Foreign investors will be slugged with higher fees and steeper penalties for buying existing homes and leaving them empty as the government aims to address housing affordability.
The federal government on Sunday announced new rules tripling taxes for foreigners who buy existing houses in Australia and a doubling in fees for those who leave dwellings vacant.
It's estimated the changes will raise about half a billion dollars.
The new rules would also encourage foreign buyers to invest in new housing developments and encourage them to make their unused properties available to renters, Treasurer Jim Chalmers said.
"It's about boosting housing stock and getting more homes onto the rental market," he told Sky News.
"It recognises that the rules are already pretty tight but we want to make them tighter."
Foreign nationals are usually barred from buying existing property but can do so in limited circumstances such as working or studying.
They are required to sell the property once they leave the country if they have not become a permanent resident.
The government will, at the same time, encourage foreigners to invest in build-to-rent projects by cutting application fee costs to the lowest commercial level.
The change will standardise fees paid by foreigners investing in rental projects across different land zones.
"Currently build-to-rent investors can be subject to different, higher fees if their projects involve particular kinds of land, like residential land," Dr Chalmers said in a joint statement with Housing Minister Julie Collins.
Vacancy fees help raise about $5 million annually, Dr Chalmers said, but only 20 or so breaches were issued in the past year.
"Those numbers are likely to be under done," he said.
The government is therefore aiming to boost compliance by funding the ATO, which will also provide an improved understanding of the size of the problem.
"Every extra house that is built in this economy - every extra property that goes on to the rental market - is welcome," Dr Chalmers said.
NSW Premier Chris Minns said the legislation could provide a welcome change, particularly in one of the most expensive cities in the world.
"We know we need to make changes because at the moment, we're losing a lot of young people from particularly metropolitan Sydney who are leaving," he told Sky News on Sunday.
But Nationals leader David Littleproud does not think the proposed reforms go far enough, as many foreign investors would be wealthy enough to foot the fees.
"These people can afford to pay it anyway," he told Nine's Today show.
"I don't understand why we're just not banning or suspending foreigners from buying residential homes for them to live in while we have a housing crisis.
"Australians should get a priority on buying homes in Australia."
The rules to implement the new fees are set to be introduced into parliament next year.
Australian Associated Press