Westpac crackdown on foreign buyers and money laundering
Property buyers will be quizzed about their tax residency under new anti-money-laundering rules being introduced by Westpac and its subsidiaries St George Bank, Bank of Melbourne and BankSA.
Mortgage brokers, who act as intermediaries between the banks and buyers, are being told that from this week they must also ask their client to provide their country of tax residency and tax identification number. Up to five countries of foreign tax residence can be recorded.
Those that cannot provide a number must provide a reason.
There is estimated to have been a 300 per cent increase in the number of suspicious transfers of money into Australia from overseas in the past two years, according to Austrac, the government agency that monitors cash flows.
That includes nearly $4 billion in suspicious money transfers from China in the past 12 months. Much of the money was targeting Australian real estate and property, according to Austrac officials.
The spike in possible illegal money transfers from China coincides with a crackdown by local banks on overseas buyers that would have prevented many raising cash through legitimate channels.
Income-tax evasion
The rules are being introduced under an Organisation of Economic Cooperation and Development initiative to fight income-tax evasion and protect the integrity of tax systems around the world. They are intended to trigger the automatic exchange of tax and financial account information.
An account cannot be opened without answering the foreign tax residency questions.
In addition, the bank is warning it may investigate if there is any information to indicate the client has an obligation as a foreign tax resident. Information will be forwarded to the Australian Taxation Office.
It will apply to individuals and organisations including companies, super fund trusts, bare trusts, custodians and beneficial owners.
A recent survey reveals foreign buyers are accounting for about 11 per cent of all new property purchases and about 8 per cent of established houses. In Victoria their market share jumped to nearly 20 per cent.
This is the highest since lenders cracked down on overseas buyers about 12 months ago by tightening terms and conditions because of fears about widespread fraud.
More than half the property purchases of overseas buyers are apartments, about 30 per cent houses and 15 per cent for redevelopment.
Last week Citigroup announced it has limited overseas mortgage lending to elite high-net-worth clients with minimum deposits or investments of $250,000 because of concerns about its capacity to handle the number of applications after the withdrawal of most other major Australian banks.
Citi was one of the few remaining lenders offering mortgages to overseas buyers. Other lenders are expected to roll out the checks over coming months.
