On 2 May 2015, the Treasurer announced proposed changes to the foreign investment regime aimed at strengthening Australia’s Foreign Investment Framework.
The Government stated that the proposed changes are intended to bring about a more modern and simpler foreign investment framework, with the opportunity for consultation of options to simplify the system going forward.
The announced changes will include:
The new Fee Schedule will add additional costs to foreign investment into Australia.
The new fees will apply at four levels:
The proposed changes will broadly result in a stricter penalty regime for most breaches, as well as the introduction of infringement notices.
Under the proposed changes, penalties will apply as follows:
Civil penalties will also be introduced in the residential space, intended to prevent defaulting foreign persons from benefiting from their breach (including a 10% penalty applied to purchase price or market value).
Infringement notices will also apply to residential land defaults. (Either an infringement notice or civil penalty would be sought but not both.) Infringement notices are not expected to apply to business proposals.
A ‘third party’ penalty regime is also proposed, intended to catch those parties who assist investors in breaching the rules.
The announcement also confirms that investors who have not complied with the rules will be able to take advantage of a Reduced Penalty Period if they voluntarily disclose the breach before 30 November 2015.
The proposed changes will introduce a $55 million threshold for investments in ‘agribusinesses’.
‘Agribusiness’ will be defined under the new rules as “primary production businesses (generally those within Division A of the Australian and New Zealand Standard Industrial Classification Codes) and certain first stage downstream manufacturing businesses (including meat, poultry, seafood, dairy, fruit and vegetable processing and sugar, grain and oil and fat manufacturing).“
‘Agricultural land’ will also be defined as “land used, or that could reasonably be used, for a primary production business“. This moves away from the current approach of land used “wholly and exclusively” for primary production and will capture a wider range of interests.
Going forward, compliance and enforcement of the foreign investment rules will be managed by the Australian Taxation Office by 1 December 2015. The transfer of these functions is intended to support the other proposed changes, as the Tax Office’s specialist compliance staff and data-matching systems is expected to improve overall compliance and enforcement.
A comprehensive land register will also be introduced, aimed at improving transparency of foreign ownership in Australia. Initially, an agricultural land register will be established, with information provided by investors directly to the ATO (from 1 July 2015). Going forward, the register will be broadened using State and Territory land titles data to expand the register to include all land by 1 July 2016.
One Investment Group is anticipating further changes to the foreign investment regime in the near future. We intend to monitor the progress of the current and future changes as they affect our clients and the broader industry.
For all questions concerning foreign investment into Australia, please contact Justin Epstein on +612 8277 0000.