This $39 million Point Piper mansion has been illegally purchased by China's 15th richest man. Photo: Supplied
Chairman Brian Wilson said a national register for property transactions was needed to help track buying by foreigners, who are barred from buying established residential property unless they are temporary residents, and in that case, must sell when they leave the country.
"There are about 11 million residential dwellings in Australia, and about 600,000 property transfers every year. It is inevitable some of those properties will be exchanged contrary to the law, but our ability to first discover and then prosecute these cases is sorely limited," Mr Wilson said.
It has been mooted that responsibility for managing the register be transferred to the Australian Taxation Office.
"The ATO is better set up for coordinating a big data approach than Treasury, which is a policy body," Mr Wilson said.
Mr Wilson said the register idea has "wide support" but will require the support of state and territory land titles offices.
Queensland is the only state that now asks buyers if they are foreign.
"This is not a straightforward process but I am confident this will get a place on the Council of Australian Governments agenda," Mr Wilson said.
The FIRB are also calling on lawmakers to institute a new range of civil penalties it could apply to a wider range of offenders.
Earlier this month, Federal Treasurer Joe Hockey announced the first forced divestment since 2007 when he ordered the sale of a $39 million Point Piper mansion that had been illegally purchased by China's 15th richest man.
At the time the Treasurer said he was putting foreign buyers "on notice" that there would be more crackdowns on illegal transactions.
But the low conviction rate to date might tempt some offshore buyers to roll the dice.
"At the moment we have the threat of forced divestment and criminal prosecution possibly resulting in jail time but the hurdle of proof for a criminal prosecution is very high, and this process takes a lot of time and money," Mr Wilson said.
No one has ever been jailed in Australia as the result of an illegal foreign property investment case.
"What we have proposed is a graduated scheme of civil penalties that would make enforcement easier," Mr Wilson said.
He wants more power for investors to be stripped of profits from illegal transactions without the obstacle of a criminal conviction needing to be met.
"Of course there would still be the threat of possible criminal convictions in extreme cases," Mr Wilson said.
The proposed introduction of an additional layer of penalties for breaches of the foreign investment rules has met with mixed results from the real estate industry.
"Some in the real estate industry have told us they don't want to see civil penalties introduced, while others have agreed there needs to be a tighter regime," Mr Wilson said.