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Kooky
Builder of Shaka, the payment router that pays every agent their commission on closing date.
About Kooky and Shaka →The Federal Court has ordered a foreign investor to pay a civil penalty of $508,000 for failing to build a home on vacant residential land within the four years her foreign investment approval allowed. The trade publications Smart Property Investment and Accountants Daily reported the judgment on 30 September and 1 October 2026, and described it as the second penalty of its kind obtained by the Australian Taxation Office, which enforces the residential side of the foreign investment rules.
The land is in Victoria, but the rule is federal. Every foreign person who buys vacant residential land in Queensland does so under the same condition, on top of the State's own duty and land tax surcharges. The case is a rare public look at what happens when the condition is ignored.
Accountants Daily, 1 October 2026; Smart Property Investment, 30 September 2026.
What the court ordered
According to Accountants Daily, the investor bought a 401-square-metre block in Berwick, in Melbourne's outer south-east, for $296,000 in 2016. The purchase was approved under the foreign investment framework on the standard condition for vacant land: that a dwelling be built within four years.
No dwelling was built. The publication reports that the buyer had arrived in Australia on a tourist visa and left the country about a month after the purchase, and that when the ATO made enquiries she said she did not have the funds to build and intended to resell the land.
The court treated each day of non-compliance after the deadline as a separate contravention. Accountants Daily puts the count at approximately 2,300 contraventions over six and a half years. The orders were a pecuniary penalty of $508,000 and legal costs of $50,757.70, a total of $558,757.70, together with a freezing order over the property for 28 days so that it could not be sold out from under the judgment.
Related readHome concession now asks for citizenship: what changes for moversThe penalty alone is about 1.7 times what the land cost. Smart Property Investment adds that the ATO separately pursued unpaid vacancy fees on another property held by the same owner, and secured that debt with a charge over the vacant land.
The ATO's response was given by Assistant Commissioner Jennifer Moltisanti, who is quoted by both publications as saying that land banking "will be met with significant consequences".
The rule that was broken
Foreign persons generally need approval before buying residential land in Australia, and approval comes with conditions that depend on what is being bought. The policy behind them is consistent: foreign investment in housing is welcome where it adds to the number of homes, and restricted where it only competes for the homes that exist.
Vacant residential land fits that policy only if something is built on it. The condition reported in this case, construction within four years of approval, is what turns a land purchase into new supply. Holding a block undeveloped in the expectation that its price will rise, which is what the term land banking means, takes a site out of use and delivers nothing.
Enforcement sits with the ATO, not with the Foreign Investment Review Board that advises on larger proposals. The tax office receives the applications for residential purchases, collects the fees, monitors the conditions and brings court proceedings when they are breached.
The vacancy fee, a separate charge
The second matter in the reports, the unpaid vacancy fee, is a different obligation that applies to dwellings instead of bare land.
The ATO's guidance on fees for foreign residential investors, updated on 1 July 2026, says a foreign owner must pay an annual vacancy fee if the dwelling is not occupied or genuinely available for rent for 183 days or more in a year, or if the owner fails to lodge the annual vacancy fee return on time. The second limb catches owners whose property was in fact tenanted but who did not file.
Related readLand tax in Queensland: who pays it, the thresholds and the exemptionsThe fee is set by reference to what the owner paid to apply for approval. The ATO says it equals double the foreign investment application fee originally paid. Application fees are themselves steeply scaled by price and by the type of property, and are indexed each 1 July.
| Type of dwelling | Price under $75,000 | Price over $40 million |
|---|---|---|
| New or near-new dwelling | $4,600 | $1,245,500 |
| Established dwelling | $13,800 | $3,736,500 |
Australian Taxation Office, fees for foreign residential investors, rates applying from 1 July 2026 to 30 June 2027. The vacancy fee is double the application fee paid.
The table shows the two ends of the scale only; the bands between them step up with price. It also shows the weighting in the system. At both ends, the fee for an established dwelling is three times the fee for a new one, which mirrors the policy described above.
For an owner who leaves a dwelling empty, the arithmetic is direct. Whatever was paid to apply is charged again, twice over, for each year the home sits vacant or the return goes unlodged.
How the same rules reach Queensland
Nothing in the case is specific to Victoria. A foreign person who buys a vacant block in Logan, on the Sunshine Coast or in Cairns receives approval under the same federal framework and takes on the same obligation to build.
Queensland then adds its own layer. A foreign person acquiring residential land in the State pays additional foreign acquirer duty at 8 per cent of the dutiable value on top of ordinary transfer duty, according to the Queensland Revenue Office, and land owned by foreign companies, foreign trusts and absentees is subject to a land tax surcharge each year. Those charges are owed whether or not anything is built.
The combined effect, for a foreign buyer of a Queensland block who does not proceed to build, is cumulative: State duty and surcharge paid from the start, and after four years a daily exposure to federal civil penalties of the kind the Federal Court has now quantified. The case suggests the federal exposure can come to exceed everything else.
Related readLogan adds 5.49 per cent and Moreton Bay 4.69 to minimum ratesEach day past the deadline counted as a breach
The court was reported to have found about 2,300 contraventions over six and a half years, one for each day the land stayed undeveloped after the four-year period ended.
How often the ATO acts
Court cases are the visible end of a larger compliance program. Both publications cite the ATO's figure that it remediated 217 foreign investment breaches in 2024-25, and that 111 residential properties were disposed of as a result.
Set against that number, a civil penalty in the Federal Court is exceptional. The published figures do not break down how the other breaches were resolved. On the reports, this matter went further because the owner was overseas, had not built for years beyond the deadline and had fees outstanding on a second property.
The freezing order is the notable procedural feature. A penalty against a person who lives abroad is worth little if the only local asset can be sold before the judgment is paid. By freezing the land for 28 days, and by taking a charge over it for the vacancy fee debt, the ATO has tied both debts to the property.
What it means for agents and conveyancers
For Queensland agents who sell land to overseas buyers, the case is a reason to be plain about the condition at the start. A buyer who believes a block can be held indefinitely and resold has misunderstood what the approval permits, and the misunderstanding becomes expensive in the fifth year.
Conveyancers and solicitors acting for foreign buyers already check that approval is in place before a contract becomes unconditional. The judgment adds weight to a second conversation, about what the approval requires afterwards: a construction timetable for vacant land, and an annual vacancy fee return for a dwelling, lodged whether or not the home was empty.
Builders and developers are affected at one remove. A foreign-owned block with a deadline attached is a block whose owner needs a building contract, and an owner who cannot fund a build is better served by selling to someone who can than by waiting.
None of this bears on the great majority of foreign buyers, who build or occupy as their approvals require, and it has no application to Australian citizens and permanent residents.
What happens next
The reports do not say whether the penalty has been paid or whether the land will be sold to meet it. The 28-day freezing order gives the parties that period to deal with the judgment.
The ATO has signalled that it sees the case as a marker. Two civil penalties for land banking do not make a pattern, but they establish a method the tax office can repeat: a daily count of contraventions, a penalty that exceeds the value of holding the land, and orders that stop the asset leaving before the debt is met.
For foreign owners of undeveloped residential land in Queensland whose four years are running or have run, the practical choices are the ones the rules always offered: build, or sell. The ATO's published guidance also provides for approvals to be varied on application, for a fee, where circumstances have changed.
Kooky, from Shaka
Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.
