ATO's $508,000 foreign-investor land penalty: why the Federal Court imposed it
The Federal Court ordered Fengqin Li to pay $508,000 after a Berwick block remained undeveloped beyond a four-year construction condition. The ruling is a specific enforcement case, not a new flat fine for every foreign property owner.
Verified brief
The story in 60 seconds
The Federal Court ordered a $508,000 civil penalty because Fengqin Li did not build a dwelling on vacant residential land in Berwick, Victoria, within the four years required by her 2016 foreign-investment approval. The court also ordered $50,757.70 in costs and extended a freezing order over the land. The ATO says the matter may be appealed and is using the decision as part of a wider land-banking compliance campaign.
This brief and the full story below are based on the disclosed sources. SearchTrends Daily’s interpretation appears later under “Our take.”
Full reporting
The complete story
The Federal Court of Australia imposed a $508,000 civil penalty on foreign investor Fengqin Li on September 28, 2026, after finding that she had continuously breached a condition attached to the purchase of vacant residential land in Berwick, Victoria.
The official judgment, Commissioner of Taxation v Li (No 2) [2026] FCA 1424, says Li applied for foreign-investment approval in February 2016. The Treasurer issued a no-objection notification on March 3, 2016, allowing the acquisition on conditions that included building a dwelling on the land within four years. The condition expired on March 4, 2020. No dwelling was built.
Justice O'Bryan declared that the breach began on March 4, 2020 and continued on every day thereafter, with each day of continuing non-compliance constituting a separate contravention under the Regulatory Powers Act. The court ordered Li to pay the Commonwealth $508,000 within 28 days, pay the Commissioner's costs of $50,757.70, and kept a freezing order over the property in place until 28 days after judgment.
The ruling was entered by default. The judgment records that Li left Australia in August 2016 and that the ATO repeatedly tried to contact her between July 2021 and December 2025. In three telephone conversations in early 2023, conducted through an interpreter, she said she did not have the money to build or seek a variation and intended to sell the land without developing it. The court said she took no step in the later proceeding despite being served with relevant documents.
The ATO announced the outcome on September 29 and described it as the second civil penalty secured through its residential land-banking audit program. Its release notes that the case remains subject to an appeal by the investor.
Source perspectives
What other reporting adds
These are the reports, official records, and trend observations used to build the story. The note under each link explains exactly what it contributes.
Primary judgment and orders for the approval condition, continuing contraventions, $508,000 penalty, $50,757.70 costs, freezing order and procedural history.
Read original source ↗Australian Taxation Office via News HubATO secures second civil penalty against residential land bankersATO announcement explaining the land-banking audit, appeal status, wider remediation figures and enforcement position.
Read original source ↗Australian Government Foreign InvestmentResidential land — Guidance Note 6Current government guidance on approval, the established-dwelling restriction, vacant-land development conditions, registration and vacancy obligations.
Read original source ↗Australian Taxation OfficeApply to buy residential property as a foreign personOfficial application guidance confirming that foreign persons generally need ATO approval before buying Australian residential property and that penalties can apply without approval.
Read original source ↗Australian Government Foreign InvestmentGuidance Note 14 — Compliance and Penalties (Residential Land)Government compliance guidance describing civil penalties and enforcement tools for breaches involving residential land.
Read original source ↗SearchTrends Daily opinion
Our take
Analysis
What the evidence and search signal suggest
The decision's most important feature is the treatment of delay as continuing non-compliance. Once the four-year deadline passed, the problem did not freeze on a single date; the court declared a separate contravention for every day the land remained undeveloped. That greatly increases potential exposure and gives the regulator leverage to seek a penalty large enough to deter passive holding.
The freezing order is also significant. It prevented disposal of the property while the case was resolved and was extended for 28 days after judgment. Combined with the ATO's statement that a forced sale can be used in appropriate cases, the enforcement model targets both money and the land itself.
But the judgment should not be stretched beyond what it says. It does not establish that every vacant block owned by a foreign person is unlawfully land-banked, nor that missing any development timetable automatically produces the same penalty. The legally controlling facts were the approval condition, the expired deadline, years of non-compliance and the orders made in this particular proceeding.
For readers, the clearest takeaway is documentary: the conditions in a no-objection notification are active obligations. A change in finances or intention does not silently rewrite them. The published record shows Li told the ATO she lacked funds to build or seek a variation; the court nevertheless enforced the condition that remained in force.
Analysis and commentary are SearchTrends Daily’s interpretation. They are intentionally separated from the sourced account above.
Meaning
Why this matters
The practical point is that approval to buy vacant residential land can carry enforceable development conditions. In this case, the permission was not an unrestricted right to hold the block indefinitely: it required a dwelling to be completed within four years. The penalty followed years of continuing non-compliance, regulator contact and a Federal Court proceeding.
That distinction matters because the headline number should not be read as a new automatic $508,000 charge on all foreign investors. Penalties depend on the law, the approval conditions, the conduct and the court's assessment. The judgment also dealt with this respondent's non-participation and the continuing nature of the breach. Anyone affected by foreign-investment rules needs advice based on their own approval documents and circumstances; this article is an explanation of the published decision, not legal advice.
The ATO says its audit is intended to prevent vacant residential land from being held for gain without development. It reported that in 2024–25 it forced remediation of 217 foreign-investment breaches, including the disposal of 111 residential properties. That makes this judgment part of a wider enforcement pattern rather than an isolated warning.
Background
How we got here
Australia's foreign-investment framework generally directs foreign residential investment toward adding housing supply. Official guidance says foreign investors usually need approval before acquiring residential land and, from April 1, 2025 to June 30, 2029, are generally prohibited from buying established dwellings unless an exception applies. Vacant-land approvals commonly require construction within a set period.
The Li approval predated that temporary established-dwelling ban. The relevant issue was not an unapproved purchase of an existing house. It was failure to comply with a specific condition on approved vacant land: complete at least one dwelling within four years.
The Federal Court judgment explains that the Foreign Acquisitions and Takeovers Act lets the Treasurer allow an acquisition subject to conditions needed to protect the national interest. It also notes that Parliament expected foreign residential investment to increase new housing supply rather than become speculative land holding.
The ATO's September release says it had already obtained another substantial land-banking penalty earlier in the month. Each case turns on its own facts, but together they show the regulator is moving beyond reminders and into court-backed enforcement.
Outlook
What is likely to happen next
The ATO's release says the investor may appeal. Until an appeal is filed and decided, the September 28 Federal Court orders remain the authoritative published outcome. Any appeal could test the default judgment, the declarations or the penalty, so a later court order would warrant a material update to this story.
The immediate order required payment of the $508,000 penalty within 28 days and extended the freezing order for the same post-judgment period. The ATO is continuing its audit of foreign-investment approvals that require residential development, so further compliance actions are plausible, but the agency has not published a timetable or a guaranteed number of cases.
We would revise this assessment if an appeal changes the orders, if the ATO corrects its enforcement figures, or if new official guidance changes the treatment of vacant residential land. Foreign investors with questions about their own deadline, variation or disposal obligations should use current government guidance and obtain qualified advice rather than relying on this case summary.
A conditional editorial assessment based on the evidence available at the review date, not a guaranteed outcome.
Live record
Updates to this story
No material updates yet.
Commentary
What we think
SearchTrends Daily opinion: the $508,000 figure will attract attention, but the better lesson is that conditional approval is not a formality. A housing-supply rule only has meaning if deadlines can be enforced after the initial purchase. At the same time, public discussion should avoid turning one default judgment into a claim that every foreign owner faces the same outcome.