As part of Australia’s increasing scrutinization of overseas investments into Australia, a new compulsory register has been introduced. From 1 July 2023, a new register consolidating the foreign ownership of certain types of Australian assets will come into operation under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”). The Register of Foreign Ownership (“Register”) will be administered by the Australian Taxation Office (“ATO”).
Reporting requirement
Foreign persons must provide notification within 30 days of each relevant notification trigger.
When do you need to report under the new Register
In summary, foreign persons would need to notify under the Register following within 30 days of the below actions occurring on or after 1 July 2023:
Australian land and entities which have interests in Australian land
If a foreign person acquires, for example, any of the following (irrespective of whether FIRB approval is required):
- a freehold interest (other than an equitable interest) in any Australian land;
- an interest as lessee in a lease giving rights to occupy Australian agricultural land if the term of the lease (including any extension or renewal) is reasonably likely, at the time the interest is acquired, to exceed five years;
- a legal interest as lessee in a lease giving rights to occupy Australian commercial land or Australian residential land if the term of the lease (including any extension or renewal) is reasonably likely, at the time the interest is acquired, to exceed five years;
- an interest (other than an equitable interest) in a mining or production tenement, such as a mining lease;
- an interest (other than an equitable interest) in a share in an Australian land corporation or unit in an Australian land trust (being a corporation or unit trust where more than 50% of its assets by value comprise interests in Australian land), unless an exemption applies; or
- an interest (other than an equitable interest) in a share or unit of an agricultural land corporation or agricultural land trust (being a corporation or unit trust where more than 50% of its assets by value comprise interests in Australian agricultural land), unless an exemption applies.
Businesses and entities
The reporting obligations in relation to businesses and entities include:
- a foreign person acquires an interest in an Australian entity or Australian business, or starts an Australian business, which constitutes a significant action, notifiable action or reviewable national security action in respect of which FIRB approval was obtained, or in respect of which the Treasurer exercised his or her call-in power;
- a foreign person acquires an interest in a national security business or an entity carrying on a national security business, or starts a national security business;
- each of the above-mentioned foreign persons ceases to hold an interest (other than an equitable interest) in the relevant entity or business, or the relevant entity ceases to be an Australian entity or one that carries on national security business (as applicable), or the relevant business ceases to be an Australian business or national security business (as applicable), or the relevant entity ceases to exist or the relevant business ceases to be carried on—but in each case, the notification trigger arises only if the foreign person is aware or ought reasonably to have become aware of the relevant cessation event; or
- the percentage interest that each of the above-mentioned foreign persons has in an entity or business changes by five percentage points or more (but only where the foreign person is aware, or ought reasonably to have become aware, of the difference).
Exemptions
Acquisitions which are wholly exempt from the FATA are not subject to the reporting requirements under the Register. These include:
- acquisitions by moneylenders;
- revenue streams from mining or production tenements; and
- exploration tenements acquired by non-government foreign investors.
How to access the new Register
- A foreign person must set up a myGovID and complete a one-off registration.
- Only once a foreign person has established access can they authorise a representative to lodge registrations in the new Register on their behalf.
- Each reporting entity would need to set up its own myGovID, as it appears that entities within a corporate group cannot use a single common login.
What to report under the Register
The ATO published an instrument known as the Foreign Acquisitions and Takeovers (Register Notices) Data Standard 2023 which sets out what must be provided in the new Register. The information required includes:
- reason for providing the register notice;
- date the registrable interest was acquired, or the registered circumstance came or ceased to exist;
- the consideration paid for the registrable interest;
- the percentage of the registrable interest held or owed;
- for a registrable interest that is an interest in Australian land: (i) the land title details; (ii) the title holding type; (iii) the nature or type of the land (including whether it is commercial, residential or agricultural land); (iv) the current and intended use of the land; (v) the location of the land; (vi) the size of the land; and (vii) information about any relevant lease; and
- for a registrable interest that is an interest in an Australian business or entity, or in the assets of an Australian business or entity: (i) the business or entity name; (ii) the business or entity identifier (such as the Australian Business Number or Australian Company Number); (iii) the relevant ANZSIC code; (iv) the main location of the business or entity; (v) the business structure and the industry sector of the business or entity; and (vi) the circumstances in which a significant agreement was entered into or terminated, or a constituent document was altered.
Penalty Interest Indexation
Failure to lodge a notification to the Register in the relevant time frame will attract a civil penalty of 250 ‘penalty units’. The value of a penalty unit (currently AUD 275 per unit or AUD 68,750 for 250 penalty units) will be indexed from 1 July 2023 based on the Consumer Price Index and again every three years after that date (in accordance with section 4AA of the Crimes Act 1914 (Cth)). The Australian Bureau of Statistics will release the June Quarter’s CPI on 26 July 2023 and the new indexed rate will apply to all penalty units issued from 1 July 2023.
Next steps
- Clients should set up their myGovID and complete the registration as soon as possible if they expect to make an acquisition in the near future.
- Foreign persons should note the increased compliance requirements and the scenarios in which such notification is required.
Authored by Charles Bogle, Stella Xi and William Tai.
