Vijay Balasubramaniyan, a residential real estate buyer based in Victoria, Australia, has been penalised $250,000.
He has thus become the first person fined by Australia’s Federal Court for breaching the nation’s foreign investor laws.
Mr Balasubramaniyan moved to Australia on a temporary visa in 2015 before marrying his Australian wife in 2017.
He was found to have purchased multiple properties in outer Melbourne without being authorised to do so by the Foreign Investment Review Board (FIRB) which is administered by the Australian Treasury and the Australian Taxation Office.
Mr Balasubramaniyan admitted buying into the Hoppers Crossing, Werribee and Aintree properties from 2016 to 2018 without giving notice to FIRB.
The ATO filed proceedings in relation to six breaches of the Foreign Acquisitions and Takeover Act 1975 (FATA) by Mr Balasubramaniyan in July 2020.
Following an investigation the ATO found that Mr Balasubramaniyan had purchased four properties without permission while simultaneously owning two established properties.
ATO assistant commissioner Keir Cornish welcomed the penalty decision. He said that this decision would serve as “a clear deterrent to other foreign investors who believe they can operate outside of the law”.
Mr Cornish added:
“There are obligations under Australian law for foreigners that have invested in, or plan to invest in Australian residential real estate. The ATO promotes voluntary compliance of the rules by foreign persons, but where foreign investors resist compliance action, stronger enforcement action is taken.”
Australia’s foreign investment rules limit the type of residential property that non-residents can purchase.
These new compliance and enforcement powers came into effect in January 2021. Under these regulations defaulters and rule breakers can see an increased penalty.
From 2015 to 2021, 434 residential properties in Australia have been disposed of as a result of foreign investor compliance action.
Foreign individuals found to be in breach of the FATA can be penalised up to 25 per cent of the value of the property or have their capital gains recaptured, whichever is greater.
Justice Jonathan Beach said in his order that Mr Balasubramaniyan banked $710,300 in capital gains from his illegal purchases and general deterrence factored into the sizeable fine.
The court ordered Vijay Balasubramaniyan pay $250,000 to the federal government as well as the Tax Commissioner’s legal costs.
It is reported that the four Melbourne properties have been sold and are now with Australian residents.