Legislation was introduced into Federal Parliament recently which, if passed, will significantly change the rules regarding foreign investment in Australia, particularly in relation to the acquisition of properties by foreign entities.
The proposed legislative measures include:
The definition of a foreign person has been extended to include foreign governments;
Fees will be imposed on all foreign investment applications to contribute to the costs of administering the administration of the system;
The introduction of tougher civil and criminal penalties for breaches of the foreign investment rules. These include
financial penalties of up to $127,500 for individuals and $537,500 for companies;
up to 3 years imprisonment; and
Penalties may also be imposed on third parties (such as lawyers and estate agents) that aid or abet contraventions of the laws.
- A register of foreign ownership of agricultural land is being introduced to improve transparency regarding the level of foreign ownership of agricultural land. Note these measures apply to new and existing holdings, and foreign persons with existing holdings must register their interests with the ATO by 31 December 2015 in order to avoid penalties.
There is a further proposal to require purchasers to pay 10% of the purchase price to the ATO as withholding tax where they have acquired the property from a foreign vendor, to reduce leakage from the Australian tax system.
The proposed legislation has been referred to the Senate Economics Legislation Committee, which is due to report by 12 October 2015. It is expected that the amendments, if passed, will apply from 1 December 2015.
Any foreign entities looking to enter into transactions in Australia will need to be aware of the proposed changes and should seek advice in relation to their rights and obligations before entering into any proposed transactions.