A foreign investor has been ordered to pay a $508,000 penalty after failing to build a home on a vacant residential block in Victoria within the timeframe required under Australia’s foreign investment rules.

The Federal Court has also issued asset-freezing orders against Fengqin Li after the Australian Taxation Office (ATO) took action over the undeveloped property in Berwick.

As per Realestate.com, court documents show Li, a resident of the People’s Republic of China, purchased the vacant land, now known as 8 Rogers Close, Berwick, in 2011.

Approval for the purchase was granted on the condition that a residential property be constructed on the site within four years.

The ATO alleged that Li failed to meet that condition, leaving the residential block vacant for more than four years instead of developing it into housing.

The case was identified through automated data-matching as part of the ATO’s targeted land-banking audit programme.

The ATO said Li initially responded to enquiries but later failed to engage with investigators and did not meet her obligations under Australia’s foreign investment framework.

The tax office subsequently commenced Federal Court proceedings and obtained freezing orders over the vacant land, preventing the property from being dealt with while the legal action was under way.

The ATO also identified outstanding vacancy fee liabilities relating to a separate residential property owned by Li.

A legal charge was registered over the vacant land to help secure recovery of the outstanding liabilities.

ATO Assistant Commissioner Jennifer Moltisanti said the outcome was the second successful Federal Court action arising from the ATO’s land-banking audit programme.

“This sends a clear message to foreign investors that land banking, which limits housing supply for the Australian community, will be met with significant consequences,” Moltisanti said.

“Foreign investors need to understand that buying residential land in Australia comes with clear obligations under Australia’s foreign investment framework.”

“These obligations will be enforced even where the investor is offshore or disengaged.”

Under Australia’s foreign investment rules, foreign investors who receive approval to purchase vacant residential land are generally required to begin construction within a specified period, with the applicable rules requiring a residential dwelling to be completed within four years.

The ATO said its broader compliance programme had already resulted in the remediation of 217 foreign investment rule breaches, including the forced disposal of 111 residential properties.

Moltisanti said the tax office could take further enforcement action where foreign investors failed to comply with the law.

“Where foreign investors do not abide by the law, the ATO can and will use its powers to bring illegally ‘land-banked’ property held by foreign investors back into the Australian housing market,” she said.

“This may include the forced sale of land.”

The ATO said its targeted audit programme is continuing to identify foreign-owned residential land that may have been held in breach of investment conditions.

The enforcement action comes amid ongoing scrutiny of foreign investment in Australian residential property and the impact of undeveloped land on housing supply.

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