Reform from 1 July 2023 - Register of Foreign Ownership of Australian Assets
As of 1 July 2023, a new Register of Foreign Ownership of Australian Assets – Part 7A (the Register) will be introduced to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA). The Register will be administered by the Australian Taxation Office.
The FATA regulates the notification, review, and approval of foreign investment in Australia, inclusive of foreign interests in land, water, businesses, and other assets. Having received Royal Assent on 10 December 2020, the Register is set to streamline the investment process for foreign investors, whilst strengthening Australia’s foreign investment framework.
Chapter 7A informs the circumstances in which a foreign person must register their interest, the requirements when doing so, and the consequences for failing to do so. The following sections of this article will discuss the streamlined benefits for investors, and simultaneously provide a summary of the new obligations which arise where a foreign person acquires, disposes of, or alters their interest in land, water, or business.
Defining a foreign person
For the purposes of the FATA, a foreign person is defined as:
an individual not ordinarily resident in Australia; or
a corporation or trustee of a trust in which:
an individual is not ordinarily resident in Australia; or
two or more persons holding an aggregate substantial interest are not ordinarily resident in Australia; or
a foreign government.
A streamlined process for investors
A primary aim of the Register is to streamline the reporting obligations associated with foreign investments. The current approach faces criticism for being prone to duplicate reporting duties, complex bureaucratic processes, and overall inefficiency from the perspective of the investor. On a practical level, the Register will consolidate and replace the obligations which are currently divided between the Residential Land Register, Agricultural Land Register and the Water Register.
Further, reporting will now be processed through the Australian Tax Office’s online notification system, a user-friendly platform. Foreign investors will be required to obtain a myGovID to use the system. The new registration obligations will apply to new events from 1 July 2023 save for the following exceptions:
If a person becomes a foreign person after the commencement of the Register while holding relevant Australian interests or carrying on a national security business.
Interests that were already registrable before the commencement of the Register and continue to be registrable.
Acquisition Requirements
Land
Under subdivision 3A, a foreign person must give a register notice for the acquisition of any non-equitable interest in Australian land, such as a freehold interest, or long term lease. If the land is considered agricultural, an equitable interest in a lease or licence with a term likely to exceed 5 years is still registrable. Registration of the interest in land must occur on the registerable event day, which is the day on which the foreign person acquires the interest. Likewise, a foreign person must give a register notice for the acquisition of an interest in an exploration tenement, with the exception of equitable interests. Previously, only foreign government investors required approval to acquire interests in exploration tenants. Now, these obligations apply to any person or individual with an interest in an exploration tenement such as mining leases and prospecting licences.
As noted above, if a person becomes a foreign person and holds a non-equitable interest in Australian land or an equitable interest in Australian land that is considered agricultural land or an interest in an exploration tenement the person must give a register notice. Registration of the interest must occur on the day that the person becomes a foreign person on or after the commencement of the Register.
Water
Similarly, a foreign person must register their interest in a registrable water interest or a contractual water right of more than 5 years duration. Regard must be had for the nature of the interest in water, for example, the volume of water, and the share in water.
Business
A foreign person is obligated to provide a register notice in the event they take significant action pursuant to sections 40 and 41 in the FATA. Relevant forms of significant action include:
acquiring a direct interest in an Australian agribusiness
acquiring shares in a company
entering into or terminating an agreement to the effect that one or more of the senior officers are obligated to act in accordance with the foreign person holding the relevant business interest
altering a constituent document to the effect that one or more of the senior officers are obligated to act in accordance with the foreign person holding the relevant business interest
As is the case with other interest categories, an individual must give a register notice if they become, or cease to be, a foreign person whilst holding an interest in an entity or business.
Requirements arising from the disposal or alteration of an interest
Similar to the obligations arising where a foreign person acquires an interest in land, water, or business, a foreign person must also report a change in, or disposal of, their interest. For example, an obligation to lodge a register notice will arise where changes are made to the relevant volume of water, or the share of a water source or where there is a change in the registrable interest held by the foreign person by 5% or more in a business.
Reporting obligations also arise where an individual becomes, or ceases to be, a foreign person whilst holding an interest in land, or where a foreign person changes the nature of their interest in land either on or after the registerable event day.
Fees and penalties
There is no fee payable for providing a register notice. However, a civil penalty of 250 penalty units will apply for non-compliance failure to give register notice within the prescribed notice time, being 30 days of the registrable event. Higher penalties may be imposed under the general compliance requirements of the FATA.
Foreign investors should be mindful of the new requirements and obtain legal advice in relation to their Australian investments.
For more information on the new requirements, please contact our people:
Ron Zucker 0410 590 111
Eollyn Cortes 0478 727 395
Sagang Chung 0431 435 333
