By Ron Cohen

10 June 2015

During the course of this year, several reforms have been proposed by the Federal Government to improve and strengthen Australia’s foreign investment framework in order to ensure that future investment benefits our national interests.

There will also be stronger enforcement of compliance with foreign investment requirements and harsher penalties for non-compliance.

These proposed reforms include:

  • Foreign residential real estate to be administered by the Australian Taxation Office. The ATO will be in charge of compliance and enforcement which will include data matching systems.
  • There will be harsher penalties for non-compliance (increased from $85,000 to $127,500 for individuals and $637,500 for companies) for those who have been found to breach Australia’s foreign investment rules.
  • Application fees will be introduced based on a “user pays” system:
  • a) for residential real estate the fee is dependant upon the value of the property and are anticipated to start from $5,000 for properties less than $1 million and then on an increasing scale;
  • b) fees will also apply for commercial and agricultural real estate; and
  • The Australian Treasurer announced that the threshold for FIRB review of purchases of agricultural land by foreign persons will be reduced from $252 million to $15 million from 1 March 2015.
  • Foreign investors must seek prior approval for a proposed acquisition of an interest in rural land where the cumulative value of rural land that the foreign person or any associates already holds exceeds, or immediately following the proposed acquisition is likely to exceed, $15 million.

The new rule provides that an interest in rural land includes a direct interest, or an interest indirectly held, for example, where a foreign person acquires a substantial interest in a company in which more than 50% of the assets are made up of rural land.

The application of this new threshold will depend on the nationality of the investor. Australia’s free trade agreements have also increased screening thresholds. The effect of this has meant that the new $15 million cumulative threshold for agricultural land will not apply to investors from US, NZ and Chile ($1,094 million threshold applies) and Thailand and Singapore ($50 million threshold applies).

 

For more information please contact Ron Cohen or a member of our Business Law Team.

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