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New Register of Foreign Ownership of Australian Assets to commence from 1 July 2023

Geoff Hoffman, David Landy and Megan Williams
22 Mar 2023
Time to read: 5 minutes

Once the new Register comes into effect on 1 July 2023, foreign investors will be required to provide notice to the Commissioner of Taxation of certain events relating to interests in land, entities and businesses in Australia.

The Australian Taxation Office has announced that the new Register of Foreign Ownership of Australian Assets is expected to come into effect on 1 July 2023.

The Register will create a variety of new reporting obligations for foreign investors, as well as Australian entities that become "foreign persons", in relation to certain interests in Australian land, entities and businesses. These are in addition to the approval processes and reporting obligations that already apply under Australia's Foreign Acquisitions and Takeovers Act (FATA).

Consultation for new Regulations and Data Standards

In anticipation of the commencement of the Register:

New reporting obligations for foreign investors under the new Register

Once the new Register comes into effect on 1 July 2023, foreign investors will be required to provide notice to the Commissioner of Taxation (the Registrar) of certain events relating to interests in land, entities and businesses in Australia.

Set out below is a summary of the new events required to be reported to the Registrar which are not currently required to be reported under the current foreign investment regime (once the Register obligations commence and assuming the Draft Regulations become law in their current form):

 

Acquisitions by "foreign persons"
An Australian entity which becomes a "foreign person"

If a "foreign person" acquires an interest in an Australian entity such that the Australian entity becomes a "foreign person" (eg. because the foreign investor acquires an interest of at least 20% in the entity), the Australian entity must report its holdings of:

  1. freehold interests in Australian land or exploration tenements; and
  2. leases of Australian land, with a term likely to exceed 5 years,

regardless of value.

The Australian entity must also report:

  1. "substantial interests" that it holds in Australian entities;
  2. "direct interests" that it holds in Australian agribusinesses; and
  3. national security businesses which it carries on, or in which it has a "direct interest",

where the acquisition of those interests would have required approval under the FATA if they had been acquired immediately after the Australian entity became a "foreign person.

Increases in interests in an Australian entity or business of 5% of more

If a "foreign person" acquired an interest in an Australian entity or business which was previously notified to the Register, it must also report any subsequent increase in its interest of 5% or more. This could include passive increases (eg. as a result of not participating in a buy-back).

Acquisition of certain interests in Australian land (regardless of value)[1]

A "foreign person" must report any acquisition of:

  • a freehold interest in Australian land or an interest in an exploration tenement; or
  • a lease of Australian land, with a term likely to exceed 5 years,

regardless of the value of the investment.

Disposals by "foreign persons" or ceasing business activities
Disposal or sell-down of 5% or more of existing interests in an Australian entity or business,[2] or ceasing certain businesses

A "foreign person" which holds an interest in an Australian entity or business which was previously notified to the Register, must report:

  1. any decrease in its interest of 5% or more, or if it disposes of the Australian entity or business;
  2. if the Australian entity ceases to be an Australian entity , or is wound up; or
  3. the business activities of the Australian entity or business which were required to be notified cease to be carried on.

A decrease in interest could be a passive decrease (eg. as a result of a dilutionary capital raise).

An Australian entity ceases to be a "foreign person" or ceases to be a "foreign government investor"

An Australian entity which is a "foreign person" or "foreign government investor" (because of interests held in it by foreign investors) and has previously notified interests in Australian land, entities or businesses to the Register, must report when it ceases to be a "foreign person" or "foreign government investor" (eg. because a foreign investor's percentage interests in the Australian entity decreases).

Disposals of certain interests in Australian land (regardless of value)[3]

A "foreign person" must report any disposal of:

  • a freehold interest in Australian land or an interest in an exploration tenement; or
  • a lease of Australian land, with a term likely to exceed 5 years,

that was previously notified to the Register, regardless of the value of the investment.

Change in interests in Australian land previously notified to the Register
Changes in interests in Australian land previously notified to the Register 

If a foreign person has previously notified an interest in Australian land to the Register, it must also report changes in the nature of the land (such as the relevant land changing from residential land to commercial land).

 

When and how to notify "registrable interests" to the Registrar

Where notice is required to be given to the Registrar, the notice must be given within 30 days of the "registrable event day" (which varies depending on the type of event but is generally the date on which the notifiable event occurs or when the person is aware, or ought reasonably to have been aware that the relevant event has occurred).

The Australian Taxation Office (ATO) will be launching a new online platform through which investors will be able to report interests for the new Register. A third party will be able to be authorised by a foreign investor to give notice on behalf of the foreign investor.

No fee is payable for notifying a registered circumstance. However, civil penalties apply for a failure to give notice within the requisite 30-day period.

Will the Register be public?

The Register will not be a public register. The information on the Register will be subject to similar rules as those that apply to other information relating to foreign investment in Australia under the FATA (ie that information can be disclosed to other government bodies to enable them to perform their functions or exercise their powers under the FATA).

Information on the Register will also be permitted to be disclosed to a person to whom information on the register relates.

Interaction with existing reporting regimes

Currently, under the FATA a person must notify the Treasurer within 30 days of taking certain actions approved under a no objection notification or an exemption certificate as well as certain notifiable situations after the action has been taken (such as the relevant interest ceases or changes, or the entity or business the interest relates to ceases to exist). From 1 July 2023, these circumstances will also need to be notified to the Registrar in order to be recorded on the new Register. To reduce duplication, the Draft Regulations provide that by giving a notice to the Registrar of a registered circumstance this will also satisfy any other equivalent reporting obligations to the Treasurer under the FATA in relation to the same action (noting that this would not extend to bespoke reporting conditions included in a no objection notification or an exemption certificate).

On commencement of the new Register, the following registers maintained by the ATO will be repealed and all information will be incorporated into the new Register:

  • Register of Foreign Ownership of Agricultural Land;
  • Register of Foreign Ownership of Water Entitlements; and
  • Register of Residential Land.

All circumstances required to be reported in relation to these registers will instead be reported to the Registrar and recorded on the new Register.

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.

Key dates

  • 17 - 25 June 2023: the current ATO Land and Water Registration form will be retired on 17 June 2023. Between 17 June to 25 June 2023, none of the relevant FIRB forms will be available on the ATO website as the ATO transitions all functions to the new platform. The ATO will publish information on how to notify these registration obligations between 17 and 25 June 2023 closer to the date.
  • 26 June 2023: The ATO has stated that it expects to make its online services (being the system through which investors will notify their interests under the new Register) available to foreign investors from 26 June 2023. The existing online ATO forms in relation to residential land applications and vacancy fee forms will be moved to this new online platform.
  • 1 July 2023: The new Register is expected to commence from 1 July 2023.

[1] New reporting requirement in respect of certain interests in land below existing financial thresholds which require notification to and approval by the Treasurer.

[2] New reporting requirement, except in relation to certain "core Part 3 actions" under section 98E(2) of the FATA.

[3] New reporting requirement in respect of certain interests in land below existing financial thresholds which require notification to the Treasurer.

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Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.