GREENWOOD:
We’ve got the Parliamentary Secretary to the Treasurer and also as I told you was the Chair of the House of Representatives committee that inquired into the foreign ownership of the housing in Australia. It was Kelly O’Dwyer who told you here on this programme that the Foreign Investment Review Board had been asleep at the wheel and had not forced any sale of any properties illegally bought in this country since 2006. She’s on the line right now. G’day Kelly how are you doing?
O’DWYER:
I’m well, how are you?
GREENWOOD:
I’m very well. Are you pleased that the Treasurer Joe Hockey had said that $39 million mansion that effectively had been bought by the Chinese investor Hui Ka Yan last year, was against the Foreign Investment Review Board rules and he has 90 days to sell this Villa del Mare?
O’DWYER:
I think that this sends a really strong signal that anybody who illegally purchases property in Australia will have the law applied to them irrespective of the value of their property, no one is above the law. The law will be enforced and the Treasurer has sent an incredibly strong signal in relation to that. That’s what he has done with this most recent announcement. The Government announced that with the changes to the foreign investment laws that we are going to beef up penalties for people who make illegal purchases. We are going to beef up the enforcement, compliance and auditing capability with a special unit to be put into the ATO to follow up on suspect purchases so that people can have confidence in the foreign investment framework.
GREENWOOD:
Ok Kelly, this is $39 million. This bloke Hui Ka Yan is obviously well heeled. He is a multibillionaire and so forth. Do you reckon 90 days to sell a $39 million mansion is reasonable or not?
O’DWYER:
The Treasurer has, within his powers, the ability to set the number of days before which the property must be sold. The Treasurer has obviously considered that matter, and while I don’t like to refer to very specific matters, the process in general is that if somebody hasn’t notified the Foreign Investment Review Board of a purchase, and it turns out that that purchase is in breach of our foreign investment framework, the Treasurer is perfectly entitled to set an appropriate time limit for the property to be sold and that is what the Treasurer has done in this instance.
GREENWOOD:
The second part of this is that it is not the only one, the Treasurer has referred to another one. Has there been any announcement of a second property that is likely to be announced to be divested?
O’DWYER:
There’s been no public announcement, but what the Treasurer has flagged is that the Foreign Investment Review Board and the Treasury and this new unit that will be set up in the ATO will have serious powers to go after people who have made illegal purchases and that the full force of the law will be applied to those people who have contravened the foreign investment framework. There are currently investigations that are on foot and when there is an opportunity to make a public announcement in relation to those, that public announcement will be made by the Treasurer. The message is clear – unlike with the previous Government that basically sat on their hands and said that “we’re not interested whether you breach the framework or not, we just don’t care, it can in effect be a free-for-all for everybody” – we say no. For people to have confidence in the foreign investment framework you need to enforce the law. There is clear law that has been established for a long period in respect to existing homes versus new dwellings. We are very keen for foreign investment when it comes to building new dwellings to increase housing stock and supply, but when it comes to existing homes there are restrictions and where people flout the law we’re going to enforce it.
GREENWOOD:
Ok now let’s go to another part of this. Because it’s all very well, $39 million mansions, and I’m sure the next announcements are also going to be very high profile properties. The laws that are being put in place could be potentially 25 per cent of the value of the property as some sort of fine as a person ends up having to sell. The question I’ve got is what about the half million dollar apartment or the million dollar house in the suburbs where a local buyer is being competed against by a foreign national buyer. And suddenly loses out on that particular property because someone has come over them illegally. Is that going to be chased as well?
O’DWYER:
Absolutely and that’s what this unit will have the dedicated resources to do. The law is clear – if it’s an established home it is not subject to a particular value limit. If it is an established home and it has been purchased by a non-resident foreign investor – that is in contravention of the Act – we will pursue all examples of that that the Foreign Investment Review Board can pursue. There will be a dedicated unit that will be able to make sure that is pursued in a much more vigorous way to the way that it’s previously been pursued. And that’s why we have also announced a modest application fee that will go with all of these applications that routinely happen for all residential purchases and other foreign investment acquisitions and approvals, so that that money can be hypothecated to make sure that we can build the right framework, to make sure that we can have integrity in the system
GREENWOOD:
Can I just tell you one thing, this particular property the one Villa del Mare – which is now going to be sold – 90 days’ notice, was sold by LJ Hooker Double Bays’ Bill Malouf and also Christies International’s Ken Jacobs – both of them very prominent real estate agents in the suburbs of Sydney. Together they have sold some of the most expensive houses in Australia. They are both very well-known real estate agents. Bill Malouf said this afternoon when he was asked about this particular case:
MALOUF: My understanding is, and this is what I’m prepared to say, this has – with a very well recognised accounting firm, the property was purchased in a registered company that is an Australian company which you are entitled to do to the best of my knowledge, there were two legal lawyers that were involved which were the vendor’s lawyers and the purchaser’s lawyers so at this stage the only thing we are saying is that the purchaser is aware that this is being questioned and we’re letting now the legal department with the purchaser’s lawyer, the purchaser’s accounting firm, go through with the Federal Government to see where they say that this is not going to be completed.
GREENWOOD:
Now Kelly O’Dwyer, you once told me that you would also try to pursue those agents that have allowed these transactions to take place. So is it likely that you will try and pursue some of Australia’s largest accounting firms who have clearly been complicit in setting up structures that have allowed these properties to be purchased?
O’DWYER:
We are saying that in this instance that the structure is not one that does allow this purchase and in fact the beneficial ownership is what really matters with the purchaser of a property irrespective of all the structures that might be put in place. To your point – are third parties, are people who knowingly give advice to a potential purchaser to purchase a property contrary to the foreign investment framework are they themselves going to find themselves captured in the penalty arrangements in a new regime? We have said yes, it is appropriate to capture third parties – it could be immigration agents, who might knowingly give advice that is incorrect. It could be other parties as you have suggested, it could well be an accountant. I’m certainly not talking about this case in particular at all…
GREENWOOD:
Could it be a big four accounting firm? Would you take them on?
O’DWYER:
If they knowingly give advice that allows somebody to breach the foreign investment framework that is quite serious. Currently we have limited penalties that we can impose and those penalties are applied directly to the foreign investor. We also know that there is a bit of an industry out there that encourages people to disregard the law and for those people who knowingly assist people to disregard the law, and to breach the law then they too will find themselves faced with penalties.
GREENWOOD:
Kelly O’Dwyer is the Parliamentary Secretary to the Treasurer and also was the Chair of the House of Representatives Economics Committee inquiry into the foreign ownership of housing in Australia. She was instrumental in getting these changes made, you can start to see they are coming through. Kelly always good to have a chat to you on the programme.