Introduction of the Register of Foreign Ownership of Australian Assets
On 1 July 2023, the new Register of Foreign Ownership of Australian Assets (Register) previously introduced by Part 7A of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) commenced. The Register will be administered and managed by the Commissioner of Taxation.
Purpose of the Register
The purpose of the Register is to:
provide the Australian Government with greater visibility over the foreign investments made in Australia;
consolidate the existing registers currently managed by the ATO (being the registers relating to agricultural land, water entitlements and residential land);
provide a streamlined experience for foreign investors to manage their investment affairs; and
expand the scope of the assets that are required to be registered.
When are register notices required?
Division 3 of Part 7A of the FATA provides that foreign investors are required to notify the Registrar of the Register in relation to the actions that have been summarised below by way of giving a ‘register notice’ (unless an exemption applies).
Broadly, a register notice is required in the following scenarios:
1. Acquisitions of interest in Australian land
A foreign person acquires an interest in Australian land that is any of the following:
freehold interest;
legal interest in commercial / residential / agricultural land pursuant to a lease or license with a term reasonably likely to exceed 5 years (including any extension or renewal);
legal interest in a mining or production tenement;
legal interest in a security in an entity that owns Australian land, being a security that entitles the holder to a right to occupy a dwelling of a kind known as a flat or home unit situated on the land;
legal interest in a share in an Australian land corporation or agricultural land corporation (and an interest in a share in a corporation that is a trustee of an Australian land trust);
legal interest in a unit in an Australian land trust or agricultural trust;
legal interest in an exploration tenement; or
registrable water interest (and hold that interest at the end of the financial year in which the interest was acquired).
Australian land includes agricultural land (i.e. land that is used for primary production business), residential land, commercial land (vacant and developed) or a mining or production tenement (i.e. a right to recover minerals, oil or gas).
2. Other actions
A foreign person takes an action in relation to an entity or business and the action is or would be a significant or notifiable action or a notifiable national security action.
3. Upon becoming a foreign person
A person becomes a foreign person while:
holding an interest in Australian land (as described above);
holding a legal interest in an exploration tenement (if the person would have been required to give a register notice had the interest been acquired while a foreign person);
holding a registrable water interest;
holding an interest in an Australian entity / business if:
the interest is:
a direct interest in an Australian entity that is an agribusiness;
a direct interest in an Australian business that is an agribusiness; or
a substantial interest in an Australian entity (i.e. at least 20%); and
had the person acquired the interest on the day of becoming a foreign person, the action would have been a notifiable action; or
carrying on a national security business or holding a direct interest in a natural security business or entity that carries on a national security business (if it would have been a notifiable national security action had the person started carrying on the business / acquired the interest on the day of becoming a foreign person).
4. Change in circumstances
Any of the following changes in circumstances occur:
a foreign person ceases to hold the relevant interest (being any of the interests described above under points 1 and 3);
there is a change in nature of the interest held by the foreign person and the person is aware or ought to reasonably have become aware of the change (e.g. an interest in commercial land becomes an interest in residential land);
there is a change in certain characteristics of a registrable water interest; and
there is a change in the size of interest in an entity or business (i.e. the percentage interest held in an entity or business differs by 5 per cent or more from the percentage previously recorded in the Register).
As the Register covers both acquisitions and disposals of interest as well as changes in the nature and level of interest, it is important that foreign investors continually monitor their registrable actions and any change in circumstances to ensure compliance.
Record keeping
Foreign investors must ensure that they make records relating to register notices and keep those records for 5 years as a failure to do so may be an offence.
Exemptions
A person is not required to provide a register notice in respect of the following interests:
moneylending agreements;
revenue streams from mining or production tenements;
exploration tenements acquired by non-foreign government investors;
interests acquired by devolution by operation of law (e.g. a person acquires property as a result of divorce proceedings);
Australian business carried on by or land acquired from the government;
acquisition of interests in all types of Australian land by people with a close connection to Australian (e.g. Australian citizen not ordinarily resident in Australia);
acquisitions of interests in agricultural land by spouses and de factor partners of Australian citizens;
acquisitions of interests in residential land by people with a connection to Australia (e.g. permanent and special category visa holders and their spouses and de facto partners); and
interests held by a person when becoming a foreign person if the acquisition of such interest would not have required a register notice had the person acquired it as a foreign person.
When does register notice need to be given?
The obligation to provide a register notice only applies in respect of transactions that occur after 1 July 2023 (e.g. if settlement in relation to an acquisition of an interest in Australian land occurs after 1 July 2023).
However, a person will need to provide a register notice in relation to an interest acquired prior to 1 July 2023 if:
the interest held is of a type described under point 3 above; and
the person was not a foreign person at the time of acquiring the interest but subsequently becomes a foreign person.
A register notice is typically required within 30 days of the date on which the action occurred. Failure to provide register notice when required to do so will attract civil penalties.
How do you give a register notice?
To register an asset, you must use the Online services for foreign investors which can be accessed through the ATO website.
To set up the Online services, you will need to:
establish and use your myGovID to set up access to the Online services; and
complete a one-off registration the first time you access the Online services.
The set up process will differ depending on whether you are setting up access for individuals or entities with an ABN and individuals or entities without an ABN.
Once you have completed a one-off registration, you may appoint a representative to access and register on your behalf. However, the authorised representative must also have its own myGovID and an email that only the authorised representative can access.
Should you have any questions in relation to compliance with the Register or require any assistance with the process of providing register notice, please feel free to get in touch with us.