Foreign investors into Australia should be aware of two critical changes to Australia’s foreign investment regime. These changes potentially affect future acquisitions and sales of Australian investments and need to be carefully considered.
The first measure involves the introduction of a new non-final withholding tax regime which applies to purchasers of certain types of Australian assets. The new regime, which commences from 1 July 2016, will have an impact on both vendors and purchasers of affected assets. However, there are a number of ways to ease the practical compliance burden, including through the use of vendor declarations, clearance certificates and exemptions.
The second measure, which was announced by the Treasurer last week, introduces tough compliance and tax transparency conditions as part of any Foreign Investment Review Board (FIRB) approval. Although the announcement contains some “business as usual” conditions, a detailed analysis reveals that they extend the scope of Australia’s taxation laws. The new conditions should be carefully considered well before approaching FIRB, especially as the new conditions may result in delays in some cases.
We have already been assisting a number of clients understand the new measures in the course of live FIRB applications and are in discussions with various stakeholders to work out practical ways to minimise the burden on foreign investors.