Court backs action over undeveloped land bought under foreign investment

The Australian Taxation Office has secured a $370,000 penalty against foreign investor Guno Handojo in a land banking case.

On Tuesday, the Federal Court of Australia found Handojo breached development conditions attached to foreign investment approval for vacant residential land.

Judges found Handojo failed to construct a residential dwelling within the required four-year timeframe.

Under Australia’s foreign investment rules, foreign investors who buy vacant residential land generally must build within 4 years.

That rule is intended to put land to productive use and contribute to housing supply.

Meanwhile, the ATO said it identified the breach through a compliance program targeting land banking.

That program uses data matching and audits of foreign investment approvals.

The agency also uses wider data and intelligence to detect breaches of the Foreign Acquisitions and Takeovers Act 1975 and the broader foreign investment framework.

During the proceedings, the Federal Court granted freezing orders over the land to prevent its disposal before the case ended.

ATO found breach through audits

ATO Assistant Commissioner Jennifer Moltisanti said the outcome showed the regulator would enforce foreign investment rules.

“Foreign investors and their representatives need to understand that buying residential land in Australia comes with clear and enforceable obligations,” Ms Moltisanti said.

However, the ATO says it promotes voluntary compliance before taking stronger enforcement action.

According to the tax office, tougher action follows when foreign investors avoid or obstruct compliance, including by failing to develop approved land or obscuring beneficial ownership.

Ms Moltisanti said the case should warn foreign investors and their advisers that court action can follow non-compliance.

She also said the ATO can use its powers to bring illegally banked foreign-held land back to market, including through a forced sale.

The matter remains subject to appeal by the foreign investor.