Since the forced sale earlier this year of the $39 million Point Piper Mansion, Villa de Mare, which was acquired in breach of Australian foreign investment laws, the Government has foreshadowed the introduction of a tougher and more robust foreign investment regime which would create greater transparency and increase compliance.
The Government introduced a package of legislation to the House of Representatives on 20 August 2015, with a view for the reforms to be implemented by 1 December 2015. The changes are mainly of an administrative, compliance and enforcement nature, including introducing tougher civil and criminal penalties for breaches, the introduction of application fees and a register of foreign interests in agricultural land.
New legislative package
The Government has delivered on its promise to introduce a tough new compliance regime for foreign investment in Australia by introducing a legislative package which is currently making its way through Parliament. The aim of the package is to increase transparency of foreign investment in Australia and compel investor compliance.
The Government has indicated that it is aiming to have the reforms commence on 1 December 2015.
The legislation package consists of the:
- Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015;
- Foreign Acquisitions and Takeovers Fees Imposition Bill 2015; and
- Register of Foreign Ownership of Agricultural Land Bill 2015.
The Bills have been referred to the Senate Economics Legislation Committee with a report due by 12 October 2015.
Main changes to the current regime
Whilst the Bills generate significant changes to the administrative and compliance mechanisms of the foreign investment regime, the package will not impact greatly on the types of transactions to be notified to the Treasurer through the Foreign Investment Review Board (FIRB).
The main changes to the current regime occur in the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, which provides for:
- Stricter civil and criminal penalties of $127,500 or three years imprisonment for individuals, and $637,500 for companies. In addition, any third parties who knowingly assist a breach of the rules (such as property agents, conveyancers and lawyers) will also face substantial civil and criminal penalties.
- The transfer of the residential real estate functions to the Australian Tax Office (ATO) to improve compliance.
- Enhancing the Treasurer's powers by providing for civil pecuniary orders in addition to divestment powers, to prevent any profit being gained through the forced divestment of an illegally acquired property. Infringement notices have also been added for less serious breaches.
- Increased scrutiny into foreign investment in agriculture by a significant lowering of the screening threshold from $252 million to $15 million for agricultural land, which took effect 1 March 2015 (note: this remains a $50 million threshold for Singaporean investors) and to $55 million for agribusiness, which will come into effect on 1 December 2015. The definition of 'agricultural land' has also been broadened.
Application fee introduction
One of the biggest impacts of this new legislative package is the imposition of substantial application fees through the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015. Currently there are no fees for foreign investment applications to FIRB, and this Bill will impose:
- a minimum application fee of $5,000 for residential properties valued at $1 million or less; and
- a range of fees up to $100,000 depending on the type and value of the acquisitions.
New agricultural land register
The final cherry on the top of the Government's legislative package is the Register of Foreign Ownership of Agricultural Land Bill 2015. The purpose of this Bill is to increase transparency around foreign ownership of agricultural land in Australia through the creation of a land register. The ATO, which will manage and maintain the Register, started collecting data for the Register on 1 July 2015.
The Treasurer's forced sale earlier this year of the $39 million Point Piper mansion, Villa de Mare, which was acquired illegally by Chinese billionaire Xu Jiayin, was the catalyst for the Government's new commitment to enforcement of the foreign investment laws. The introduction of this legislative package is a significant step towards a more robust and transparent regime of foreign investment supervision.
Any foreign individuals or companies involved in investment in Australia must familiarise themselves with the regime and ensure that they are aware of all their rights and obligations under the system.
As noted above, the Bills are currently making their way through the houses of Parliament, with the majority of reforms expected to start on 1 December 2015.