Treasury is currently conducting a review of the standard conditions it imposes on a variety of foreign investment approvals. A recent decision of the Federal Court in Commissioner of Taxation v Handojo (No 2) [2026] FCA 1363 is a timely reminder that compliance with FIRB approval conditions is not optional.
The decision highlights that foreign investors who fail to comply with conditions attached to a FIRB approval may face substantial civil penalties, enforcement proceedings and costs and restrictions on dealing with their property.
Background
The case concerned an Indonesian national who acquired vacant residential land in Point Cook, Victoria in 2017 for $290,000. FIRB approval was granted subject to a condition that one or more dwellings be constructed on the land within four years after the approval date.
The construction deadline expired on 28 February 2021. The purchaser failed to commence or complete any development, did not seek a variation of the condition and did not respond to repeated correspondence from the Australian Taxation Office (ATO) seeking an explanation for the breach.
The ATO subsequently commenced proceedings in the Federal Court seeking declarations of contravention and the imposition of civil penalties.
The Court’s findings
Justice O’Bryan found that the respondent had contravened section 96(1) of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) by failing to comply with the condition requiring a dwelling to be constructed within four years after the date of the FIRB approval.
Importantly, the Court held that this obligation was a continuing one. Under the Regulatory Powers (Standard Provisions) Act 2014 (Cth) (RP Act), each day of non-compliance constituted a separate contravention. By the time judgment was delivered, the contravention had continued for approximately five and a half years and involved more than 2,000 separate breaches.
Getting off lightly – the $370,000 penalty
Under section 96(4) of the FATA, for the period 1 March 2021 to 31 December 2022, the maximum penalty was $185,000 per day of contravention and, in the period on and after 1 January 2023, $370,000 per day, meaning the penalty could have been hundreds of millions of dollars.
Fortunately for the landowner, the Court elected to exercise its powers under section 85 of the RP Act to treat the series of contraventions based on the same facts as appropriate for a single civil penalty of $370,000, plus costs of $51,020.59. The civil penalty was equivalent to the current maximum penalty applicable to a single contravention, which the Court regarded as just and appropriate having regard to the contravening conduct as a whole and the value of the property.
In assessing penalty, the Court emphasised that:
- the contravention had continued for an extended period and remained ongoing;
- the conduct undermined the objectives of Australia’s foreign investment framework and the policy of increasing housing supply;
- the respondent stood to benefit from holding undeveloped residential land in a rising property market;
- the respondent failed to engage with repeated ATO compliance enquiries; and
- both specific and general deterrence were important considerations.
Under section 104(3) of the FATA, a charge is created over the relevant land to secure the payment of the penalty. In this case the Court also extended a freezing order made under Rule 7.32 of the Federal Court Rules 2011 (Cth) preventing the landowner from disposing of, dealing with, or diminishing the value of the property for 28 days after the date the judgement was delivered, to allow time for a charge to be registered over the land by the ATO.
Key takeaways for foreign investors
The decision highlights several important lessons for foreign investors and developers:
- FIRB conditions are legally enforceable obligations, not administrative requirements.
- Conditions attached to approvals should be actively monitored throughout the investment lifecycle.
- Investors should maintain systems to track development, reporting and other compliance obligations.
- Where compliance becomes difficult or impossible, investors should seek advice early regarding available options, including potential applications to vary approval conditions which should be made ahead of time.
- Ignoring correspondence from the ATO or FIRB is likely to be viewed unfavourably and may significantly increase enforcement risk and potentially the level of any fines imposed.
The case also demonstrates the Australian Government’s increasing willingness to pursue civil penalties against investors who fail to comply with conditions requiring the development of vacant residential land, reflecting political concerns about chronic housing undersupply.
How Addisons can help
Addisons regularly advises Australian and international investors, developers, property owners and funds on all aspects of Australia’s foreign investment regime.
Our team assists clients with:
- FIRB applications and approval strategies;
- transaction structuring and foreign investment compliance;
- compliance reviews of existing FIRB approvals;
- responding to notices, investigations and enquiries from the ATO and Treasury; and
- managing breaches of notifications for approval, approval conditions, including remediation strategies and engagement with regulators.
If you have questions about your FIRB obligations, are concerned about compliance with existing approval conditions for direct and indirect land transactions or are considering a direct of indirect land transaction that may require foreign investment approval, please contact a member of the Addisons Property team.