New Register of Foreign Ownership of Australian Assets – are you impacted?

A new register will soon come into operation which will require foreign investors (including Australian companies and trusts with sufficient foreign ownership) to report their interests in Australian land, mining tenements, entities and businesses. The new register will allow the Commonwealth Government to better understand the nature and extent of foreign ownership in Australia. Foreign-owned businesses should become familiar with the new reporting requirements (which can apply even where FIRB approval is not required) to ensure all applicable interests are notified to the Register and subsequently kept up-to-date.

Background

The new Register of Foreign Ownership of Australian Assets (Register) is expected to come into effect on 1 July 2023. The new Register imposes a variety of new reporting obligations for foreign investors, in addition to the obligations that already apply under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (the Act).

The Register was established by the Act as part of the foreign investment reforms which commenced on 1 January 2021, but is only now coming into operation.

An exposure draft for the proposed amendments to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (FIRB Regulations) to support operation of the Register, has been released by the Treasury and was subject to consultation which ended on 31 March 2023.

The Register will replace the Australian Taxation Office’s (ATO) existing registers for water, agricultural land and residential land. Like the existing registers, the Register will not be a public register and there will be no fee payable for the registration. The Register is anticipated to reduce the duplication that currently exists between the reporting obligations to the ATO and FIRB.

The establishment of the Register is intended to increase the Australian Government’s visibility of foreign ownership in Australia.

Register reporting requirements

Once the Register commences, the following people must give notices to the Registrar generally within 30 days of certain events occurring (note that the new reporting obligations do not appear to be retrospective):

1. A foreign person who acquires:
   1. an interest (other than an equitable interest) in Australian land which is either:
      1. a freehold interest in Australian land;
      2. an interest as lessee in a lease giving rights to occupy Australian land likely exceeding 5 years; or
      3. an interest in a mining or production tenement;
   2. an equitable interest in a lease or licence likely exceeding 5 years in agricultural land;
   3. an interest (other than an equitable interest) in an exploration tenement; or
   4. a registrable water interest, which continues to be held at the end of the financial year in which it was acquired.
2. A foreign person who takes an action that required FIRB approval under the Act, or for which they have sought voluntary FIRB approval (including where the foreign person relied on an exemption certificate to take that action).
3. A person who becomes a foreign person while holding a land interest, water interest or interest in an entity or business which is required to be notified to the Register.
4. A foreign person who becomes aware of a change:
   1. in the nature of their land interest previously notified to the Register (such as a change from an exploration tenement to a production tenement or residential land to commercial land);
   2. to the volume of water or share of a water interest previously notified to the Register; or
   3. of 5% or more to their percentage interest in an entity or business previously notified to the Register (including passive increases and decreases 5% or above).
5. A foreign person who becomes aware that their interest previously notified to the Register ceases, or who ceases to be a foreign person (or, if the person was also a ‘foreign government investor’, the person ceases to hold that status) while holding that interest.
6. An executor or administrator for a person who dies before giving notice or a corporate liquidator for a corporation that is wound up before giving notice.

The land notification requirements set out in item 1 apply irrespective of the value of the acquisition, and whether or not it requires FIRB approval. Accordingly, foreign investors need to be aware that land acquisitions that are generally outside of the scope of the Act (for example, interests in developed commercial land valued below A$310 million) will soon need to be notified.

Importantly, ‘foreign person’ is broadly defined under the Act, and includes Australian incorporated companies and Australian domiciled trusts with upstream foreign interests of as little as 20%. Australian companies and trusts in this category, whose property transactions have not historically triggered FIRB approval requirements as the relevant monetary thresholds were not met, should take particular note of the new Register requirements. Small-scale property transactions, including commercial leasing arrangements (if the leases are likely to exceed 5 years) will need to be notified to the Register.

The penalty for failing to give notice to the Registrar within 30 days is a civil penalty of 250 penalty units (currently A$68,750).

Next Steps

Subject to the draft amendments to the FIRB Regulations being finalised after the consultation period ended on 31 March 2023 and the commencement date of the Register being confirmed, the ATO intends to launch a new online platform through which foreign persons (or their authorised agents) will be able to report interests for the Register.

The ATO has announced that it anticipates that the online platform will become available from 26 June 2023, before the Register is intended to commence on 1 July 2023.

This article was written by Cam Steele, Partner and Sarah Wedding, Associate.