TREASURER:
Good morning Neil.
NEIL MITCHELL:
What’s the best movie you’ve seen in the past 20 years?
TREASURER:
20 years, 20 years. Boy, 20 years.
NEIL MITCHELL:
Alright, 10 years.
TREASURER:
I like a bit of action. True Lies was a great movie, that was probably more than 10 years ago. Or Ocean’s Eleven or Ocean’s Twelve, any of those sort of, you know with Brad Pitt and George Clooney.
NEIL MITCHELL:
Not the Wolf of Wall Street?
TREASURER:
[laughter] No, no not at all. I’ve seen it, but it didn’t do it for me.
NEIL MITCHELL:
Okay, serious business. 195 cases involving suspected breach of residential property rules. Does this mean we’re on top of it?
TREASURER:
Well, we have come a long way, we’ve still got a way to go. We’re putting a lot of resources into the Australian Taxation Office which has now got the new investigative powers and they’re employing 60 people who are doing a lot of data matching. Particularly between the Department of Immigration and the Tax Office, Centrelink, AUSTRAC, to identify which foreign citizens are purchasing existing residential real estate in Australia. Interestingly, they’ve come back and said we think there could be quite a bit of tax fraud here as well.
NEIL MITCHELL:
How does that work?
TREASURER:
Because they don’t declare rental income.
NEIL MITCHELL:
Oh okay.
TREASURER:
So they’re a foreign national that’s getting rental income from properties in Australia and they’re not declaring it to the tax authority and in one case, there’s one individual that has 10 properties across two states. One property – the lowest value $300,000 and the highest value $1.4 million. They’re certainly having a good look at that one.
NEIL MITCHELL:
There’s a perception that it’s mostly Asian buyers purchasing in this way, is it?
TREASURER:
Well, there’s a mix. The biggest investors in residential real estate in Australia last year were the Chinese, previously it’s been the United States, but there’s been a massive surge. Victoria has got the largest amount of foreign investment of any state in Australia in the previous 12 months. Victoria had very strong housing construction, but a lot of new housing has been going to foreign investors, particularly the Chinese. Look, you can’t stereotype it because we’ve got one case where I said they have to divest and given them the chance to divest because they came forward from the United Kingdom. That’s in Western Australia and that’s a property around $700,000.
NEIL MITCHELL:
So what are the rules, what are they breaching? What mainly is it?
TREASURER:
Well if you’re a foreign citizen you’re not allowed to buy existing residential real estate in Australia. You can buy new real estate, but you need approval to buy existing residential real estate from FIRB. You’re only going to get approval really from FIRB if you are a temporary resident. So if you’re coming to work in Australia for a few years, you get permission to buy residential real estate in Australia, existing residential. Then you have to sell it when you leave. Or, if you’re buying an existing property and you’re going to demolish it and build a new property. The idea being that foreign investors if they invest in residential real estate in Australia, they have to create construction jobs. So, that’s the idea behind, part of the idea behind foreign investors being allowed to buy new residential real estate, because that means that they’re putting their money into new construction jobs, rather than buying an existing asset.
NEIL MITCHELL:
But see anecdotally we’re getting messages as you would be as well from the audience saying there is regularly, and they’d send a notice that Chinese buyers in particular, are regularly Chinese buyers buying in their streets, forcing prices up. In my own area there’s a house, unoccupied for three years after being bought by Chinese purchasers. Now I don’t know whether they’re entitled to buy it or not, but it’s very strange to have a house sitting there empty for three years.
TREASURER:
Well, it is but, you know we’ve got to be careful here because there’s been Chinese Australians in Australia for a lot longer than my family. They might look like foreign buyers but in fact they’re not. So I’m giving everyone the benefit of the doubt, but if anyone – I’m just getting a hotline number. But if anyone has any information then please, I’ll get the number for you now, and we’re prepared to investigate. I mean I referred one of my own neighbours for investigation and found out that yes they had got approval but on pretty spurious grounds.
NEIL MITCHELL:
Oh, so what’s happened to them?
TREASURER:
Well, you know, I’m waiting to hear back. But I mean it was a kilometre down the road and they bought a property on the basis that it was meant to be a, you know they were going to add to the housing stock by building a granny flat out the back or something, and I thought that’s ridiculous. It was a heritage house so…
NEIL MITCHELL:
I’d be surprised if you don’t get some dog droppings over the front fence after that.
TREASURER:
[laughter] Well, you know, I think to deny an Australian the right to purchase a house in Australia, if someone unlawfully purchases a house in Australia…
NEIL MITCHELL:
I guess it comes back to the point I said at the start, I mean you’ve made some ground here but it seems to me on the anecdotal evidence we get, and this is from people getting around auctions with their eyes open. People with no English buying properties and obviously a foreign, well foreign background, as you say not necessarily foreign citizens. There’s a hell of a lot to go yet.
TREASURER:
Well, there probably is, there probably is. That’s why we need to hear about it, contact my office, we’ll give you a hotline to go straight to the Australian Taxation Office but we need to hear about it. Look this is part of the integrity program, I mean it’s not as if we’re dramatically changing the laws. Sure we’re introducing a very serious penalty regime and also, if there are any real estate agents or lawyers or accountants that are helping people to shield their true identity or true nationality, then there are fines for those people as well. That starts on the 1st of December, but people have until the 1st of December to come forward if they’ve got any doubts about their legal ownership of a property. I’ve got a number for you, 1800 050 377, 1800 050 377.
NEIL MITCHELL:
So that’s if people consider there’s some sort of suspicious purchaser?
TREASURER:
Yeah, look if they have concerns then they should come forward, we’ll properly investigate them. That’s what we’re doing and look, there have been for example, 24 of the 195 cases have come forward voluntarily.
NEIL MITCHELL:
Have you been talking to real estate agents? Because they’d know.
TREASURER:
Yeah, well I come from a family of real estate agents…
NEIL MITCHELL:
No, no, but I mean does the Tax Office go and knock on Joe Bloggs Real Estate and say how much have you sold that might have went to foreign investors.
TREASURER:
Look, the better data is coming from data matching with the Department of Immigration. Also, AUSTRAC, where you can track big [inaudible] of money coming into Australia. So, you go through those sorts of things and because the – you see these powers, well these resources weren’t there previously. So, now it’s in the Australian – I looked at all my agencies and said well who’s got the capacity to do these investigations? FIRB was a small unit in Treasury, the Foreign Investment Review Board, and it wasn’t, just wasn’t getting to the, you know, the [inaudible] of the matter. So, what I did was, the ATO has in excess of 20,000 people and we all know they’re pretty good at investigations. So, they’re now employing a bank of people to do data matching with all these other departments and say well hang on, it will spit up the name of someone, and say hang on who’s this person? We haven’t got any other details on him or her out of these agencies and hang on, they’re not an Australian citizen. So, they can – that’s the best way to try and get that information.
NEIL MITCHELL:
1800 050 377. If I might a couple of other quick things. Reported in the Financial Review today that you’ll be – you’ve got Labor’s support to dump the dependent spouse tax offset, is that right?
TREASURER:
Well we do, this is an initiative to save money from last year. The Labor Party was going to go down this path as well and it comes back to the fact that we just – we can’t keep spending money we have to try and save some money…
NEIL MITCHELL:
It’s [inaudible] for stay at home mums though?
TREASURER:
Oh, it was - there were other things in play. I mean there was the family tax benefit that also assists stay at home mums. There’s a range of other initiatives that help stay at home mums.
NEIL MITCHELL:
A dependent spouse tax offset, I understand if the spouse earns less than about $10,500 you got a $2,400 offset.
TREASURER:
And one of the things that has happened over the last few years has been a dramatic increase in the tax free threshold as well, which has meant that effectively people have got significant benefit if they’re…
NEIL MITCHELL:
So how many people will this affect, do you know?
TREASURER:
Look I haven’t got the immediate number in front of me, and…
NEIL MITCHELL:
The other thing, this is back to real estate. The Greens arguing for dropping negative gearing, are you thinking about that?
TREASURER:
Well, I’m surprised that they’ve come forward with this policy because my strong view is that it would cause people to increase rents that have investment properties. If they increase rents it’s going to hurt people that are, more often than not, least able to afford a dramatic increase in rents…
NEIL MITCHELL:
So you’re not looking at cutting negative gearing?
TREASURER:
Well we’ve got a Tax White Paper at the moment where we’ve specifically said that you know, we’re looking at the tax system overall. This is I suspect where The Greens proposal has come from. But we can’t see any merit in changing negative gearing on residential real estate because of the unintended consequences, or maybe the intended consequences for some, to have a quite dramatic increase in rent, in certainly Melbourne or Sydney.
NEIL MITCHELL:
Thank you very much for your time, I know you’re pushed, thank you Joe Hockey, the Federal Treasurer.