New Register of Foreign Ownership – Investment in Australia just got more complex!

Commercial

minutes reading time

DATE PUBLISHED: September 20, 2023

key takeaways

  • The new Register of Foreign Ownership of Australian Assets (New Register), which commenced on 1 July 2023, replaces and expands a number of existing reporting frameworks. 
  • The compliance burden on foreign investors has now substantially increased due to the New Register, with a significant number of additional transactions and events now required to be reported to the Commissioner of Taxation. 
  • Reporting must be done via the ATO's "Online Services for Foreign Investors", with specific data required for each relevant notification.
  • Failure to notify a relevant transaction or event within 30 days could result in substantial civil penalties. 

Background

Australia’s foreign investment rules, as set out in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (Regulations), regulate the investment by foreign persons in Australia.
 
One of the primary features of the FATA and Australia’s foreign investment regime, is that it requires foreign persons to obtain Foreign Investment Review Board (FIRB) approval (by way of “no objection notification” or “exemption certificate”) before proceeding with a proposed investment. The regime also requires that certain actions and investments by foreign persons be notified to FIRB and/or the Commissioner of Taxation (through the Australian Taxation Office (ATO)).

Prior to 1 July 2023, several foreign investment registers were maintained regarding certain Australian assets. For example, foreign persons were previously required to register with the ATO if they (among other things):

  • acquired an interest in Australian residential land within 30 days of the acquisition;
  • acquired or ceased to hold certain interests in Australian agricultural land within 30 days of the event; or
  • acquired or ceased to hold certain Australian water interests within 30 days of the end of the financial year.

These interest were previously recorded with the ATO in standalone registers, being:

  • the Register of Foreign Ownership of Agricultural Land;
  • the Register of Foreign Ownership of Water Entitlements; and
  • the ATO's register of foreign-held interests in residential land, (collectively referred to as the Previous Registers).

Establishment of the New Register

With effect from 1 January 2021, the FATA was amended to (among other things) introduce the Register of Foreign Ownership of Australian Assets (New Register). It was contemplated in the amendments to the FATA that the New Register would come into effect at a later time. That later time was 1 July 2023.

The purpose of the New Register is to give the Australian government greater visibility of foreign ownership of Australian assets.

The New Register is administered by the Commissioner of Taxation and replaces the Previous Registers. However, it is important to note that:

  • the Register of Foreign Owners of Media Assets maintained by the Australian Communications and Media Authority; and
  • the Register of Critical Infrastructure Assets administered by the Cyber and Infrastructure Security Centre,

will continue to operate (and will not be replaced by the New Register).

There are of course, other state-based registers relevant to transactions concerning "foreign persons", such as the Foreign Ownership of Land Register Act 1988 (Qld) in Queensland. These will also continue to operate separately from the New Register.

The New Register will not be publicly available. However, the information on the New Register will be subject to similar rules as those that apply to other information relating to foreign investment in Australia under the FATA (for example – the information on the New Register may be disclosed to other government authorities to enable them to perform their functions or exercise their powers pursuant to the FATA).

Reporting Obligations

The New Register aims to streamline foreign investment reporting obligations by consolidating them into a single platform. However, the compliance burden on foreign persons under the New Register has increased significantly due to the broader range of transactions and events that now must to be reported to the ATO.

Under the regime of the New Register, and regardless of whether FIRB approval is required, a “register notice” must be provided to the ATO in respect of the following events and transactions:

  • a foreign person acquires:
    • a legal interest in Australian land which is a freehold interest, a long-term lease or an interest in a mining or production tenement;
    • an equitable interest in a long-term lease or licence of agricultural land; or
    • a registrable water interest, which continues to be held at the end of the financial year;
  • a foreign person takes an action regulated under the FATA in relation to an entity or business which either:
    • already required FIRB approval before being taken; or
    • does not require approval but was voluntarily notified and/or approved (or covered by an exemption certificate), or if FIRB has decided to review the action;
  • a person becomes a foreign person while:
    • holding an interest in land or a mining or production tenement;
    • holding an interest in an Australian entity or business, the acquisition of which would have been notifiable to FIRB is acquired by a foreign person;
    • carrying on a "national security business," which would have been notifiable if the person had started doing so as a foreign person; or
    • holding a registrable water interest; or
  • after an event is registered, certain changes occur, including:
    • a registered circumstance ceases (e.g. the relevant interest/investment is disposed of);
    • the person ceases to be a foreign person; or
    • a foreign person's percentage interest in the relevant entity or business increases or decreases by 5% or more.

How and when to notify

Where a register notice is required to be provided, the register notice must generally be provided within 30 days of the relevant transaction or event.

Foreign investors and their authorised advisors can submit register notices for the New Register via the ATO’s "Online Services for Foreign Investors" portal. Foreign investors are required to register themselves through myGovID to use this service and log in to complete a one-off registration (after which point in time the foreign person will be able to authorise representatives to act on their behalf, including their solicitors).

No fee is payable for lodging a register notice with the ATO. However, penalties apply where a foreign person fails to give notice within the relevant 30 day period.

next steps

As a result of the New Register, foreign investors (and their Australian advisors) must assess the notification requirements for each event or proposed transaction that is to be undertaken.
 
Foreign investors must remain cognisant of the notification requirements for the New Register that may arise as a result of any changes to their underlying ownership.

Australia's foreign investment laws, including these new and ongoing reporting requirements, are technical and complex. Legal advice should always be sought on the reporting requirements that apply in any circumstances, particularly given the significant penalties for non-compliance.
 
If you require further information on the New Register and your initial and ongoing reporting obligations, please reach out to us today.

GET IN TOUCH WITH US!

Don't Miss a Beat

Subscribe to MCW Insights

Still Have Questions?

Make an Enquiry

Mandatory Climate Reporting in Australia. Are You Ready for the Shift?
Gender Pay Gap Reporting: What Does It Mean and What Should You Be Doing
Lenders Beware: FIRB Approval May Be Required for Your Lending Transaction
Higher Standards for ‘Sophisticated Investors’: What This Means for Your Disclosure Obligations
AI Notetaker Tools – Time Saver or Ticking Time Bomb?
High Stakes: Advertising Risks for Businesses Involved with Medical Cannabis
FIRB Update: Significant Changes to Application and Vacancy Fees for Residential Dwellings
Property Developers Beware: Tougher Penalties for Unfair Contract Terms