New Register of Foreign Ownership of Australian Assets – what are your new obligations?
The Register of Foreign Ownership of Australian Assets (New Register) will come into force on 1 July 2023 and will require foreign persons to register their ownership of certain Australian assets.
Currently, foreign persons are required to report:
- the interests they hold in Australian agricultural land and water entitlements to the Australian Taxation Office (ATO) under The Register of Foreign Ownership of Agricultural Land Act 2015. This information is then kept on a register and forms the basis of an annual, deidentified, publicly available report;
- any interests they acquire in residential land, as a standard condition of their Foreign Investment Review Board (FIRB) approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA). These reports are also recorded on a register, but not one established by legislation; and
- the completion of any transaction for which FIRB approval was required, as a specific reporting requirement under the FATA. These notifications are not currently recorded on a register.
However, from 1 July 2023, these various reporting obligations will be consolidated under a single registration requirement under the new Chapter 7A of the FATA, the scope of which will be expanded to include a foreign person’s interests in any commercial land, mining, production and exploration tenements, interests in Australian businesses and critical assets, and national security transactions. These reporting obligations will apply in respect of any acquisition, disposal, or change of control of any of these interests and will all be recorded on a register. The specific information on the register will be confidential and not publicly available, but an annual report on the aggregated, deidentified statistics contained in the register will be provided to the Treasurer and published.
Your new reporting obligations under the New Register
Land, assets, businesses and entities
Under the new rules, a foreign person will now be required to notify the ATO within 30 days (with certain exceptions) when:
- the foreign person acquires an interest in Australian land. This includes freehold land, an interest in a lease or licence for Australian land where the lease term (including any extension or renewal) is likely to exceed five years and shares or units in an Australian land corporation or trust. It does not include equitable interests in land other than certain equitable interests in agricultural land. This notification requirement applies regardless of the value of the land and whether or not the acquisition is subject to FIRB approval under FATA;
- the foreign person holds an interest in land and the nature of that interest in land changes (e.g. if it changes from agricultural land to commercial land);
- the foreign person acquires an interest (other than an equitable interest) in an exploration tenement. Again, this applies regardless of the value of the exploration tenement and whether or not the acquisition is subject to FIRB approval;
- the foreign person acquires an interest in an entity or business for which FIRB approval was (or should have been) obtained, including under an exemption certificate;
- a foreign person takes an action for which they obtain FIRB approval under the reviewable national security action rules; and
- a person (or entity) becomes a foreign person while holding an interest in:
- land or an exploration tenement;
- an Australian entity or agribusiness for which FIRB approval would be required if newly acquired; and
- a national security business for which FIRB approval would be required if newly acquired or commenced.
Unlike the registration requirements set out above, which all need to be undertaken within 30 days of the date on which the relevant action was taken, notification in relation to foreign ownership of water is required within 30 days of the last day of the financial year. This notification requirement covers acquisitions, disposals, changes to the characteristics of an interest in water and becoming or ceasing to be foreign while holding an interest in water during that financial year, but only to the extent the interest continues to be held on the last day of the financial year.
Changes in registered circumstances
All of the circumstances set out above which require a foreign person to register their interests in Australian assets are referred to under the new rules as ‘registered circumstances’. When a registered circumstance ceases, there is also a requirement to lodge a notice. This can occur when the foreign person ceases to be foreign, or the entity in which the foreign person holds an interest ceases to conduct the relevant business, or the foreign person ceases to hold an interest of any percentage in the entity for which the registration was required. The range of circumstances where a registered circumstance ceases varies depending on the nature of the registered circumstance, and you should seek specific advice relating to your circumstances.
In addition, where a foreign person has registered their interest in an entity or business, and then their interest in that entity or business changes by 5% or more, there is an obligation to register that change within 30 days.
Importantly, the above obligations in respect of the New Register can exist even when there is no obligation to obtain FIRB approval. In fact, they can apply where there is no actual transaction in Australia. For example, an entity may start to be or cease to be a foreign person because of changes in the upstream ownership of the entity which may trigger notification requirements depending on the nature of the Australian assets held. It is therefore important for foreign persons to consider their compliance obligations to register their interests in Australian assets notwithstanding that FIRB approval may not be required before obtaining or disposing of those assets, or for the change in ultimate ownership.
No stocktake period
A foreign person is only required to provide notice under the New Register for any registrable interest obtained after the commencement of the New Register, being 1 July 2023. The new reporting obligations will not apply to any registrable interest acquired prior to the commencement of the New Register.
Fees, registration and penalties
Consistent with the existing registers, the information recorded on the New Register will not be available to the public and there will be no fee payable to register an interest.
The ATO will be launching a new online platform for the submission of any register notices. It is expected this platform will be available from 26 June 2023.
If a person is required to register an interest but fails to do so within the 30 day time frame for giving notice, then a civil penalty of 250 penalty units may apply (currently A$68,750). However, higher penalties can be imposed under the general compliance requirements of the FATA.
What you need to do
There is no doubt that the New Register will create additional compliance obligations.
As such, individuals and entities that are foreign for FIRB purposes should:
- ensure any acquisition of an interest in land or in an Australian entity which completes after 1 July 2023 is assessed to confirm whether it is required to be registered;
- add registration under the New Register (or at least an assessment of whether registration is required) to all post-transaction checklists; and
- implement a periodical review process to ensure ongoing compliance with these registration and reporting requirements, their status as a foreign person, as well as any other FIRB conditions which may have been imposed.
FIRB has generally opted to facilitate compliance rather than issue penalties during the introduction of new requirements such as this, and we expect these new changes to follow that precedent. Organisations that show a genuine commitment to compliance and take reasonable steps to ensure compliance are less likely to face penalties and generally have a much more positive engagement with FIRB should there be an inadvertent breach or when seeking FIRB approval in the future.
McCullough Robertson can assist foreign investors with any queries relating to the New Register and the foreign investment regime generally. Please reach out to one of our FIRB specialists for more information.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.