What Australia’s Foreign Investment Law Reform Means for Your Will and Estate Plan

Wills and Estates

minutes reading time

DATE PUBLISHED: August 1, 2022

key takeaways

  • Subtle changes in Australia's foreign investment laws mean that you now might need to seek approval from the FIRB for transactions you would not have needed to previously.
  • The FIRB no longer accepts the FATR's exemption from the FATA for property acquired by way of a will.
  • Legal personal representatives, estate lawyers, estate administrators, beneficiaries of an estate and executors need to be mindful of the foreign investment framework to ensure they remain compliant in certain circumstances.

introduction

Australia's foreign investment laws have recently undergone significant reform.

The bulk of the changes has been about:

  • Providing the treasurer with additional powers in the name of national security; or
  • Providing additional measures which relate to "national security businesses".

Some of the changes have been very subtle and may apply in a manner which requires you to seek approval of the Foreign Investment Review Board (FIRB) for transactions you would not have needed to previously (and in situations where you may not have thought Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) would even apply). 

An example of such a subtle change is the removal of the exemption from the FATA for property acquired by way of a will. An exemption for this was previously provided under the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (FATR).


So, what was the exemption?

FIRB used to accept that the FATR's exemption meant property acquired through a will could be exempt from aspects of the FATA requiring the inheritor to obtain the FIRB's approval before acquisition.

Arguably, the former exemption created a further undesirable effect if a person acquired a property in breach of the FATA and that property was later transferred to a foreign person by way of a will. In some circumstances regarding this particular situation, the deceased's original acquisition and the acquisition by the inheritor under the will could become legitimised by virtue of the exemption under section 29 of the FATR, leaving the government with no avenue to take action on the matter.

However, this quirk in Australia's foreign investment laws has now been cured. There is no longer any exemption provided under the FATR for properties acquired by way of a will. As a result, FIRB approval may be required in certain circumstances where it was not previously required.


What this means for you

Legal personal representatives, estate lawyers, estate administrators, beneficiaries of an estate and executors need to be mindful of the foreign investment framework to ensure compliance in circumstances where:

  • The definition of a foreign person in the FATA can extend to entities you wouldn't ordinarily expect (e.g. a trust that can distribute to foreign family members or charities outside of Australia will be considered a foreign trust even if those persons never have or will receive distributions from the trust); and
  • The threshold for seeking FIRB approval in relation to residential property is $0.

conclusion

Breaches to Australia's foreign investment framework can have serious consequences, including substantial civil and even criminal penalties. Advisors and persons who assist in breaches of Australia's foreign investment laws are also exposed to those consequences in addition to the recipient of the property for which FIRB approval needed to be sought but was not.

get in touch with us!

We can assist you with your foreign investment, or compliance with the FATA and Australia's foreign investment framework by:

  • Assisting legal personal representatives, beneficiaries of all matters relating to estate law and foreign investment law (including taxation laws that affect such transactions, including adverse consequences that need to be managed or mitigated);
  • Estate lawyers, estate administrators – who are often fellow lawyers and accountants – to manage these risks:
    • In the estate planning process
    • In the estate administration process
    • In the planned distribution or receipt of estate assets
  • Advising whether a transaction is likely to be subject to the FATA and by extension, require FIRB Approval, including in respect of a deceased estate or for estate planning purposes;
  • Assisting in negotiating and documenting all aspects of a transaction involving foreign investment;
  • Preparing and lodging an application to the FIRB in respect of a proposed transaction;
  • Providing advice on FIRB applications which are already on foot; and
  • Making an application for an exemption certificate to obtain "pre-approval" on a proposed transaction which is subject to the FATA and FIRB.

If you require any assistance or have any questions,  please fill out the enquiry form below and mention this article for an obligation-free appointment.

Don't Miss a Beat

Subscribe to MCW Insights

Still Have Questions?

Make an Enquiry

What Australia’s Foreign Investment Law Reform Means for Your Will and Estate Plan
When Should I Update My Estate Planning Documents?
Why SMSF Members and Advisers Must Review Their Binding Death Benefit Nominations
The 4 Reasons Why A Corporate Trustee Is The Right Move For You
Executors Beware – There Is A Little-Known Tax On Death

Taxation and Revenue, Wills and Estates

Corporate Trustee for Self-Managed Superannuation Funds
SMSFs – How Prepared Are You for the Director/Trustee to Unexpectedly Lose Capacity?
Do You Have Children Living Overseas?