliance risks … but has not yet compiled and implemented a compliance and enforcement strategy,” he said.
He said monitoring and reporting arrangements were largely effective, but could be strengthened.
Mr. Hehir said the ATO had been compiling a land register of residential real estate using property data from State and Territory land titles offices.
“The ANAO’s analysis identified serious deficiencies in populating the register with reliable data.
He said there was likely to be under-reporting of self-registrations, over-reporting of foreign identity information in State property data and low levels of matching between datasets.
“The ATO will need to undertake extensive manual verification processes in coming years,” Mr Hehir said.
The audit made two recommendations, including that the ATO prioritise developing and finalising data matching rules to address key compliance risks, to which the ATO agreed.
The Auditor-General’s 70-page report can be accessed at this PS News link and the audit team was Kylie Jackson, Renee Hall, Sonya Carter, Dung Chu, Fei Gao, Haydn Thurlow and Andrew Morris.
