Federal Foreign Investment Framework: Package of Bills

Friday 21 August 2015 @ 12.49 p.m. | Taxation | Trade & Commerce

On 17 July 2015, the Federal Government closed consultation on the draft bills for the newly proposed foreign investment framework. Yesterday (20 August 2015), they introduced a package of reforms to strengthen that framework, based on their consultation in July.

Background to the Package of Bills

While recognising that foreign investment provides significant economic benefits to Australia, it is necessary to regulate certain kinds of foreign investment to ensure that these proposals are not contrary to Australia’s national interest.

Foreign investment provides additional capital for economic growth, creates employment opportunities, improves consumer choice and promotes healthy competition while increasing Australia’s competitiveness in global markets. It can also help deliver improved productivity by introducing new technology, providing much needed infrastructure, allowing access to global supply chains and markets, and enhancing Australia’s skills base.

Foreign investment is primarily regulated by the Foreign Acquisitions and Takeovers Act 1975 (Act) and the Foreign Acquisitions and Takeovers Regulations 1989 (Regulations) in Australia.

In very broad terms, the package of Bills requires foreign persons who are planning to invest in certain interests to notify the Treasurer. The question of whether a particular investment is contrary to the national interest is a matter for the Treasurer. While each proposal is considered on a case-by-case basis, the factors that are typically considered by the Treasurer when considering any non-residential proposal include the impact of the proposed investment on Australia’s national security, the economy and the community, competition, other Government policies (including taxation), and the character of the investor. When considering an application to acquire an interest in residential land, the overarching consideration is whether the proposed acquisition would add to Australia’s housing stock.

Foreign Investment Bills Package

The package of reforms to strengthen the foreign investment framework include:

  • stronger enforcement of the foreign investment rules by transferring all of the residential real estate functions to the Australian Taxation Office;
  • stricter penalties that will make it easier to pursue court action and ensure that foreign investors are not able to profit from breaking the rules;
  • application fees to improve service delivery and ensure that Australian taxpayers no longer have to fund the cost of administering the system;
  • increased scrutiny around foreign investment in agriculture;
  • increased transparency on the levels of foreign ownership in Australia through a land register; and
  • a more modern and simpler foreign investment framework.

These reforms will be given effect by the following bills introduced into the House of Representatives on 20 August 2015:

  • Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015;
  • Register of Foreign Ownership of Agricultural Land Bill 2015; and
  • Foreign Acquisitions and Takeovers Fees Imposition Bill 2015.

Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015

The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 (Bill) makes substantial changes to the Act to modernise the rules and strengthen the enforcement of the foreign investment system:

  • The Bill introduces civil penalties and additional and stricter criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules.
  • The Bill enables the transfer to the Australian Taxation Office (ATO) of responsibility for regulating foreign investment in residential real estate, which will further enable stronger enforcement and better compliance with the existing rules.
  • The Bill also enables the lowering of screening thresholds for investments in Australian agriculture to ensure significant investments in this sector are scrutinised.

Foreign Acquisitions and Takeovers Fees Imposition Bill 2015

The Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 (Imposition Bill) introduces fees on all foreign investment applications. Fees on foreign investment applications will ensure Australian taxpayers are no longer funding the administration of the system, while providing additional resourcing to the Treasury and the ATO to improve service delivery for investors.

Register of Foreign Ownership of Agricultural Land Bill 2015

The Register of Foreign Ownership of Agricultural Land Bill 2015 (Register Bill) complements these changes by establishing a register of foreign ownership of agricultural land operated by the ATO. Foreign persons are required to register information about their existing holdings and subsequent acquisitions and disposals of Australian agricultural land, providing greater transparency around the levels of foreign ownership of agricultural land.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

Foreign Acquisitions and Takeovers Fees Imposition Bill 2015Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 and Register of Foreign Ownership of Agricultural Land Bill 2015 and Secondary materials, as reproduced on TimeBase LawOne

Related Articles: