Just when you thought the FIRB regime could not get more complex.
Foreign investors in Australia will need to be prepared for new registration obligations under Australia’s foreign investment regime. The Register of Foreign Ownership of Australian Assets (New Register) is expected to start operating on 1 July 2023.
The New Register was part of the foreign investment legislation reform which became law on 1 January 2021 but is only now coming into operation. The New Register is expected to replace, by amalgamating and expanding, existing registers for water, agricultural and residential land maintained by the Australian Taxation Office (ATO) and to provide a means of compliance with reporting obligations under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA). A foreign person who has a registrable interest in water, land (all types including mining or production tenements), exploration tenements, entities or business will be able to register on the New Register (also maintained by the ATO).
Whilst the intent is for the New Register to be a one stop shop for foreign investors to manage their investment affairs, there is scope for confusion with duplication of reporting obligations under the FATA as well as unclear exemptions from the FATA or the New Register. The New Register is expected to alleviate duplication, however investors will need to be careful with ensuring that all reporting is undertaken.
The legal requirements for the New Register are outlined in the FATA. These will be supplemented by more detailed regulations, to be introduced by amendments to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth). The draft amendments were released by the Treasury on 2 March 2023, and are open to public consultation until 31 March 2023. Separately, the ATO is also seeking comments on draft data standards that describe the technical requirements for submitting information to the New Register.
In summary, the requirements under the FATA and the amended regulations require, from the date of commencement of the New Register, that a person gives a register notice to the Registrar within 30 days if:
- it is a foreign person and acquires an interest in Australian land (including mining or production tenements) or exploration tenement, or the nature of the interest it holds changes
- it is a foreign person and acquires a registrable water interest during a financial year and continues to hold the interest at the end of the financial year, or the volume of water or share of a water resource changes
- it becomes a foreign person while holding an interest in Australian land or exploration tenement or registrable water interest
- it is a foreign person and takes an action relating to entities or businesses that is subject to a mandatory notification, is voluntarily notified or is called in under the Act, or there is a 5% change in interest in the entity or business
- it becomes a foreign person while holding an interest in an entity or business which would have been subject to the mandatory notification requirements under the Act, or while carrying on or holding interest in a national security business
- it ceases to be a foreign person while register circumstances exist
- the registered circumstances cease, e.g. if the interest is disposed of
Importantly, the land and exploration tenement registration applies regardless of the value and whether or not the acquisition would have needed a FIRB approval under the FATA).
Only certain land interests are registrable: freehold, leases of more than 5 years, equitable interest in leases or licences of more than 5 years agricultural land, and interests in mining or production tenements.
It appears that acquisitions of interests in Australian land entities which do not meet the entity threshold are not registrable, even though such acquisitions may require a FIRB approval. However, the Australian land entity may need to give a register notice if it becomes a foreign person.
While the draft amendments are supposed to mitigate regulatory burden by continuing existing exemptions, the drafting creates some confusion as to which exemption is continuing. Clarity is still required as to whether interests in commercial or residential land and land rich entities which are currently exempted from post-acquisition notification will also be exempted from registration on the New Register.
No fee is payable for the registration.
Register notices are to be submitted through the Online services for foreign investors, which will become available from 26 June 2023 before the New Register commences. Where a register notice is lodged on the New Register, no additional lodgement is required on the current notification of action portal on the FIRB website.
If a person is required to give a register notice but fails to do so within 30 days, and the Registrar has not given an extension, then a civil penalty of 250 penalty units will apply (currently A$68,750). However, as with other breaches of the FATA there is the possibility of higher fines (up to 300 penalty units for tier 2 infringement notice and 1,500 penalty units for tier 3 infringement notice) where the breach is not self-reported.
The establishment of the New Register is intended to increase the Australian Government’s visibility of foreign ownership in Australia, including in respect of interests held by foreign persons in all types of entities as well as Australian land and in water. In doing so, the Government has imposed additional obligations on investors. The extent of reporting requirements is such now that investors will need to actively monitor their compliance and reporting obligations more closely. For frequent investors, consideration should be given to having dedicated compliance personnel to ensure reporting is up to date.
This ultimately is another addition to the cost and complexity of the FIRB regime.