Chinese Investor Fined $508,000 for Land Banking in Victoria

A Chinese resident has been ordered by the Federal Court to pay $508,000 to the Australian Taxation Office after failing to build a dwelling on vacant land in Berwick, Victoria, within four years of purchase. Fengqin Li bought the 401 square-metre property in 2011 under a foreign investment approval that required development. She left Australia one month after arrival and never returned to complete construction. The penalty marks the second foreign investor fined for land banking as the ATO pursues a broader compliance program.

What Li was required to do

Li purchased the Berwick property for $296,000 in 2011 on a subclass 600 tourist visa while still in China. Her foreign investment approval came with a condition: she had to build a dwelling on the land within four years. Justice Michael Hugh O’Bryan found that Li left Australia just one month after arrival and never returned. No building permit, planning permit, or construction activity was ever recorded against the property.

How the ATO discovered the breach

The ATO identified the breach through data matching and its land banking audit program. When the ATO contacted Li for an explanation, she initially responded but later stopped engaging. Justice O’Bryan noted that Li failed to respond on multiple occasions. When the ATO finally reached her, Li admitted she intended to resell the property because she lacked funds to build.

The court’s penalty and enforcement

Justice O’Bryan imposed a $508,000 penalty equal to double the capital gain Li would make on the property’s disposal, plus $50,757.70 in ATO legal costs. The court also imposed a 28-day freezing order to prevent her selling the property before the ruling. A charge was registered over the vacant land to secure payment. The ATO also pursued unpaid vacancy fees linked to another property Li held.

Broader enforcement against land banking

The ATO defines land banking as holding land for future gain instead of putting it to productive use through development. ATO Assistant Commissioner Jennifer Moltisanti said the fine sends a clear message that land banking limits housing supply for the Australian community. In 2024-25 alone, the ATO’s compliance program addressed 217 breaches of foreign investment rules and forced the disposal of 111 residential properties held in breach of conditions.

Final Thoughts

Foreign investors who buy Australian residential land face strict development obligations backed by substantial penalties and forced sale powers. The ATO is actively enforcing these rules to increase housing supply and protect Australia’s national interests.

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