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Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015
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2013-2014-2015

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Foreign Acquisitions and Takeovers legislation Amendment » « Bill » 2015

Foreign acquisitions and takeovers fee imposition « bill » 2015

Register of Foreign Ownership of Agricultural Land « Bill » 2015

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Treasurer, the Hon J. B. Hockey MP)



Table of contents

Glossary.............................................................................................................. 5

General outline and financial impact............................................................ 7

Chapter 1               Background......................................................................... 11

Chapter 2               Preliminary provisions....................................................... 19

Chapter 3               Powers of the Treasurer in relation to acquisitions...... 45

Chapter 4               Offences and civil penalties............................................. 73

Chapter 5               Fees...................................................................................... 89

Chapter 6               Record keeping and confidentiality of information...... 91

Chapter 7               Miscellaneous..................................................................... 97

Chapter 8               Amendments contingent on the Acts and Instruments (Framework Reform) Act 2015................................................................................... 105

Chapter 9               Application and transitional provisions for Schedules 1 and 2 and Fees Imposition Act.................................................................. 109

Chapter 10            Amendments of confidentiality provisions.................. 117

Chapter 11            Finding table..................................................................... 123

Chapter 12            Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015     127

Chapter 13            Statement of Compatibility with Human Rights......... 139

Chapter 14            Register of Foreign Ownership of Agricultural Land « Bill » 2015       159

Chapter 15            Regulation impact statement......................................... 185

Index............................................................................................................... 255



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

ABS

Australian Bureau of Statistics

Act

Foreign Acquisitions and Takeovers Act 1975

ADJR Act

Administrative Decisions (Judicial Review) Act 1977

AML Act

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

APS

Australian Public Service

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 2001

ATO

Australian Taxation Office

« Bill »

Foreign Acquisition and Takeovers Legislation « Amendment » « Bill » 2015

Commissioner

Commissioner of Taxation

DIBP

Department of Immigration and Border Protection

FATA (as amended)

Foreign Acquisitions and Takeovers Act 1975 as would be amended by the Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015

Federal Circuit Court

Federal Circuit Court of Australia

Federal Court

Federal Court of Australia

FIRB

Foreign Investment Review Board

Foreign Acquisitions « Bill »

Foreign Acquisition and Takeovers Legislation « Amendment » « Bill » 2015

Gazette

Commonwealth of Australia Gazette

Guide

A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September « 2011 » , Australian Government

ICCPR

International Covenant on Civil and Political Rights

Imposition « Bill »

Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015

ITAA 1936

Income Tax Assessment Act 1936

ITAA 1997

Income Tax Assessment Act 1997

Options Paper

Options Paper ‘Strengthening Australia’s foreign investment framework’ ( 25 February 2015 )

Policy

Australia’s Foreign Investment Policy

Register

Register of Foreign Ownership of Agricultural Land

Register « Bill »

Register of Foreign Ownership of Agricultural Land « Bill » 2015

Regulations

Foreign Acquisitions and Takeovers Regulations 1989

Regulatory Powers Act

Regulatory Powers (Standard Provisions) Act 2014

TAA 1953

Taxation Administration Act 1953



Strengthening the foreign investment framework

This package of Bills makes changes to strengthen the integrity of Australia’s foreign investment framework, ensuring Australia maintains a welcoming environment for foreign investment that is not contrary to Australia’s national interest.

The Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill »  2015 ( « Bill » ) makes substantial changes to the Foreign Acquisitions and Takeovers Act 1975 (Act) to modernise the rules and strengthen the enforcement of the foreign investment system.

•        The « Bill » introduces civil penalties and additional and stricter criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules.

•        The « Bill » enables the transfer to the Australian Taxation Office (ATO) of responsibility for regulating foreign investment in residential real estate, which will further enable stronger enforcement and better compliance with the existing rules.

•        The « Bill » also enables the lowering of screening thresholds for investments in Australian agriculture to ensure significant investments in this sector are scrutinised.

The Foreign Acquisitions and Takeovers Fees Imposition « Bill »  2015 (Imposition  « Bill » ) introduces fees on all foreign investment applications. Fees on foreign investment applications will ensure Australian taxpayers are no longer funding the administration of the system, while providing additional resourcing to the Treasury and the ATO to improve service delivery for investors.

The Register of Foreign Ownership of Agricultural Land « Bill »  2015 (Register  « Bill » ) complements these changes by establishing a register of foreign ownership of agricultural land operated by the ATO. Foreign persons are required to register information about their existing holdings and subsequent acquisitions and disposals of Australian agricultural land, providing greater transparency around the levels of foreign ownership of agricultural land.

Date of effect : The amendments apply from 1 December 2015.

Proposal announced : Proposals included in the Bills were announced by the Prime Minister, the Treasurer and the Minister for Agriculture in the joint Media Release titled Government tightens rules on foreign purchases of agricultural land of 11 February 2015; the Prime Minister and the Treasurer in the joint Media Release titled Government to strengthen Australia’s foreign investment framework of 25 February 2015; and the Prime Minister and the Treasurer in the joint Media Release titled Government strengthens the foreign investment framework of 2 May 2015 and in the modernisation package agreed by the Government as released on the Foreign Investment Review Board site.

Financial impact : It is expected that this package of Bills will result in a $667.2 million increase to consolidated revenue over four years.

The introduction of application fees on foreign investment applications from 1 December 2015 is estimated to raise $735.0 million in revenue over the forward estimates period.

The 2015-16 Budget included additional funding for the Treasury ($19.7 million over four years), the ATO ($47.5 million over four years) and the Department of Agriculture ($0.6 million over four years) to support additional screening and compliance activities associated with the reforms.

Human rights implications : The package of Bills raises human rights issues. For the « Bill » and the Imposition  « Bill » see Chapter 13 Statement of Compatibility with Human Rights . The « Bill » and the Imposition  « Bill » are compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate. For the Register  « Bill » , see Chapter 14, paragraphs 14.49 to 14.70. The Register  « Bill » is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

Compliance cost impact : Low. Screening of an additional 125 agricultural proposals per annum involves compliance costs of an estimated $1.25 million for foreign persons whose acquisitions would not previously have required foreign investment screening. The introduction of fees on foreign investment applications and the registration of the ownership of agricultural land also involves minor regulatory costs associated with the process of payments and registration. Offsetting these costs are changes to modernise and streamline the Act, reducing around $1.5 million of associated costs and providing greater certainty for investors.

Summary of regulation impact statement

Regulation impact on business

Impact : Small. Foreign persons will benefit from the reduced cost of complying with a modernised and streamlined foreign investment framework and will incur a cost from the imposition of fees for the processing of applications, additional screening of agricultural investments, and for the registration of foreign ownership of agricultural land.

Main points :

•        The measures have a small overall regulatory impact of $0.05 million.

•        Changes to modernise and streamline the Act remove around $1.5 million of associated costs.

•        The lower screening thresholds for agricultural land and agribusiness means around 125 additional proposals per annum require screening, at an estimated average cost of $10,000 per proposal.

•        The introduction of fees on foreign investment applications involves a total estimated regulatory cost of around $117,000 per annum for around 21,000 applications (or on average less than $6 per application). Under the Government’s regulatory framework, the cost of filling out the application is considered regulatory while the application fee is not.

•        The registration of foreign ownership of agricultural land also has a minor regulatory impact on foreign persons.



       

Background

Context of amendments

1.0                    The Australian Government welcomes foreign investment because it plays an important and beneficial role in the Australian economy. Foreign investment provides additional capital for economic growth, creates employment opportunities, improves consumer choice and promotes healthy competition while increasing Australia’s competitiveness in global markets. It can also help deliver improved productivity by introducing new technology, providing much needed infrastructure, allowing access to global supply chains and markets, and enhancing Australia’s skills base.

1.1                    While recognising that foreign investment provides significant economic benefits to Australia, it is necessary to regulate certain kinds of foreign investment to ensure that these proposals are not contrary to Australia’s national interest. Foreign investment is primarily regulated by the Foreign Acquisitions and Takeovers Act 1975 (Act), the Foreign Acquisitions and Takeovers Regulations 1989 (Regulations) and Australia’s Foreign Investment Policy (Policy). [1]

1.2                    In very broad terms, the Act currently requires foreign persons who are planning to invest in certain interests to notify the Treasurer. Consistent with the Government’s approach to welcoming foreign investment, in most cases, the Treasurer is satisfied that the proposal is not contrary to the national interest and does not object to the proposal. However, the Treasurer may also decide not to object to a particular proposal provided that the person complies with specified conditions that are considered necessary so that the proposal would not be contrary to the national interest. If the Treasurer considers that the proposal is contrary to Australia’s national interest the Treasurer may make an order prohibiting the proposed transaction or, if the transaction has already taken place, direct the person to dispose of their interest.

1.3                    The question of whether a particular investment is contrary to the national interest is a matter for the Treasurer. While each proposal is considered on a case-by-case basis, the factors that are typically considered by the Treasurer when considering any non-residential proposal include the impact of the proposed investment on Australia’s national security, the economy and the community, competition, other Government policies (including taxation), and the character of the investor. When considering an application to acquire an interest in residential land, the overarching consideration is whether the proposed acquisition would add to Australia’s housing stock.

1.4                    The Policy assists foreign investors and their advisers by providing guidance on how the Australian Government interprets and administers the Act and Regulations. The Policy also sets out additional requirements that certain foreign investors such as foreign governments are expected to comply with.

1.5                    The Act has remained largely unchanged since it came into effect and includes obsolete provisions, as well as provisions that do not promote investor certainty or consistency in the application of the foreign investment review framework. Further, the Act has not been amended to take into account major changes in other corporate regulatory frameworks such as the Corporations   Act   2001 , or developments in investment structures.

1.6                    Schedule 1 to this « Bill » , comes into effect on 1 December 2015 and strengthens Australia’s foreign investment review framework by:

•        promoting greater transparency and confidence in Australia’s foreign investment framework by providing a statutory basis for the requirements that apply to foreign government investors;

•        facilitating the Commissioner of Taxation’s role in administering aspects of the Act, particularly in relation to residential land;

•        promoting compliance with the framework by increasing the penalties that can be imposed for offences under the Act;

•        increasing the enforcement options available by making it possible for a court to issue a civil penalty order and for certain officers to issue infringement notices;

•        increasing scrutiny around foreign investment proposals in the agricultural sector; and

•        requiring application fees to be paid. The introduction of fees improves service delivery and ensures that Australian taxpayers no longer have to fund the cost of administering the framework.

Summary of new law

Who does the « Bill » regulate?

1.7                    The « Bill » imposes a range of obligations on ‘foreign persons’. In broad terms, the following persons may fall within the definition of a foreign person:

•        an individual not ordinarily resident in Australia;

•        a corporation or a trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest with associates (that is, an interest of at least 20 per cent in the corporation or trust);

•        a corporation or a trustee of a trust in which two or more persons, each of whom is either an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest with associates (that is, an interest of at least 40 per cent in the corporation); or

•        a foreign government.

Regulated acquisitions

1.8                    The « Bill » enables the Treasurer to make a broad range of orders in relation to a ‘significant action’ that a person is proposing to take or has already taken. Broadly, a significant action is an action to acquire interests in securities, assets or land, or otherwise take action in relation to corporations and unit trusts. An action is generally only a significant action if it meets the applicable interest and monetary thresholds (if such thresholds apply to the action) and the action results in either a change in control involving a foreign person or the action is taken by a foreign person.

1.9                    If the Treasurer is notified that a person is proposing to take a significant action, the Treasurer may:

•        decide that they do not object to the action and give the person a no objection notification not imposing conditions;

•        decide that they do not object to the action provided the person complies with one or more conditions and give the person a no objection notification imposing conditions; or

•        decide that taking the action would be contrary to the national interest and make an order prohibiting the proposed significant action.

1.10                If the significant action has already been taken which the Treasurer is satisfied is contrary to the national interest, the Treasurer may make an order, known as a disposal order, which is directed at unwinding the action. For example, the Treasurer could order a person to dispose of their shares by a specified time. This « Bill » also allows the Treasurer to impose legally enforceable conditions in such circumstances as an alternative to a disposal order.

1.11                A foreign person is not obliged to inform the Treasurer that they are proposing to take a significant action unless the action is also a notifiable action (that is, only certain significant actions are also notifiable actions) - this concept is explained below. However, it is anticipated that some foreign persons will choose to notify the Treasurer because they will want the certainty offered by a no objection notification. If a foreign person is given a no objection notification in relation to the significant action, provided the person does not take any action which is not specified by the notification, the Treasurer generally is not able to make a disposal order.

1.12                A foreign person who proposes to enter an agreement to take a notifiable action must notify the Treasurer before entering into the agreement.

1.13                In broad terms, a notifiable action is a proposed action:

•        to acquire a direct interest in an agribusiness;

•        to acquire substantial interests in Australian entities; or

•        to acquire an interest in Australian land.

1.14                Generally, the action is only notifiable if the entity, business or land meets the threshold test.

1.15                A foreign person who gives a notice must not enter into the agreement for a specified period (generally 40 days) unless the person is given a no objection notification.

1.16                Actions to acquire interests in Australian land that are specified in an exemption certificate are generally not notifiable actions. An exemption certificate is a certificate given by the Treasurer that specifies an interest, or an interest of a kind, is not a significant action or notifiable action. Currently exemption certificates are issued under the Regulations and includes certificates for an annual program of acquisitions of Australian urban land (this alleviates the need for a foreign person to notify and seek a no objection notification (imposing conditions) in relation to each covered acquisition during the period) and a pre-approval certificate that allows developers to sell new dwellings in a development to foreign persons, without the foreign person having to notify and seek a no objection notification not imposing conditions.

Administration and enforcement

Fees

1.17                Fees are generally payable by any person who makes an application under this Act. The Treasurer may waive or remit the whole or part of a fee if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee. Notices and applications are not considered given or made until the applicable fee has been paid or the fee has been waived or remitted. The amounts of the fees are found in the Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015 .

Offences

1.18                A person may commit an offence or contravene a civil penalty provision if the person:

•        fails to notify the Treasurer before taking a notifiable action;

•        takes an action that has been notified, before the « end » of the applicable time limit;

•        contravenes an order made by the Treasurer which prohibits a proposed significant action, an interim order or a disposal order; or

•        contravenes a condition in a no objection notification imposing conditions or an exemption certificate.

1.19                A foreign person who fails to comply with the obligations imposed by this Act in relation to residential land may also be liable to a civil penalty.

1.20                Each civil penalty provision in this Act is enforceable under Part 4 of the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act).

1.21                An infringement officer may issue an infringement notice if the infringement officer believes on reasonable grounds that the person contravened a civil penalty provision relating to residential land. The framework for the « use » of infringement notices created by the Regulatory Powers Act applies to infringement notices given for suspected contraventions of this Act.

Confidentiality of information

1.22                Much of the information needed to assess whether a significant action or a notifiable action is contrary to the national interest is personal information within the meaning of the Privacy   Act   1988 or commercial-in-confidence. To assess whether a significant action or a notifiable action may be contrary to the national interest it is often necessary for officers assisting the Treasurer to perform the Treasurer’s functions under this Act to consult with officers in a range of Commonwealth, State and Territory departments and agencies.

1.23                Recognising that the unauthorised « use » or disclosure of information that is collected under or for the purposes of the Act could cause significant harm to the affected person, the « Bill » makes it an offence for a person to « use » or disclose information provided under the Act for an unauthorised purpose. The « Bill » also specifies the purposes for which information may be disclosed and the classes of people to whom it may be disclosed.

Other matters

1.24                All substantive provisions in the existing Act will be repealed.

Comparison of key features of new law and current law

New law

Current law

The definition of foreign person is extended so that it applies to foreign governments. This means that the requirements imposed by the Act apply to all foreign government investors unless an exemption in the Act or regulations applies.

The definition of foreign person does not apply to foreign governments.

The substantial interest threshold is 20 per cent.

The substantial interest threshold is 15 per cent.

Fees are payable. The fee to be made for each application or notice is specified in the Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015 . The Treasurer can waive the whole or part of a fee if it would not be contrary to the national interest to do so.

No fees are payable.

The requirements that currently apply to Australian urban land apply to all land in Australia (including agricultural land) unless below the threshold, exempt, or specific rules apply.

A foreign person is required to notify the Treasurer of a proposal to acquire or increase an interest in Australian urban land, unless an exemption applies. The Treasurer has the power to make an order prohibiting the proposed acquisition if he or she considers that it would be contrary to the national interest, or to impose conditions.

In addition to enabling the Treasurer to require a person to give information or produce documents, the Act enables officers from the Australian Taxation Office (ATO) to exercise broad ranging investigatory powers.

The Treasurer can monitor compliance with the Act and Regulations and investigate alleged contraventions of the Act and the Regulations by requiring a person to give information or provide documents.

In addition to the enforcement options provided for in the existing Act, the « Bill » makes it possible for civil penalty orders to be made and infringement notices to be issued. The « Bill » also significantly increases the maximum penalties for some offences.

Only divestment orders and criminal penalties apply to breaches of the Act. The maximum penalty that can be imposed for an offence under the Act is a fine of 500 penalty units (currently $90,000), imprisonment for two   years, or both.

The circumstances in which information collected under or for the purposes of this Act may be used and disclosed are specified and it is a criminal offence to « use » information collected under the Act for an unauthorised purpose.

The general provisions in the Privacy   Act 1988, Freedom of Information Act 1982, Public Service Act 1999 , the Public Service Regulations 1999 and the Crimes Act 1914 that govern the handling of information apply.

1.25                The « Bill » forms part of a package of legislation which includes:

•        the Foreign Acquisitions and Takeovers Fees Imposition « Bill »   2015 ; and

•        the Register of Foreign Ownership of Agricultural Land « Bill »   2015 .

1.26                It is also anticipated that the Regulations and the Foreign   Acquisitions and Takeovers (Notices) Regulations 1975 will be repealed and a new regulation made which will come into effect on 1 December 2015.



Outline of chapter

2.0                    This chapter explains the preliminary provisions of the « Bill » , including:

•        the short title and commencement;

•        the simplified outlines;

•        the definitions of key terms used in Schedule 1 to this « Bill » , which includes the main amendments to the Foreign Acquisitions and Takeovers Act 1975 (Act); and

•        the constitutional basis and application of the « Bill » .

Detailed explanation of new law

Short title

2.1                    If the « Bill » is enacted it may be cited as the Foreign Acquisitions and Takeovers Legislation « Amendment » Act 2015. [Section   1]

Commencement

2.2                    The various provisions in the « Bill » commence on the day specified in the table to section 2.

2.3                    Sections 1 to 3 of this « Bill » (which concern the formal aspects of the Act), as well as anything in the Act not elsewhere covered by the table, commence on the day on which the Foreign Acquisitions and Takeovers Legislation « Amendment » Act 2015 receives Royal Assent.

2.4                    Schedules 1, 3 and 4 to this « Bill » commence on 1 December 2015. Schedule 2 commences immediately after Schedule 1 to the Acts   and Instruments (Framework Reform) Act 2015 comes into effect. [Section 2]

Schedules

2.5                    Each Act specified in a Schedule to the Foreign Acquisitions and Takeovers Legislation « Amendment » Act 2015 is amended or repealed as set out in the applicable items in the Schedule and any other item in a Schedule has effect according to its terms. This is a technical provision which gives operational effect to the amendments contained in the Schedules. [Section   3]

Repeal of sections of the Act and « amendment » to the long title of the Act

2.6                    If enacted, the « Bill » would repeal all the substantive provisions in the existing Act. It would also amend the long title of the Act so that it becomes An Act relating to the foreign acquisition of certain land interests and to the foreign acquisition and foreign control of certain business enterprises and mineral rights. [Schedule   1, items   1 to 3]

Simplified outlines

2.7                    To assist the reader the « Bill » includes a number of simplified outlines. However, the outlines are not intended to be comprehensive and it is intended that the reader will rely on the substantive provisions. [Schedule   1, item   3, section   3; Schedule   1, item   4, sections   38, 39, 46, 50, 56, 66, 80, 83, 112, 116 and 131]

Definitions

2.8                    The dictionary provides definitions of terms used in the « Bill » . In some cases the definitions are signposts to other provisions in the « Bill » or that meanings will be prescribed in the regulations to the Act, or refer to definitions of terms in other Acts in which the meaning of the term is given. [Schedule   1, item 3, section 4]

‘Foreign person’

2.9                    The term foreign person is central to the « Bill » . It means:

•        an individual not ordinarily resident in Australia. An Australian citizen who is living overseas may therefore be a ‘foreign person’ for the purposes of the Act;

•        a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•        a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•        the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•        the trustee of a trust in which two or more persons, each of whom is either an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•        a foreign government; or

•        any other person, or any other person that meets the conditions, prescribed by the regulations.

2.10                The terms aggregate substantial interest, foreign corporation, foreign government and substantial interest are each defined.

2.11                A person holds a substantial interest in an entity if the person holds an interest of at least 20 per cent in the entity. In the case of a trust (including a unit trust), a person holds a substantial interest if they, together with any one or more associates, hold a beneficial interest in at least 20 per cent of the income or property of the trust.

2.12                Two or more persons hold an aggregate substantial interest in an entity if the persons hold an aggregate interest of at least 40 per cent in the entity. In the case of a trust, two or more persons, together with any one or more associates of any of them hold, in the aggregate, beneficial interests in at least 40 per cent of the income or property of the trust.

2.13                In determining if a person holds a substantial interest, or two or more persons hold an aggregate substantial interest, interests of associates of the person or persons are also taken into account.

2.14                Foreign corporation refers to a foreign corporation to which paragraph 51(xx) of the Constitution applies.

2.15                Foreign government refers to an entity (within the ordinary meaning of the word) that is a body politic (or part of a body politic) of a foreign country or a body politic (or part of a body politic) of part of a foreign country. [Schedule   1, item   3, section   4]

Meaning of ‘ordinarily resident’

2.16                An individual who is not an Australian citizen is ordinarily resident in Australia at any particular time if:

•        the individual has been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and

•        at that time, the individual is in Australia and the individual’s continued presence in Australia is not subject to any limitation as to time imposed by law; or

•        if the individual is not in Australia, immediately before the individual’s most recent departure from Australia the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law. An individual’s continued presence in Australia is subject to a limitation as to time imposed by law if the individual is an unlawful non-citizen within the meaning of the Migration   Act   1958.

2.17                This provision substantially re-enacts section 6 of the current Act. [Schedule 1, item 3, section 5]

Meaning of ‘associate’

2.18                The term associate is defined broadly. However, unlike the current Act, it does not make any person who is an associate under the existing provision, an associate of any other person who is an associate of the person (including a person who is an associate of the person by another application or other applications of this rule). In the « Bill » , the following people are associates of a person:

•        a person’s ‘relative’ within the meaning given by the Income   Tax Assessment Act 1997 (ITAA 1997), which is explained below;

•        any person with whom the person is acting, or proposes to act, in concert in relation to an action to which this Act may apply;

•        any person with whom the person carries on a business in partnership;

•        any entity of which the person is a senior officer (the meaning of the term ‘senior officer’ is explained below);

•        if the person is an entity, any holding entity and any senior officer of the entity;

•        any entity whose senior officers are accustomed to or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person, or, if the person is an entity, the senior officers of the person;

•        an entity if the person is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the entity or the senior officers of the entity;

•        any corporation in which the person holds a substantial interest;

•        if the person is a corporation, a person who holds a substantial interest in the corporation;

•        the trustee of a trust in which the person holds a substantial interest;

•        if the person is a trustee of a trust, a person who holds a substantial interest in the trust;

•        if the person is a foreign government, a separate government entity (a term which is explained below) or a foreign government investor (a term which will have the meaning prescribed by the regulations, but for the associates definition it is intended to exclude through the regulations foreign government investors who are only foreign government investors due to an ‘aggregate substantial interest’ from two or more foreign countries) of a foreign government of a foreign country:

-       any other person that is a foreign government in relation to that country (or any part of that country);

-       any other person that is a separate government entity in relation to that country (or any part of that country); or

-        any other foreign government investor in relation to that country (or part of that country).

[Schedule   1, item   3, section   6]

2.19                New section 79 provides the Treasurer with an order power to declare persons involved in avoidance to be taken to be associates if the Treasurer is satisfied that not making an order under the section is contrary to the national interest. Such an order may take such persons to be associates of each other for the purposes of this Act or for specified purposes. The order specifies the duration that it will apply. [Schedule 1, item 4, section 79]

2.20                The term associate has a wider meaning for an action taken relating to an interest in residential land. In this context, the following people are also an associate of a person:

•        an entity that is not listed for quotation in the official list of a stock exchange if the person’s relative holds a substantial interest in the entity or is a senior officer of the entity; or

•        if the person is an entity (referred to in the « Bill » as the first entity), another entity if:

-       an individual holds a substantial interest in the first entity or is a senior officer of the first entity; and

-       the individual’s relative holds a substantial interest in the second entity or is a senior officer of the second entity; and

-       neither the first entity nor the second entity are listed for quotation in the official list of a stock exchange, or are a subsidiary of an entity listed for quotation in the official list of a stock exchange or the trustee of an entity that is listed for quotation in the official list of a stock exchange.

2.21                The « Bill » excludes certain persons from the definition of associate. A person is not an associate of another merely because:

•        one gives advice to the other, or acts on the other’s behalf, in the proper performance of the functions attaching to a professional capacity or a business relationship;

•        one, a client, gives specific instructions to the other, whose ordinary business includes dealing in financial products to acquire financial products on the client’s behalf in the ordinary course of that business;

•        one has sent, or proposes to send, to the other an offer under a takeover bid for securities held by the other;

•        one has appointed the other, otherwise than for valuable consideration (within the ordinary meaning of the term) given by the other or by an associate of the other, to vote as a proxy or representative;

•        one is providing independent services as a trustee of a trust to the other who is a beneficiary of the trust if the trustee is licensed to provide those services under a law of the Commonwealth, a State, a Territory, a foreign country, or a part of a foreign country;

•        one holds a substantial interest in a managed investment scheme (within the meaning of the Corporations Act) and the other is the responsible entity of the scheme; or

•         both are partners of one of certain kinds of partnerships, namely a partnership of actuaries or accountants; medical practitioners; patent attorneys; sharebrokers or stockbrokers; trademark attorneys; a partnership that has as its primary purpose collaborative scientific research, and includes at least one university and one private sector participant; architects; pharmaceutical chemists or veterinary surgeons; or legal practitioners.

[Schedule   1, item   3, section   6]

2.22                The regulations may also provide that persons are not associates of other persons. [Schedule 1, item 3, section 37]

Meaning of ‘relative’

2.23                Section 995-1 of the ITAA 1997 currently defines the term ‘relative’ of a person to mean an individual’s:

•        spouse. ‘Spouse’ is currently defined by section 995-1 of the ITAA 1997 to include:

-       another individual (whether of the same or different sex) with whom the individual is in a relationship that is registered under a State law or a Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act   1901 as a kind of relationship prescribed for that purpose; and

-       another individual who, although not married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple;

•        the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendent or adopted child of that person, or of that person’s spouse; and

•        the spouse of a person referred to immediately above.

Meaning of ‘senior officer’

2.24                A senior office of an entity means an officer of an entity:

•        for a corporation, a director of the corporation;

•        for a unit trust, if the trustee is an individual, the trustee. If the trustee is not an individual, a director. It also includes any other individual involved in the central management and control of the trust;

•        a person who is, or a person in a group of persons who are, in a position to determine the investments or policy of the entity or the trustee of the entity;

•        a person who makes, or participates in making, decisions that affect the whole, or a substantial part of, the business of the entity; and

•        a person who has the capacity to affect significantly the financial standing of the entity.

2.25                An independent director is not a senior officer if they or the entity they are a director of meets the requirements set out in new section 7. [Schedule   1, item   3, section   4]

Meaning of ‘separate government entity’

2.26                The term ‘separate government entity’ of a foreign country means an individual, a corporation or a corporation sole that is an agency or instrumentality of the foreign country and is not part of the body politic of a foreign country or of a part of a foreign country. [Schedule 1, item 3, section 4]

Meaning of ‘independent director’

2.27                Only directors that are directors of listed entities or entities with a close relationship to a listed entity are independent directors if they meet the requirements of new section 7. [Schedule   1, item   3, section   7]

2.28                For a director of a listed entity, the director is independent if they meet the criteria to be considered independent of the listing stock exchange. If the stock exchange does not have its own criteria incorporated in its listing rules, a director can satisfy director independence criteria recognised by the listing exchange. Such criteria could be based on the law of the jurisdiction where the stock exchange is located and may also be non-binding . [Schedule   1, item   3, subsection   7(1)]

Example 2.1  

While the Australian Securities Exchange (ASX) listing rules do not include criteria for director independence, a director of an ASX listed entity where the entity considers one or more of their directors to be independent directors based on their assessment that the director meets the criteria in the ASX Corporate Governance Principles and Recommendations, would satisfy the requirements of new section 7. The entity’s assessment that one or more directors are independent directors would be supported by their public announcements and reports such as their annual reports including statements of this.

2.29                For a listed unit trust with a corporate trustee, the status of the directors of the trustee corporation is considered. In such cases, if directors of the trustee meet the criteria for director independence of the stock exchange on which the unit trust is listed, such directors are independent directors. [Schedule   1, item 3, subsection 7(1)]

Example 2.2  

Turtle unit trust is listed on a stock exchange that includes criteria for director independence in the listing rules of the stock exchange. Its trustee, the unlisted Turtle trustee corporation, has a board of ten directors three of which meet the independence criteria of the stock exchange on which the Turtle unit trust is listed. These three directors are independent directors under new section 7.

2.30                Subsection 7(2) includes a special rule for entities whose securities are stapled. Such entities are often referred to as stapled entities or members of stapled groups. Such entities can include corporations and unit trusts. The securities of such entities are treated as stapled securities where the securities in an entity can only be transferred together with securities in one or more other entities. However, it is common that only one of the two or more entities whose securities are stapled is listed on a stock exchange. For the purpose of new subsection 7(2), if the listed entity whose securities are stapled to the securities of one or more other entities has a director that meets the requirements of new subsection 7(1) and the director is also a director of an unlisted entity whose securities are stapled to the securities of the listed entity, the director is also a taken to be an independent director of the unlisted entity. [Schedule 1, item 3, subsection 7(2)]

Meaning of ‘Australian business’

2.31                Australian business means a business that is carried on wholly or partly in Australia in anticipation of profit or gain. A person who has an interest in a ‘mining or production tenement’ is taken to carry on a business in Australia of exploiting the tenement in anticipation of profit or gain, and the tenement is taken to be an asset of that business [Schedule 1, item 3, section 8] . The term ‘mining or production tenement’ is defined by new section 4.

Meaning of ‘agribusiness’

2.32                The regulations will prescribe certain kinds of businesses to be an ‘agribusiness’. It is anticipated that the regulations will prescribe an agribusiness to be a business that is carried on, wholly or partly, in any of certain classes of the Australian and New Zealand Standard Industrial Classification Codes as in force from time to time, published by the Australian Bureau of Statistics (ABS), and which is published on the ABS website and available free of charge. [2]

2.33                It is anticipated that the regulations will prescribe an Australian business to be an agribusiness if the value of the assets of the business used in carrying on an agribusiness is at least the prescribed percentage of the value of the total assets of the business.

2.34                It is anticipated that the regulations will prescribe an Australian entity to be an agribusiness if it meets at least one of the following criteria:

•        the value of assets used in carrying on an agribusiness is at least the percentage prescribed by the regulations; or

•         the revenue or profits derived from carrying on an agribusiness is at least the prescribed percentage by the regulations.

[Schedule   1, item   3, section   4]

Meaning of ‘interest’ in a ‘security’

2.35                Security is defined to mean a share in a corporation or a unit in a unit trust. Share of a corporation is defined to mean a share in the share capital of the corporation and includes stock into which all or any of the share capital has been converted and includes (except in relation to new section 9) an interest in such a share or in such stock. [Schedule 1, item 3, section 4]

2.36                A person holds or acquires an interest in a security if the person has any legal or equitable interest in that security. In determining whether a person holds or acquires an interest in a security it is immaterial that the interest cannot be related to a particular security.

2.37                For the purposes of this Act a person is considered to hold or acquire an interest in a security in an entity if the person is not the registered holder of the security, if the person is entitled to exercise or control the exercise of a right attached to the security (other than because the person was appointed as a proxy or representative to vote at a general meeting of the entity or a class of members or unit holders of the entity).

2.38                A person holds or acquires an interest in the issued shares in a corporation if all or part of the share capital of the corporation consists of stock and the person holds an interest in that stock. The issued shares are taken to have the same nominal amount as the amount of that stock and the same rights attached to them as are attached to that stock. [Schedule 1, item 3, section 9]

Meaning of ‘asset’ and ‘interest’ in an asset

2.39                Asset includes an interest in an asset [Schedule 1, item 3, section 4] . A person holds or acquires an interest in an asset if the person holds any legal or equitable interest in that asset [Schedule 1, item 3, section 10] .

Meaning of ‘interest’ in a trust

2.40                A person holds or acquires an interest in a trust if the person holds or acquires a beneficial interest in the income or property of a trust or the person holds an interest in a unit in a unit trust. [Schedule   1, item   3, section   11]

Meaning of ‘land’, ‘Australian land’ and ‘interest in Australian land’

2.41                The definition of land includes a building (including a new dwelling or an established dwelling) or part of a building and the subsoil of land. Australian land means agricultural land, commercial land, residential land or a mining or production tenement. [Schedule 1, item 3, section 4]

2.42                Agricultural land is defined to mean land in Australia that is used, or could reasonably be used, for a primary production business within the meaning of the ITAA 1997. The definition of ‘primary production business’ in the ITAA 1997 currently includes cultivating or propagating plants; maintaining animals for the purpose of selling them or their bodily produce; conducting operations relating directly to taking or catching fish and certain other marine animals; planting or tending trees in a plantation or forest that are intended to be felled; or felling trees in a plantation or forest.

2.43                The definition of agricultural land includes land which is partially used for a primary production business, or land where only part of the land could reasonably be used for a primary production business. An example of the latter is where part of the land is subject to an environmental protection zone that does not allow primary production activities within the zone. Agricultural land also includes land which may, from time to time, be covered by water.

2.44                Whether land could reasonably be used for a primary production business depends on the facts and circumstances of the land. Factors that may provide a reasonable indicator that the land could (or could not) reasonably be used, either alone or together with other factors, could include:

•        The primary uses allowed on the land under its zoning : These are likely to provide a reasonable indicator of if the land could reasonably be used for a primary production business. For example, if zoning allowed for primary production activities to be undertaken without the further approval of the local regulatory body, this would likely indicate that the land could reasonably be used for a primary production business. However, land within a rural residential zone, where zoning requirements either explicitly do not allow for primary production activities, or would only be approved in special circumstances, is unlikely to be land that could reasonably be used for a primary production business.

•        Land « use » history : If the land has been used in a primary production business in recent years, this is likely to indicate that the land again could reasonably be used for a primary production business, unless there has been one or more significant changes in the land in the meantime (for example, significant permanent environmental degradation, water depletion or pollution, or removal or loss of the earlier primary production business infrastructure). However, even though the land has not been used in a primary production business in recent years does not necessarily mean that it could not reasonably be used for a primary production business in the future. Examples of this could include if the land is not being used in a primary production business due to:

-       an extended extreme climatic event, such as a long term drought;

-       a recent natural disaster, such as bushfire or floods; or

-       other activities, such as mineral exploration and development on the land after which expected, or legally required, land remediation works would mean that the land in whole or part again could reasonably be used for a primary production business.

Example 2.3  

Raoul Co, a foreign person, has an interest in leasehold land in Australia. There is currently a mining operation being conducted on the leasehold land and the land could not reasonably be used for a primary production business. However, when the mining lease ends, which is expected to be in twenty years, the land will be rehabilitated at which time a primary production business will be able to be conducted on the property. After rehabilitation, the land is agricultural land.

•        Land characteristics (for example, climate, crop yield, land size, remoteness, soil quality, stock holding capacity, topography, vegetation and water availability) : While relevant to if the land could reasonably be used for a primary production business, a single characteristic such as land size, in isolation may be insufficient to make a reasonable assessment. It is also not necessary that the land be of sufficient size to allow for the operation of a stand-alone primary production business in some or all cases within the site. Remoteness of the land from goods transport and other infrastructure, as well as key agricultural service providers, is likely to mean that land could not reasonably be used for a primary production business, until such infrastructure and/or services became available to the locality.

•        Lease or licence conditions or limitations : Where there is a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) is reasonably likely to exceed five years, there may be land « use » conditions or restrictions attaching to the lease or licence:

-       Where these explicitly allow for primary production activities to be undertaken, the land could reasonably be used for a primary production business, irrespective of the lessee or licence holder’s intention during the lease or licence term.

-       Where these do not permit « use » for a primary production business by the lessee or licence holder, this in isolation should not be taken as meaning the land could not reasonably be used for a primary production business. Other factors, such as those outlined above and the rationale for such a restriction on the lease or licence would be relevant to an assessment. For example, if a lessor has retained adjacent land on which they are operating a primary production business and has restricted the uses of the lessee so that they can incorporate the land back into their operations should they decide to so at the « end » of the lease term (after the land has been left fallow to raise productivity), then the land could reasonably be used for a primary production business.

2.45                Commercial land is defined to mean land in Australia or the seabed of the offshore area (that is, the exclusive economic zone of Australia or the continental shelf of Australia). It does not include land used wholly and exclusively for a primary production business; land on which there is at least one dwelling (except ‘commercial residential premises’ within the meaning given by the A New Tax System (Goods and Services Tax) Act   1999) ; or land on which the number of dwellings (except commercial residential premises) could reasonably be built is less than the number prescribed for the purposes of subparagraph (a)(ii) of the definition of ‘residential land’.

2.46                The term ‘commercial residential premises’ is currently defined by section 195-1 of A New Tax System (Goods and Services Tax) Act to mean:

•        a hotel, motel, inn, hostel or boarding house;

•        premises used to provide accommodation in connection with a school;

•        a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire;

•        a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport;

•        a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences;

•        a caravan park or a camping ground; or

•        any other premises similar to the ones described above, other than premises to the extent they are used to provide accommodation to students in connection with an education institution that is not a school.

2.47                Residential land means land in Australia on which there is at least one dwelling, or on which the number of dwellings that could be reasonably built on the land is less than the number prescribed in the regulations (which is anticipated to be 10). It does not include land used wholly and exclusively for a primary production business or land on which the only dwellings are commercial residential premises.

2.48                Mining or production tenement means:

•        a right under a law of the Commonwealth, a State or a Territory to recover minerals (such as coal or ore), oil or gas in Australia or from the seabed or subsoil of the offshore area, or a right to preserve such a right, but does not include a right to recover minerals, oil or gas for the purposes of prospecting or exploring for minerals, oil or gas;

•        a right which includes a right mentioned in the first dot point;

•        a lease under which the lessee has a right mentioned in the first dot point; or

•        an interest in a right mentioned above or a lease mentioned above.

2.49                The definitions of agricultural land, commercial land, residential land or a mining or production tenement are not intended to be mutually exclusive.

2.50                A person has an interest in Australian land if the person has:

•        a legal or equitable interest in Australian land. However, it does not include an interest under a lease, a licence, a unit in a unit trust, an interest in an agreement given a right (known as a profit à prendre) to take something off another person’s land, or to take something out of the soil of that land, or an interest in an agreement involving the sharing of profits or income from the « use » of or dealings in, Australian land;

•        an 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 situated on the land;

•        an interest as lessee or licensee in a lease or licence giving rights to occupy Australian land if the term of the lease or licence (including any extension or renewal) is reasonably likely, at the time the interest is acquired, to exceed five years;

•        an interest in an agreement giving a right known as a profit Ã  prendre if the term of the agreement (including any extension or renewal) is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years. For example, in New South Wales, a forestry right is considered a profit Ã  prendre;

•        an interest in an agreement involving the sharing of profits or income from the « use » of, or dealings in, Australian land if the term of the agreement (including any extension or renewal) is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years;

•        an interest in a share in an Australian land corporation or an agricultural land corporation. Australian land corporation and agricultural land corporation have the meanings prescribed by the regulations;

•        an interest in a unit in an Australian land trust or agricultural land trust. Australian land trust and agricultural land trust have the meanings prescribed by the regulations; or

•        if the trustee of an Australian land trust or agricultural land trust is a corporation, an interest in a share in that corporation.

2.51                The « Bill » clarifies that a person is considered to acquire an interest in land even if the person already has an interest in Australian land and the person increases their interest. [Schedule   1, item   3, section 12]

Interests that are remote or subject to restraint

2.52                A person holds or acquires an interest in a security, asset, trust or Australian land despite its remoteness, the manner in which it arose, or the fact that the exercise of a right conferred by the interest is or is capable of being made subject to restraint or restriction. [Schedule   1, item   3, section 13]

Interests held or acquired jointly

2.53                A person holds or acquires an interest in a security, asset, trust or Australian land even if the person holds or acquires the interest jointly with one or more other persons. [Schedule 1, item 3, section   14]

Interests acquired by entering into agreements or acquiring options

2.54                A person is taken to acquire an interest in a security (that is, a share in a corporation or a unit in a unit trust), asset, trust or Australian land if the person:

•        enters an agreement to acquire the interest;

•        in relation to an interest in a security, asset or trust, the person has a right to acquire such an interest under an option;

•        in relation to an interest in Australian land, the person acquires an option to acquire such an interest; or

•        has a right, other than by reason of having an interest under a trust, to have such an interest transferred to himself or herself or to his or her order.

2.55                It is irrelevant whether or not the right or option is presently exercisable or exercisable in the future, or whether the agreement, right or option requires the fulfilment of a condition.

2.56                However, for some purposes of this Act, if the provisions of an agreement to acquire or sell an interest in a security, asset, trust or Australian land do not become binding on a person until one or more conditions are met, the person is taken to have entered the agreement, and to have acquired or sold the interest, only when the provisions become binding. This exception applies for the purposes of new Part 4 (notice of notifiable action), new Part 5 (offences and civil penalties) to the extent that it relates to Part 4, and any other provision of the Act to the extent that it relates to new Part 4 or Part 5. This ensures that persons who notify a notifiable action prior to the related agreement entered into becoming binding have not committed an offence and are not subject to a civil penalty. [Schedule 1, item 3, section 15]

Meaning of ‘proposes’ to take certain action

2.57                Without limiting the meaning of ‘propose’, a person proposes to acquire an interest in securities (that is, shares in a corporation or a unit trust), assets or Australian land if:

•        the person makes an offer to acquire the interest;

•        the person makes or publishes a statement that expressly or impliedly invites a person who holds an interest in securities, assets or Australian land to dispose of that interest; or

•        the person takes part in, or proposes to take part in, negotiations with a view to acquiring an interest in securities, assets or Australian land.

2.58                A person proposes to enter into or terminate an agreement if the person takes part in, or proposes to take part in, negotiations with a view to entering or terminating the agreement. [Schedule 1, item 3, section 16]

Meaning of ‘interest’ and ‘aggregate interest’ of a specified percentage in an entity

2.59                A person holds an interest of a specified percentage in an entity if the person, alone or together with any one or more associates of the person:

•        is in a position to control at least that percentage of the voting power or potential voting power of the entity; or

•        holds interests in at least that percentage of the issued securities of the entity, or would hold at least that percentage of such interests, if securities in the entity were issued as the result of the exercise of certain other specified kinds of rights, such as the right to acquire an interest in shares under an option.

Example 2.4  

Finland Co is the trustee of the Finco Unit Trust. There are 100 units in the Finco Unit Trust as at 1 July 2015. Menfem Co, a foreign person, holds 24 units in Finco Unit Trust, which gives it a beneficial interest in the Finco Unit Trust of at least 20 per cent. This means that Menfem Co has a substantial interest in Finco Unit Trust. Thus Finland Co, as the trustee of the Finco Unit Trust, is a foreign person under the Act.

2.60                Two or more persons (not being associates of each other) hold an aggregate interest of a specified percentage in an entity if they, together with any one or more associates of them:

•        are in a position to control at least that percentage of the voting power or potential voting power in the entity; or

•        hold interests in at least that percentage of the issued securities in the entity, or would hold at least that percentage of such interests, if securities were issued as a result of the exercise of specified kinds of rights.

2.61                In determining the percentage of voting power or potential voting power that a person is in a position to control in an entity, any votes that the person controls as a proxy are disregarded. This does not affect the voting power of the person who has appointed the proxy or representative. [Schedule 1, item 3, section 17]

Rules relating to determining percentages of interests in entities

Exercise of future rights

2.62                In determining the percentage of the interests in the issued securities in an entity that a person holds, or would hold at a particular time, it should be assumed that:

•        if a person has a right which would result in the person holding an interest in an issued security in an entity, the right is exercised at that time; or

•        if it cannot be determined at that time whether the right could be exercise, the right is exercised at that time.

Discretionary trusts

2.63                If the terms of a trust confer on a trustee a power or discretion to distribute the income or property of a trust to one or more beneficiaries, for the purposes of this Act each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or property of the trust that the trustee is permitted to distribute to that beneficiary. [Schedule 1, item   3, section 18]

Example 2.5  

Jakarta Co is the trustee of the Ronson Discretionary Trust. Pursuant to the Trust Deed, the trustee has discretion to distribute up to 25 per cent of the income of the trust each financial year to each of four beneficiaries Able, Brian, Cain and Donna (all of whom are individuals not ordinarily resident in Australia).

The trustee did not distribute income to any of the beneficiaries from commencement of the trust in the 2012 and 2013 income years. However in the 2014 income year the trustee distributed 25 per cent of the income to each of Able, Brian and Cain but there was no distribution to Donna. Even though Donna has not received a distribution, for the purposes of the Act she is taken to hold a beneficial interest to the maximum percentage the trustee is permitted to distribute to her being 25 per cent. The same applies to Able, Brian and Cain and Donna for the trust from commencement. Thus Jakarta Co, as the trustee of the Ronson Discretionary Trust, is a foreign person under the Act.

Tracing of substantial interests in corporations and trusts

2.64                The « Bill » provides for substantial interests in a corporation or trust to be traced back through the ownership of relevant entities.

2.65                The tracing rules do not apply for the purposes of determining, under new subsection 47(2) (which concerns the meaning of notifiable action) whether a foreign person acquires a direct interest in an Australian entity or Australian business that is an agribusiness or a foreign person acquires a substantial interest in an Australian entity. This ensures that acquisitions that occur offshore and are remote from Australia (such as an acquisition by a French Group of a United Kingdom parent entity of a multinational group that has an Australia business as part of its global operations) are not notifiable actions, although it may still be a significant action where the Treasurer may have powers available should the acquisition be considered contrary to the national interest.

2.66                The tracing rules also do not apply when determining if a foreign person acquires a direct interest in an Australian entity or Australian business that is an agribusiness is a significant action. This means that if the Australian agribusiness was owned by a United States parent entity that was acquired by a French Group, it would not be a significant action specific to an Australian agribusiness (this does not necessarily exclude it from being a significant action - entities if the conditions are met for it to be a significant action to acquire a substantial interest in an entity). [Schedule 1, item   3, sections 19 and 42]

Meaning of ‘acquire’ an interest of a specified percentage in an entity

2.67                A person acquires an interest of a specified percentage in an entity if the person:

•        starts to hold an interest of that percentage in the entity; or

•        would start to hold an interest of that percentage in the entity on the assumption that the person held interests in securities that the person has offered to acquire or held rights to votes that might be cast at a meeting of the entity that are rights the person has offered to acquire; or

•        with respect to a person who already holds an interest of that percentage in the entity, the person:

-       begins to be in a position to control more of the voting power or potential voting power in the entity;

-       starts to hold additional interests in the issued securities in the entity; or

-       would start to hold additional interests in the issued securities in the entity, if securities in the entity were issued as a result of the exercise of all rights of a kind mentioned in new paragraph 15(1)(b) or (c).

[Schedule   1, item   3, section   20]

Meaning of ‘subsidiary’ and ‘holding entity’

2.68                An entity (described in the « Bill » as the ‘lower entity’) is a subsidiary of another entity (described in the « Bill » as the ‘higher entity’) if the higher entity is in a position to control more than half the voting power in the lower entity; holds more than half the issued securities in the lower entity; or the lower entity is a subsidiary of an entity that is the higher entity’s subsidiary. The « Bill » provides that certain securities held or powers exercisable by various persons are to be disregarded for the purposes of determining whether a lower entity is a subsidiary of a higher entity.

2.69                An entity (the higher entity) is a holding entity of another entity if the lower entity is a subsidiary of the higher entity. [Schedule 1, item 3, section 21]

Meaning of ‘voting power’ and ‘potential voting power’

2.70                The voting power in an entity refers to the maximum number of votes that might be cast at a general meeting of the entity [Schedule 1, item 3, subsection 22(1)] . The term ‘general meeting’ is defined by new section 4.

2.71                The potential voting power in an entity refers to the voting power in an entity calculated on the basis that the votes that might be cast at a general meeting include each vote that might come into existence in the future because of the exercise of a right, and, if it came into existence, might be cast at a meeting of the entity.

2.72                For the purposes of assessing how much of the potential voting power in an entity a person is in a position to control at a particular time, if a right exists that, if exercised, would result in the person being in a position to control more of the potential voting power in the entity and it cannot be determined at that time whether the right would be exercised, it should be assumed that the right would be exercised at that time.

2.73                If a person is in a position to veto any resolution of the board or a general meeting of the entity, then (except for the purposes of new subsection 47(2)(b) (meaning of notifiable action) and subsection 54(4) (meaning of control)) the person is taken to be in a position to control 20 per cent of the potential voting in the entity. [Schedule 1, item 3, section 22]

Meaning of ‘controls’ the voting power

2.74                A person controls the voting power in an entity if the person controls the power directly or indirectly, including as a result or by means of agreements or practices, regardless of whether the agreements or practices have legal or equitable force or are based on legal or equitable rights. [Schedule 1, item 3, section 23]

Meaning of ‘determines the policy’ of a business of exploiting a mining or production tenement

2.75                Without limiting the meaning of determines the policy , a person determines the policy of a business of exploiting a mining or production tenement if the person determines questions relating to the disposal of an interest in the tenement. [Schedule 1, item 3, section 24]

Meaning of ‘enters’ an agreement

2.76                Without limiting the meaning of the term, the « Bill » provides that a person enters an agreement if the person enters any formal or informal scheme including by creating a trust, entering into a transaction, or acquiring an interest in a security, asset, trust or Australian land. A person is also taken to enter an agreement if the agreement is materially altered or varied. [Schedule 1, item   3, section 25]

2.77                A material alteration or variation would include an alteration or variation that increases the percentage that a person holds or would hold in an entity. A variation to the way that consideration is worked out is not material. [Schedule 1, item 3, Note 2 in section 25]

2.78                ‘Scheme’ is broadly defined by the Act and includes any agreement, understanding, promise or undertaking, express or implied, regardless of whether this is legally enforceable. [Schedule 1, item   3, section   4]

Meaning of ‘sensitive business’

2.79                A business that meets the conditions specified in the regulations made under the Act is a sensitive business . The regulations may prescribe sensitive businesses generally, or different sensitive businesses for different kinds for foreign persons and different conditions for different kinds of sensitive businesses. [Schedule 1, item 3, section 26]

2.80                Businesses that may be prescribed as a sensitive business include if:

•        the business is carried on wholly or partly in the media, telecommunications and transport sectors (including a business relating to infrastructure for those sectors); or

•        the business is wholly or partly:

-       the supply of training or human resources to, the manufacture of « military » goods, equipment or technology for, or the supply of « military » goods, equipment or technology to, the Australian Defence Force or other defence forces;

-       the manufacture or supply of goods, equipment or technology able to be used for a « military » purpose;

-       the development, manufacture or supply of, or the provision of services relating to, encryption and security technologies and communications systems; or

-       the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of nuclear facilities.

Regulations to provide in relation to valuing assets

2.81                Regulations may be made in relation to valuing the assets of an entity, trust or business. [Schedule   1, item 3, section 27]

Acts done by agents

2.82                Any act done or proposed to be done by an agent on behalf of his or her principal is taken to be done or proposed to be done by his or her principal. [Schedule 1, item 3, section 28]

Application of this Act to individuals and entities

2.83                The Act and any regulations made under it apply to all individuals, irrespective of whether they are resident in Australia or Australian citizens; all corporations, whether or not formed or carrying on business in Australia; and all unit trusts, regardless of whether they are Australian unit trusts. [Schedule 1, item   3, section 29]

Extension to external Territories

2.84                The « Bill » and any regulations made under it apply to every external Territory. ‘External Territory’ has the meaning given by section 2B of the Acts Interpretation Act   1901 . [Schedule 1, item 3, section 30]

Extraterritorial application

2.85                The « Bill » and any regulations made under it apply both within and outside Australia. [Schedule 1, item 3, section 31]

Extension to exclusive economic zone and continental shelf

2.86                The « Bill » applies to matters relating to the exercise of Australia’s sovereign rights in the exclusive economic zone or the continental shelf. [Schedule   1, item 3, section 32]

Act binds the Crown

2.87                The Commonwealth, State and Territory Governments are bound by the Act. In line with normal practice, the Crown is not liable to a pecuniary penalty or to be prosecuted for an offence. [Schedule 1, item 3, section 33]

Effect of Act on other laws

2.88                The « Bill » and any regulations made under it are not intended to exclude or limit the operation of a law of a State or Territory that is capable of operating concurrently with it. [Schedule 1, item 3, section 34]

Severability

2.89                The « Bill » provides for continued operation of the Act (or provisions of the Act) in the event of a successful constitutional challenge. It sets out the various constitutional heads of power upon which the Act can draw if its operation is expressly confined to apply to persons under those constitutional powers. This gives the « Bill » the widest possible operation consistent with Commonwealth constitutional legislative power. [Schedule 1, item 3, sections   35 and 36]

Regulations providing for exemptions

2.90                Regulations may be made that provide that this Act, or specified provisions of this Act, do not apply to:

•        acquisitions of the kind or in the circumstances prescribed by the regulations;

•        interests of the kind or in the circumstances prescribed by the regulations;

•        Australian businesses of the kind or in the circumstances prescribed by the regulations; or

•        foreign persons if the kind or in the circumstances prescribed by the regulations.

2.91                In addition, the regulations may provide that:

•        land of a specified kind is not agricultural land; or

•        specified foreign persons who take action in relation to interests in Australian land may disregard the fact that the land is agricultural land for all or specified purposes.

[Schedule 1, item 3, section 37]



Outline of chapter

3.0                    This chapter explains the powers of the Treasurer to make orders and decisions under new Part 3 of the Act in relation to any significant action taken or proposed to be taken.

3.1                    This chapter also explains the circumstances in which a foreign person must notify the Treasurer before taking a notifiable action. The concepts of significant action and notifiable action are defined by new Part 2 of the Act.

Summary of new law

3.2                    The « Bill » enables the Treasurer to make a broad range of orders in relation to a significant action that a person is proposing to take or has already taken. Broadly, a significant action is an action to acquire specified interests in securities, assets or interests in land, or otherwise take action in relation to entities (that is, corporations and units trusts) and businesses, that have a connection to Australia. An action is generally only a significant action if it meets the applicable monetary threshold test and the action results in either a change in control involving a foreign person or the action is taken by a foreign person.

3.3                    If the Treasurer is notified that a person is proposing to take a significant action, the Treasurer may:

•        decide not to object to the action and give the person a no objection notification not imposing conditions;

•        decide not to object to the action provided that one or more conditions are complied with and give the person a no objection notification imposing conditions; or

•        decide that the person taking the action would be contrary to the national interest and make an order prohibiting the proposed significant action.

3.4                    If a significant action has already been taken which is contrary to the national interest, the Treasurer may make an order, known as a disposal order, which is directed at unwinding the action. For example, the Treasurer could order a person to dispose of their shares by a specified time. This « Bill » also allows the Treasurer to impose legally enforceable conditions in such circumstances as an alternative to a disposal order.

3.5                    A foreign person is not obliged to inform the Treasurer that they are proposing to take a significant action unless the action is also a notifiable action (this concept is explained below, but only certain significant actions are also notifiable actions). However, a foreign person may choose to notify the Treasurer before taking a significant action for the certainty offered by a no objection notification. If a foreign person is given a no objection notification in relation to the significant action, and provided the person does not take any action which is not authorised by the Act, the Treasurer is not able to make a disposal order.

3.6                    A foreign person who proposes to enter an agreement to take a notifiable action must notify the Treasurer before entering the agreement. In broad terms, a notifiable action is a proposed action:

•        to acquire a direct interest in an agribusiness;

•        to acquire substantial interests in Australian entities; or

•        to acquire an interest in Australian land.

3.7                    Generally, the action is only notifiable if the entity, business or land meets the threshold test.

3.8                    A foreign person must not enter into the agreement for a specified period (generally 40 days) unless the person is given a no objection notification.

3.9                    Actions to acquire interests in Australian land that are specified in an exemption certificate are generally not notifiable actions. An exemption certificate is a certificate given by the Treasurer that specifies an interest, or an interest of a kind, is not a significant action or notifiable action. Existing examples of exemptions certificates under the Act are certificates for an annual program of acquisitions of Australian urban land (known as, annual program certificates) and the certificate that allows developers to sell new dwellings in a development to foreign persons.

Detailed explanation of new law

Meaning of significant action

3.10               The criteria for determining whether an action is a significant action depend on whether the action is in respect of an entity, a business or Australian land.

Meaning of significant action - entities

3.11               An action in relation to an entity (that is, a corporation or a unit trust) is a significant action if it meets four conditions. These conditions concern:

•        the kind of action;

•        whether the action meets the threshold test;

•        the kind of entity; and

•        except in the case of an agribusiness, whether there has or would be a change in the control of the entity. In the case of an agribusiness, the fourth condition is satisfied if the action in question is taken by a foreign person.

Kinds of action

3.12               The first condition concerns the kind of action. An action satisfies the first condition if it involves:

•        an acquisition of a direct interest in an entity that is an agribusiness. The terms ‘agribusiness’ and ‘direct interest’ will be defined by the regulations;

•        an acquisition of interests in securities in an entity;

•        the issuing of securities in any entity;

•        the entry into an agreement in relation to the affairs of the entity under which one or more senior officers of the entity will be under an obligation to act in accordance with the directions, instructions or wishes of a foreign person who holds a substantial interest in the entity, or an associate of such a person; or

•        the alteration of a constituent document of the entity as a result of which one or more senior officers of the entity will be under an obligation to act in accordance with the directions, instructions or wishes of a foreign person who holds a substantial interest in the entity, or an associate of such a person. ‘Constituent document’ of an entity means any rules or other document constituting or establishing the entity or governing its activities. In the case of a corporation, the corporation’s constitution will be a constituent document. In the case of a unit trust, the trust deed will be a constituent document.

[Schedule 1, item 3, section 4]

Threshold test

3.13               The second condition is that the threshold test is met in relation to the entity. In order for the threshold test to be met, a certain value must be above a threshold prescribed by the regulations. The value tested depends on the action taken - see new section 51, which is discussed in more detail below.

Kinds of entities

3.14               The third condition is that the entity is:

•        in relation to an acquisition of interests in shares or an issue of shares, a corporation that is a relevant entity that carries on an Australian business (a business carried on wholly or partly in Australia in anticipation of profit or gain), either alone or together with one or more other persons or the holding entity of such a corporation. In general terms, a corporation is a ‘relevant entity’ if it is a corporation formed in Australia; a foreign corporation that holds relevant Australian assets (that is, Australian land) or is a holding corporation of one or more Australian corporations; or a holding entity of such a foreign corporation or a unit trust;

•        for any other action in relation to a corporation, a corporation formed within Australia that carries on an Australian business, whether alone or together with one or more other persons or the holding entity (other than a foreign corporation) of such a corporation; or

•        an Australian unit trust or a holding entity of an Australian unit trust. A unit trust is an ‘Australian unit trust’ for the purposes of this Act if:

-       the trustee of the trust holds relevant Australian assets;

-       the trustee of the trust carries on an Australian business;

-       the central management and control of the trust is in Australia;

-       one or more persons who are ordinarily resident in Australia hold more than 50 per cent of the beneficial interests in the income or property of the unit trust; or

-       it is listed for quotation in an official stock exchange in Australia.

Actions results in change of control or, in the case of acquiring a direct interest in an agribusiness, the action is taken by a foreign person

3.15               The last condition, other than in the case of acquiring a direct interest in an Australian agribusiness, is that the action would or has resulted in a change in control of the entity. The term ‘change in control’ has the meaning given by Subdivision C of Division 4 of Part 2, which is discussed below.

3.16               An agribusiness meets the last condition if the action is or is to be taken by a foreign person. [Schedule 1, item 3, section 4; Schedule 1, item 4, section 40]

Meaning of significant action - businesses

3.17               An action in relation to a business is a significant action if it meets three conditions. These conditions concern:

•        the kind of action;

•        whether the action meets the threshold test; and

•        whether the action results in a change in control, or, in the case of an agribusiness, the action is taken by a foreign person.

Kinds of action

3.18               The first condition is that the action is one of the following:

•        an acquisition of a direct interest in an agribusiness. The terms ‘agribusiness’ and ‘direct interest’ will be defined by the regulations;

•        an acquisition of an interest in the assets of an Australian business; or

•        entering into or terminating a significant agreement with an Australian business. The term ‘significant agreement’ with an Australian business is defined to mean an agreement relating to the leasing of, the letting on hire of, or the granting of any other right to « use » assets of the business or the participation by a person in the profits or management of the business.

Threshold test

3.19               The second condition is that the threshold test is met in relation to the Australian business. In order for the threshold test to be met, a certain value must be above a threshold prescribed by the regulations. The value tested depends on the action taken - see new section 51, which is discussed below.

Action results in change of control, or, in case of acquiring a direct interest in an agribusiness, the action is taken by a foreign person

3.20               Other than in the case of acquiring a direct interest in an Australian agribusiness, the third condition is that there would be or has been a change in control of the business. The term ‘change in control’ has the meaning given by Subdivision C of Division 4 of Part 2, which is discussed below.

3.21               In the case of an agribusiness, the third condition is that the action is or is to be taken by a foreign person. [Schedule 1, item 4, section 41]

Action taken in relation to agribusinesses

3.22               New section 42, for the avoidance of doubt, makes it explicit that actions (other than a direct interest in an Australian agribusiness) relating to an Australian entity or Australian business that is an agribusiness that meet the conditions to be a significant action, will still be significant actions where the necessary conditions for the applicable significant action are met. [Schedule 1, item 4, section 42]

Meaning of significant action - land

3.23               The acquisition of an interest in Australian land by a foreign person is a significant action if the threshold test is met in relation to the land. The threshold amount will be prescribed in regulations. [Schedule 1, item 4, section 43]

Meaning of significant action - actions prescribed by the regulations

3.24               The « Bill » permits regulations to be made that provide that a specified action is a significant action for the purposes of this Act [Schedule 1, item 4, section 44] . For example, it is anticipated that regulations will prescribe the following actions to be significant actions:

•        the acquisition by a foreign person of an interest of at least 5 per cent in an entity or business that wholly or partly carries on an Australian media business;

•        the acquisition by a foreign government investor of a direct interest in an Australian entity or Australian business; and

•        the starting an Australian business by a foreign government investor.

Actions that are not significant actions

3.25               The « Bill » carves out several kinds of acquisitions in Australian land that would otherwise be a significant action for the purposes of this Act.

3.26               First, an acquisition is not a significant action if:

•        a foreign person acquires an interest in a new dwelling that will be, is being or has been built on another interest in Australian land;

•        the acquisition was from a person specified in an exemption certificate given under new section 57;

•        the development interest was specified in the certificate;

•        the specified person gave the foreign person a copy of that certificate before the foreign person acquired the interest; and

•        any conditions specified in the certificate were met.

3.27               New dwelling means a dwelling (other than commercial residential premises) that will be, is being, or has been built on residential land and has:

•        either not been previously sold as a dwelling; and

•        has not been previously occupied; or

•        if the dwelling is contained in a development [3] (which, in general terms, means one or more multi storey buildings that are or were under one development approval where the number of independent self-contained dwellings (other than townhouses) that the building or buildings contain or will contain at least the number prescribed by the regulations) and the dwelling was sold by the developer of the development, has not been previously occupied for more than 12 months in total.

[Schedule 1, item 3, section 4]

3.28               The above provides for the existing certificate that allows developers holding a certificate to sell new dwellings in a development to foreign persons. The effect of the certificate is that foreign persons acquiring interests in new dwellings in developments covered by a certificate are exempt from the requirement under the Act to notify and receive a no objection notification prior to proceeding with the purchase.

3.29               Secondly, an acquisition is not an interest in Australian land if a foreign person who makes the acquisition is specified in an exemption certificate given under new sections 58 or 59; the interest is of a kind specified in the certificate; and any conditions specified in the exemption certificate were met. [Schedule 1, item 4, subsection 45(2)]

3.30               New section 58 certificates allow for a program of acquisitions of Australian urban land (this relieves the foreign person of the requirement to notify and seek a no objection notification for each individual acquisition with the period). This reflects an existing longstanding type of certificate known as annual program certificates that are given on a 12 month basis. Where a foreign person is given such a certificate, they are required to comply with the standard requirements that would apply under the Australia’s Foreign Investment Policy (Policy) for the type of property that is to be purchased. For example, for vacant land acquisitions construction must begin within the required timeframe. Such certificates include a requirement to report on acquisitions made and any associated required development of vacant land purchased.

3.31               The new section 59 certificate for established dwellings allows a foreign person to bid at multiple auctions over a specified period (such as six months) while only paying one application fee. In the absence of such a certificate, foreign persons bidding at auctions would need prior foreign investment approval because bids at auction normally have to be unconditional. Only one property will be allowed to be purchased under each certificate and it will be a condition of the certificate that the foreign person notifies the Australian Taxation Office (ATO) once they have purchased a property. The highest bid that the foreign person granted the certificate can make at an auction will be limited by the application fee that they have paid (as a tiered fee structure based on the consideration of the property to be purchased is proposed for acquisitions of interests in residential land).

Meaning of notifiable action

Meaning of notifiable action - general

3.32                An action is a notifiable action if four conditions are met. These conditions concern:

•        the kind of action;

•        whether the action meets the threshold test;

•        the kind of entity; and

•        the action is or is to be taken by a foreign person.

Kinds of action

3.33               The first condition is that the action is any of the following:

•        the acquisition of a direct interest in an agribusiness;

•        the acquisition of a substantial interest (that is, an interest of at least 20 per cent in the entity, or, in the case of a trust, a beneficial interest in at least 20 per cent of the income or property of the trust) in a corporation formed in Australia or an Australian unit trust; or

•        the acquisition of an interest in Australian land.

Thresholds

3.34               The second condition is that the threshold test is met in relation to the entity, business or land. In order for the threshold test to be met, a certain value must be above a threshold prescribed by the regulations. The value tested depends on the action taken - see new sections 51 to 53, which are discussed below.

Kinds of entities covered

3.35               The third condition is that the action in relation to an entity is:

•        an Australian corporation that carries on an Australian business, whether alone or together with one or more other persons or an Australian entity that is the holding entity of such a corporation; or

•        an Australian unit trust or an Australian corporation that is the holding entity of an Australian unit trust.

Action taken by a foreign person

3.36               An action meets the fourth condition if the action is or is to be taken by a foreign person. [Schedule 1, item 4, section 47]

Actions prescribed by the regulations to be a notifiable action

3.37               The regulations may prescribe that a specified action is a notifiable action. [Schedule 1, item 4, section 48]

Actions that are not notifiable actions

3.38               The « Bill » carves out several kinds of acquisitions in Australian land that would otherwise be a notifiable action for the purposes of this Act.

3.39               First, the acquisition of an interest in Australian land by a foreign person is not a notifiable action if the action would not be a significant action under new section 45.

3.40               Secondly, the acquisition of an interest in a new dwelling by a foreign person is not a notifiable action if:

•        the interest (referred to in the « Bill » as the development interest) was acquired from a person who is specified in an exemption certificate given under new section 57;

•        the development interest was specified in the certificate and the foreign person was given a copy of the certificate before the foreign person acquired the development interest; and

•        one or more conditions specified in the certificate have not been met but the foreign person is not, at the time of the action, aware that the conditions have not been met.

3.41               This ensures that foreign persons who acquire interests in new dwellings (off-the-plan) that are part of a development from a developer do not have a notifiable action, subject to the above conditions being met. This reflects the current practice with off-the-plan developer certificates, where a developer has pre-approval to sell the new dwellings to foreign persons and the foreign person purchasing from the developer in such situations does not need to individually apply for approval (that is, the purchase by the foreign person is treated as exempt based on the certificate).

3.42               The regulations may also prescribe that other actions are not a notifiable action. [Schedule 1, item 4, section 49]

Threshold test and change in control

The threshold test for entities and businesses

3.43               The threshold value to be tested depends on the kind of action in question. The following table shows the threshold value for each kind of significant action in relation to an entity or business. [Schedule 1, item 4, section 51]

Significant action

Value

Acquiring a direct interest in an Australian entity or Australian business that is an agribusiness.

The sum of the value of the consideration for the acquisition and the value of the other interests held by the person, alone or together with one or more associates, in the entity or the business.

Acquiring interests in securities in an entity, or issuing securities in an entity.

The total asset value for the entity or the total issues securities value for the entity (whichever is higher).

Entering into an agreement, or altering a constituent document.

The total asset value for the entity.

Acquiring interests in the assets of an Australian business.

The value of the consideration for the acquisition.

Entering into or terminating a significant agreement with an Australian business.

The value of the total assets of the business.

The threshold test for land

3.44               The threshold test for land distinguishes between three kinds of land - land of a kind that is prescribed by the regulations; agricultural land; and land that is neither prescribed nor agricultural land.

3.45               There will be no threshold for land that is prescribed for the purposes of new subsection 52(1). It is anticipated that residential land, vacant commercial land, mining or production tenements, and land acquired by a foreign government investor will be prescribed for the purpose of this provision.

3.46               The threshold test for agricultural land is met if the total value of all interests in agricultural land held by the foreign person and the consideration for the acquisition of the interest in the land is more than value prescribed by the regulation for the purposes of new paragraph 52(2)(b). It is anticipated that the prescribed value will be $15 million.

3.47               The threshold test for land is met in relation to land that has neither been prescribed for the purposes of new subsection 52(1) nor is agricultural land if the value of the interest in the land is more than the value prescribed for the purposes of new paragraph 52(3)(b). [Schedule 1, item 4, section 52]

The threshold test in relation to actions of more than one kind

3.48               If an action in relation to an entity, business or land is covered by an agreement, the action is taken to be a significant action if the threshold is met in relation to the entity, business or land even if the threshold test is not met for another action covered by the agreement.

Example 3.1  

A foreign person has entered an agreement that includes a share acquisition and a land acquisition from the same vendor. While the share acquisition is not a significant action due to it not meeting the conditions to be a significant action - entities, the land acquisition does meet the conditions to be a significant action - land.

3.49               If a single action is of more than one kind, the threshold test is met in relation to the single action if the test is met in relation to any one of the kinds of action or land.

Example 3.2  

Aus Co is a foreign person due to Hong Kong Co, a foreign corporation, holding 25 per cent of the issued securities in Aus Co. Aus Co is neither a foreign government investor nor an investor from an agreement country.

Aus Co is proposing to acquire 25 per cent of the issued shares in Land Estate Co, an unlisted Australian incorporated corporation. The consideration for the 25 per cent interest, which will be acquired from a number of existing Aus Co shareholders, will be $60 million.

Aus Co intends to complete the acquisition in December and in September gives the Treasurer a notice in writing using the manner approved. Aus Co also pays the required fee on the same day so the notice is taken to have been given.

The target entity, Land Estate Co, which is not a holding entity, is an Australian corporation that carries on a business in Australia, but it is not an agribusiness. It released its latest audited financial accounts in August. The balance sheet shows a reasonable value for the interests in land held by Land Estate Co. Such interests exceed 50 per cent of the value of its total assets, thus Land Estate Co is an Australian Land Corporation. Land Estate Co does not carry on an agribusiness.

Upon receipt, the proposal is assessed against significant action - entities and significant action - land.

The first and third conditions for a significant action - entities are met as Aus Co proposes to acquire a substantial interest in an Australian corporation that carries on an Australian business. However, as the consideration for the shares values Land Estate Co at $240 million (based on the $60 million consideration for the proposed 25 per cent interest), which is below the 2015 indexed monetary threshold of $252 million, the action is not a significant action - entities because the second condition is not met. As the second condition has not been met, the fourth condition has also not been considered.

However, the two conditions for significant action - land (that is, the action is for a foreign person to acquire an interest in Australian land and the threshold test is met in relation to the land) are satisfied and thus the proposal is a significant action - land.

The assessment of the significant action - land does not raise any national interest concerns so the Treasurer decides within the decision period that the Commonwealth has no objection to the action and notifies Aus Co in writing (the no objection notification) of the decision before the « end » of the 10 days after the decision is made.

Agribusinesses that do not meet the threshold

3.50               If an entity or business that is not an agribusiness does not meet the threshold test in relation to the entity or business the Act applies to the entity or business as if it were not an agribusiness. [Schedule 1, item 4, section 53]

Change in control

3.51               For the purposes of determining whether an action is a significant action, the Treasurer may only be satisfied that there is a change in control of an entity if the Treasurer is satisfied that the action would have, or has had, any of the following results:

•        one or more foreign persons would begin, or have begun, to control the entity or business (whether alone or together with any associate of any of those persons); or

•        if one or more foreign persons already control the entity or business:

-       another foreign person would become, or has become, a person who controls the entity or business; or

-       a person would cease, or has ceased, to be a person who controls the entity or business.

3.52               A person is considered to control an entity or business if:

•        in relation to the acquisition of interests in securities in an entity or an issue of securities in an entity:

-       the persons holds a substantial interest in the entity;

-       or the person is one of two or more persons who hold an aggregate substantial interest in the entity; or

•        the person (whether alone or together with one or more associates) is in a position to determine the policy of an entity or business in relation to any matter.

3.53               However, a person holding a substantial interest in an entity or an aggregate substantial interest in the entity together with other persons is not considered to control the entity if the Treasurer is satisfied that, having regard to all the circumstances, the person together with any one or more associates of that person is not in a position to determine the policy of the entity.

3.54               If the Treasurer is satisfied that one or more foreign persons together with one or more associates control an entity or business, then, in relation to an action taken relating to the entity or business, a reference to a foreign person is taken, for the purposes of new Part 3, to include a reference to those associates, even if those associates are not foreign persons. [Schedule 1, item 4, section 54]

Regulations

3.55               Without limiting the regulations that could be made for new Part 2 of the Act, the « Bill » provides that regulations may be made that prescribe values or amounts of nil, different values or amounts for different kinds of entities, business or land, different values or amounts for different kinds of foreign persons, and different values or amounts for sensitive sectors generally or different sectors for different foreign persons.

3.56               The « Bill » also expressly provides that the Act does not limit subsection 33(3A) of the Acts Interpretation Act 1901 . In general terms, subsection 33(3A) of the Acts Interpretation Act provides that where an Act confers a power to make an instrument of a legislative or administrative character with respect to particular matters, the power is to be interpreted as including a power to make such an instrument with respect to only some of those matters or with respect to a particular class or particular classes of those matters and to make different provision with respect to different matters or different classes of matters. [Schedule 1, item 4, section 55]

Exemption certificates

Exemption certificates for new dwellings

3.57               A person may apply for an exemption certificate if the person or any other person proposes to acquire or has acquired an interest in Australian land and the person or other person proposes to dispose to a foreign person new dwellings that will be, are being or have been constructed on that interest. The exemption is limited to new dwellings because it is the Commonwealth’s policy that foreign investment in residential land should increase Australia’s housing stock.

3.58               The term ‘new dwelling’ is defined to mean:

•        a residential dwelling on residential land that has not been previously sold and has either not been previously occupied; or

•        if the dwelling is part of a development and the person who sold the dwelling is the developer of the development, the dwelling has not been previously occupied in total for more than 12 months.

3.59               The Treasurer may give an exemption certificate if the Treasurer is satisfied that the disposal of new dwellings to foreign persons is not contrary to the national interest.

3.60               If the Treasurer gives such a certificate it must state the person to whom the certificate relates and the interest to which the certificate applies. [Schedule 1, item 3, section 4; Schedule 1, item 4, section 57]

3.61               This reflects the existing certificate that allows developers holding a certificate to sell new dwellings in a development to foreign persons. The effect of the certificate is that foreign persons acquiring interests in new dwellings in developments covered by a certificate are exempt from the requirement under the Act to notify and receive a no objection notification prior to proceeding with the purchase.

Exemption certificates for foreign persons

3.62               A foreign person who proposes to acquire one or more kinds of interest in Australian land may apply for an exemption certificate. This provision may be used to reduce the regulatory burden on developers who would otherwise have to make separate applications in relation to each residential and commercial development they propose to make within a 12 month period. Provided the Treasurer is satisfied that the proposed developments are not contrary to the national interest the Treasurer could grant a single certificate. This reflects an existing longstanding type of certificate known as annual program certificates.

3.63               Where a foreign person is given such a certificate, they are required to comply with the standard requirements that would apply under the Policy for the type of property that is to be purchased. Such certificates are currently issued under paragraph 3(h) of the Regulations.

3.64               If the Treasurer grants a certificate it must specify the person to whom the certificate relates and the kinds of interests in Australian land to which the certificate relates. [Schedule 1, item 4, section 58]

Exemption certificates for established dwellings

3.65               A foreign person may apply for an exemption certificate if the foreign person or any other foreign person proposes to acquire an interest in an established dwelling. ‘Established dwelling’ means any dwelling that is not a new dwelling. [Schedule 1, item 3, section 4]

3.66               The Treasurer may give such a certificate if the Treasurer is satisfied that an acquisition of that kind by that foreign person is not contrary to the national interest. If the Treasurer gives such a certificate the certificate must specify the person to whom the certificate is to apply and the kinds of interests in Australian land to which the certificate relates. [Schedule 1, item 4, section 59]

3.67               This certificate allows a foreign person to bid at multiple auctions over a specified period (such as six months) while only paying one application fee. In the absence of such a certificate, foreign persons bidding at auctions would need a no objection notification for each auction that they intend on bidding at because bids at auction normally have to be unconditional, whereas under the Act, it is an offence to fail to notify before an acquisition becomes unconditional.

3.68               Only one property will be allowed to be purchased under each certificate and it will be a condition of the certificate that the foreign person reports back to the ATO once they have purchased a property. The highest bid that the foreign person granted the certificate can make at an auction will be limited by the application fee that they have paid (as a tiered fee structure based on the consideration of the property to be purchased is proposed for acquisitions of interests in residential land).

Other matters specified by an exemption certificate

3.69               An exemption certificate may specify one or more conditions; a period during which the certificate is in force; and any other matter. An exemption certificate may deal with more than one interest or kind of interest in Australia. [Schedule 1, item 4, section 60]

Time limit for making decisions on exemption certificates

3.70               If a person applies for an exemption certificate the Treasurer must make a decision about whether to grant the application before the « end » of the period prescribed in the regulations or, if the person requests the Treasurer to extend the period, the period as extended.

3.71               If the Treasurer grants the application the exemption certificate must be given to the person before the « end » of 10 days after the decision is made.

3.72               If the Treasurer does not make a decision about an application for an exemption certificate within the period referred to above the Treasurer is taken to have granted the application without conditions. [Schedule 1, item 4, section 61]

Variation or revocation of exemption certificates

3.73               The Treasurer may vary or revoke an exemption certificate if the Treasurer is satisfied that the variation or revocation is not contrary to the national interest. The Treasurer may exercise this power on the Treasurer’s own initiative or at the request of the affected person. [Schedule 1, item 4, section 62]

Regulations may provide for additional kinds of exemption certificates

3.74               Regulations may be made which provide for additional kinds of exemption certificates. [Schedule 1, item 4, section 63]

Entities whose securities are stapled and entities operating on a unified basis

3.75               In general terms, an entity whose securities are stapled to the securities of another entity and an entity that operates on a unified basis with another entity are to be treated as entities of the same kind for the purposes of the « Bill » in certain circumstances. As a result, an action taken in relation to those entities may be a significant action or a notifiable action for the purposes of this Act.

3.76               Two entities are taken to be of the same kind if:

•        the securities in an entity are stapled to the securities in one or more other entities; or

•        an entity has entered an agreement with one or more other entities resulting in the entities being under a legal obligation to operate on a unified basis (for example, entities in a dual listed company arrangement); and

•        a person takes an action in relation to an entity whose securities are stapled or any entity that is under a legal obligation to operate on a unified basis (which is referred to in the « Bill » as the target); and

•        the target is not an Australian entity, an entity carrying on an Australian business or the holding entity of such an entity; and

•        the securities of the target are stapled to an entity that is an Australian entity, an entity carrying on an Australian business or the holding entity of such an entity or the target is under a legal obligation to operate on a unified basis with an Australian entity, an entity carrying on an Australian business or the holding entity of such an entity (the related entity).

[Schedule   1, item   4, section   65]

Powers of the Treasurer

Orders prohibiting proposed significant actions

3.77               The Treasurer may make an order which prohibits a significant action which is proposed to be taken if the Treasurer is satisfied that taking the significant action would be contrary to the national interest. The kind of significant action proposed determines the conduct that the Treasurer can prohibit.

Example 3.3  

If a foreign person is proposing to acquire interests in shares in a corporation and it is a significant action - entities which would be contrary to the national interest, the Treasurer could make an order prohibiting the whole or a part of the proposed acquisition.

3.78               If the Treasurer makes an order prohibiting a proposed significant action the Treasurer may also make certain additional orders. For example, if a foreign person proposes to acquire an interest in Australian land, the Treasurer may make an order directing a specified foreign person not to acquire any interests in the land or other thing concerned, or to acquire any such interests only to a specified extent. [Schedule 1, item 4, section 67]

3.79               A person may commit an offence or contravene a civil penalty provision if they engage in conduct that contravenes an order which prohibits a proposed significant action. [Schedule 1, item 4, sections   86 and 93]

Interim orders

3.80               It may sometimes not be possible for the Treasurer to decide whether to make an order prohibiting a proposed significant action within the statutory time limit (which is 30   days after the day that a person notifies the Treasurer that the person is proposing to take a significant action unless the person agrees otherwise   -   see new section   77). To ensure there is adequate time the Treasurer may make an order of the kind the Treasurer could make under new section   67 of the Act, the Treasurer may make an interim order. An interim order cannot be made for a period of more than 90   days and the additional period specified in the order commences once the order is published in the Commonwealth of Australia Gazette (Gazette) [Schedule   1, item   4, section   68] .This reflects the existing interim order practice under section   22 of the existing Act. An interim order may only be made once in relation to a significant action.

Disposal orders

3.81               If the Treasurer is satisfied that a significant action has been taken and the result is contrary to the national interest, the Treasurer may make an order that requires the person to dispose of the interest. The precise scope of the Treasurer’s power to make such an order depends on the kind of significant action taken. For example, if the person acquired shares in a corporation, the Treasurer may make an order directing that the person who acquired the interest in the shares to dispose of those interests within a specified period to any one or more persons approved in writing by the Treasurer. [Schedule   1, item   4, section   69]

3.82               A person may commit an offence if they fail to comply with a disposal order [Schedule   1, item   4, section   86] . The Treasurer could also apply for an order from a court which requires the person to comply with the disposal order [Schedule   1, item   4, section   132] .

3.83               This reflects existing practice under the Act.

Limitation on making disposal orders

3.84               The Treasurer is generally not permitted to make a disposal order in relation to an action that is specified in a no objection notification imposing conditions or a no objection notification unless:

•        the person is convicted of the offence of engaging in conduct that contravenes a condition of a no objection notification imposing conditions (see new section   87) or an order is made under section   19B of the Crimes Act 1914 (which allows a court to discharge a person without proceeding to conviction even though the court was satisfied that the charge was proved) in respect of such an offence; or

•        a civil penalty order is made against the person under the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act) in relation to a contravention of new sections   93 (contravening the conditions in a no objection notification), 96 (contravening conditions in a no objection notification relating to residential land) or 97 (contravening the condition in a no objection notification that the person notify the Treasurer when the person acquires or disposes of an interest in residential land) relating to a condition included in the notification.

[Schedule   1, item   4, section   70]

Variation and revocation of orders

3.85               The Treasurer may vary or revoke an order prohibiting a proposed significant action, an interim order or a disposal order at any time if the Treasurer is satisfied that the variation or revocation is not contrary to the national interest. In the case of a variation, the person must either consent to the variation or the Treasurer must be satisfied that the person will not be disadvantaged by the variation. [Schedule   1, item   4, section   71]

Publication and commencement of orders

3.86               Any prohibition order, interim order, disposal order or variation or revocation of such an order must be in writing, signed by the Treasurer, and published in the Gazette within 10   days after the order is made.

3.87               An order generally commences on the day the order is published except in the case of an additional order or a disposal order, in which case the order commences on the day specified in the order, which must be at least 30   days after the order is published in the Gazette. [Schedule   1, item   4, section   72]

3.88               This reflects existing practice under the Act.

Actions of more than one kind

3.89               If a single action is covered by more than one provision, the Treasurer may make any of the orders under new Subdivision   A of Division   2 that he or she could make in relation to the single action. For example, if a notifiable action was both a significant action  -  entities and a significant action - land, the Treasurer may make orders that can be made in either case. [Schedule   1, item   4, section   73]

No objection notification imposing conditions

3.90               The Treasurer may decide that the Commonwealth has no   objection to a proposed significant action if one or more conditions are imposed, being a condition or conditions which the Treasurer is satisfied is necessary to ensure the action, if taken, will not be contrary to the national interest.

3.91               The Treasurer may also decide that the Commonwealth has no   objection to a significant action that has been taken if one or more conditions are imposed, being a condition or conditions that the Treasurer is satisfied are necessary to ensure that the action is not contrary to the national interest.

3.92               A no   objection notification that is subject to conditions must be given no later than the « end » of 10   days after the decision is made.

3.93               The Treasurer may revoke a condition at any time if the Treasurer is satisfied that to do so is not contrary to the national interest. The Treasurer may also vary a notification at any time by imposing a new condition or varying an existing condition if the Treasurer is satisfied that to do so is not contrary to the national interest and the person either consents to the new condition or the variation, or the Treasurer is satisfied that the new condition or variation does not disadvantage the person. The Treasurer may decide to vary a notification on the Treasurer’s own initiative or in response to a written application made by the person.

3.94               If the Treasurer gives a person a no objection notification in relation to more than one significant action and the Treasurer is satisfied that the actions would result in a change in control of the entity or business, but not all the actions are taken, the person may give the Treasurer a later notice relating to a later action that is proposed to be taken in relation to the entity or business. If the person does give the Treasurer a later notice the Treasurer may determine that there has been a change in control of the entity or business as a result of the later action. [Schedule   1, item   4, section   74]

Example 3.4  

The foreign person Singapore   Co (who is not a foreign government investor) receives a no objection notification imposing conditions in relation to its proposed significant action - entities to acquire 60   per cent of the Australian corporation, Parts   Co. In this case, the action would have to result in a change in control to be a significant action. All conditions for it being a significant action were met and the Treasurer considered that significant action would be contrary to the national interest if conditions were not imposed. Thus, Singapore   Co received a no   objection notification imposing conditions.

Subsequently, Singapore   Co did not fully implement the proposed significant action. It only acquired a 25   per cent interest in the shares of Parts   Co.

Two   years after the original no objection notification imposing conditions, Singapore   Co gives another notice of notifiable action in relation to Parts   Co as it proposed to make a full takeover. At the time of its notice, Singapore   Co has no nominees on the board of Parts   Co (whereas under its earlier proposal it had indicated that it would seek a majority on the Board once it acquired a simple majority stake of greater than 50 per cent of the shares of Parts Co). There are some other large shareholders in Parts   Co (their stakes had been expected to significantly decrease as Singapore   Co moved to 60   per   cent).

In light of the circumstances that have eventuated as Singapore   Co did not fully implement its earlier significant action, the Treasurer is able to consider if the latest notifiable action would meet the conditions to be a significant action, including the requirement for the action to result in a change in control.

The Treasurer is satisfied that the notifiable action is a significant action and that the action would be contrary to the national interest if conditions were not imposed. Thus, Singapore   Co received a no   objection notification imposing conditions.

3.95               If a person who is given a no objection notification imposing conditions in relation to significant action engages in conduct that contravenes a condition in a no objection notification imposing conditions the person may commit an offence or be liable to a civil penalty. [Schedule   1, item   4, section s   87 and 93]

No objection notification not imposing conditions

3.96               If the Treasurer receives a notice that a person proposes to take a significant action and the Treasurer is satisfied that the proposed action would be a significant action within the meaning of the Act, the Treasurer may decide that the Commonwealth has no objection to the action. The Treasurer must then give a no objection notification of the decision to the person, which must be given before the « end » of 10   days after the decision is made.

3.97               A no objection notification in relation to an action taken in relation to an entity or business does not prevent the Treasurer from determining later whether there has been a change in control of the entity or business. [Schedule   1, item   4, section   75]

Content of notification

3.98               A no objection notification must specify the one or more significant actions to which the notification relates; the one or more foreign persons to which the notification relates; and a requirement that the significant actions to which the notification relates be taken before the « end » of the specified period.

3.99               A no objection notification may identify a foreign person by specifying a foreign person that is not yet incorporated or a trustee of a trust that is not yet established and specifying the way in which the foreign person is to be incorporated or the trust is to be established. This reflects that depending on the nature of what is to be acquired, business practice is often to establish a special purpose vehicle for the acquisition.

Example 3.5  

A foreign person is participating in a tender to purchase a large shopping centre. The shopping centre seller has made it a requirement that all bids are unconditional, so to participate in the tender the foreign person needs to give a notice of notifiable action to avoid otherwise committing an offence under the Act.

As the foreign person does not know if it will be successful in the tender, it does not want to bear the cost of incorporating a new wholly owned subsidiary to make the acquisition prior to having the Treasurer consider the significant action and knowing the outcome of the tender.

The Treasurer being able to include a yet to be incorporated subsidiary in the no objection notification caters to the business reality. Should the Treasurer consider the place of incorporation relevant to if the acquisition could be contrary to the national interest, the Treasurer is able to limit this to a particular jurisdiction such as Australia.

3.100           It is envisaged that if a no objection notification identified a foreign person that is not yet incorporated, the notification will specify that the corporation must be a wholly owned subsidiary of the person who applied for the no objection notification. The notification may also limit where the subsidiary can be incorporated or the trust may be established. Moreover, if the foreign person is ultimately not incorporated or the trust is not established, in the way specified in the notification, the notification will be taken not to specify the foreign person. [Schedule   1, item   4, section   76]

Example 3.6  

The no objection notification specified a foreign person that was yet to be incorporated and that the foreign person was to be incorporated in Australia (consistent with what was requested in the notice given of a notifiable action). However, the significant action was taken by Foreign   Co, a foreign person that was neither specified in the no objection notification, nor newly incorporated in Australia.

In this case, Foreign   Co who took the significant action does not get the benefit of the no   objection notification. As the significant action was also a notifiable action, Foreign   Co prima facie has failed to notify a notifiable action and may have committed an offence or exposed itself to civil penalties. The Treasurer’s powers in relation to the significant action taken would also likely be available should the Treasurer consider the significant action taken to have been contrary to the national interest.

Time limit on making orders and decisions

3.101           If a person notifies the Treasurer that a significant action is proposed to be taken the Treasurer can only make a prohibition order or give a no   objection notification imposing conditions during the ‘decision period’ provided the person has not taken the action by the « end » of the decision period.

3.102           The decision period is usually 30   days after the day the Treasurer was notified that a significant action is proposed to be taken, unless, before the « end » of that period, the person requests in writing that the Treasurer extend the period. However, if a person is given a notice under new section   133 (which requires the person to give information or produce documents), the decision period does not include any day in the period beginning on the day the notice is given and ending on the day the person gives the information or produces the document in accordance with the notice.

3.103           If the Treasurer makes an interim order in relation to the significant action, the Treasurer is not able to make a prohibition order or a disposal order, or give a no objection notification (imposing or not imposing conditions) in relation to the action if, by the time the interim order ends, the person has not taken the action by the « end » of the period. [Schedule   1, item   4, section   77]

Anti -avoidance

3.104           The Treasurer may exercise the anti-avoidance powers in new subsection   78(2) (anti-avoidance powers) if:

•        one or more persons enter into, begin to carry out, or carry out a scheme (a term which is broadly defined by new section 4);

•        the Treasurer is satisfied that any of the persons who entered into, began to carry out or carried out all or any part of the scheme did so for the sole or dominant purpose of avoiding the application of any provision in this Act; and

•        all or part of scheme has achieved, or would have achieved were it not for the anti-avoidance powers, the purpose of the scheme.

3.105           This provision establishes an objective test, which means that the Treasurer may infer the purpose of the participant or participants from their conduct.

3.106           If the pre-conditions for the exercise of the anti-avoidance powers are satisfied, the Treasurer may make any order or decision under new Division   2 of Part   3 of the Act that the Treasurer would have been able to make if all or part of the scheme had not achieved that purpose. However, the Treasurer cannot make an order prohibiting a person from doing anything the person has already done before the order is made.

3.107           This provision substantially re-enacts section   38A of the existing Act. [Schedule   1, item   4, section   78]

Persons involved in avoidance taken to be associates

3.108           New section   79 allows the Treasurer to declare persons involved in avoidance to be taken to be associates if the Treasurer has made an order under section   78 (anti-avoidance) in relation to more than one person and is satisfied that not making an order under the subsection   79(2) is contrary to the national interest. Such an order may take some or all of such persons to be associates of each other for the purposes of this Act, or for specified purposes. The order must specify the duration that it is in force and has effect according to its terms. To assist the reader the « Bill » explicitly provides that an order made under this provision is not a legislative instrument. Such an order would have an administrative, and not a legislative, character. [Schedule   1, item   4, section   79]

Compulsory notice of notifiable actions and limitation on taking significant actions after notice given

3.109           A foreign person who proposes to enter an agreement to take a notifiable action must give notice to the Treasurer before entering the agreement [Schedule   1, item   4, section   81] . A foreign person who gives a notice to the Treasurer stating that a significant action (including a significant action that is a notifiable action) is proposed to be taken must not take that action until the earliest of the following:

•        10   days after the ‘decision period’ (that is, 30   days after the day the Treasurer receives a notice from the person about the proposed significant action which is a notifiable action unless the person requests in writing that the Treasurer extends the period);

•        if an interim order is made   -   the day specified in the order; and

•        the day a no objection notification is given to the person. [Schedule 1, item 4, section 82]

Reviewability of decisions

3.110           The Act does not currently provide for any decision to be reviewed on its merits and all decisions are excluded from the operation of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) by Schedule 1 to that Act. However, judicial review is available under section 39B of the Judiciary Act 1903 .

3.111           Like the existing Act, the « Bill » does not provide for merits review of any decision and decisions remain excluded from review under the ADJR Act, although judicial review remains available under the Judiciary Act.

3.112           The « Bill » does not provide for the review of decisions on their merits because the decisions under the Act involve complex questions of government policy that can have broad ranging implications for persons other than those immediately affected by the decision. For example, when making a decision under the Act it may be proper for the Treasurer to take into account a broad range of factors, including national security, competition, Australian Government policies (including tax), impacts on the economy and the community, and character of the foreign investor. It is therefore not appropriate for decisions that have such a high political content to be subject to merits review. The provision of merits review might also result in applicants being less willing to provide sensitive information which is relevant to the decision if they believe there is a risk that such information may be disclosed during such proceedings.

 



Outline of chapter

4.0                    To promote compliance with the obligations imposed by the legislation a number of offences and civil penalty provisions are included in new Part 5 of the Act.

Summary of new law

4.1                    The « Bill » ensures that regulatory action can be taken in response to an alleged contravention which is commensurate with the seriousness of the alleged breach. To this « end » , the « Bill » provides for the imposition of criminal and civil penalties, as well as the issuing of infringement notices for less serious offences.

4.2                    A person may commit an offence or be liable to a civil penalty if the person:

•        fails to notify the Treasurer before taking a notifiable action;

•        gives a notice to the Treasurer stating that a significant action (including a significant action that is a notifiable action) is proposed to be taken and takes the action before the « end » of the applicable time limit;

•        contravenes an order made by the Treasurer which prohibits a proposed significant action, is related to a prohibition order, is an interim order or is a disposal order; or

•        contravenes a condition in a no objection notification imposing conditions or an exemption certificate.

4.3                    A foreign person who fails to comply with the obligations imposed by this Act in relation to residential land may also be liable to a civil penalty.

4.4                    Each civil penalty provision in this Act is enforceable under Part 4 of the Regulatory Powers (Standard Provisions) Act   2014 (Regulatory Powers Act).

4.5                    An infringement officer may issue an infringement notice if the infringement officer believes on reasonable grounds that the person contravened a civil penalty provision relating to land. The framework for the « use » of infringement notices created by the Regulatory Powers Act applies to infringement notices given for suspected contraventions of this Act.

Comparison of key features of new law and current law

New law

Current law

The maximum penalty for an individual who commits any of the most serious offences in the Act is imprisonment for three years, a fine equivalent to 750 penalty units, or both. If a body corporate commits any of these offences the maximum penalty is 3,750   penalty units.

The maximum penalty for an individual who commits any of the most serious offences under the Act is a fine not exceeding 500 penalty units, or imprisonment for two years, or both. The maximum penalty for a body corporate who commits any of the most serious offences under the Act is a fine not exceeding 2,500 penalty units.

Creates a number of civil penalty provisions (Part 5, Division 3 of the « Bill » ). The level of civil penalties reflects the seriousness of the contraventions and provides clear and strong disincentives for non-compliance.

No equivalent provisions.

Each civil penalty provision is enforceable under Part 4 of the Regulatory Powers Act (new section 99).

No equivalent provision.

An infringement notice may be issued by an infringement officer if the officer believes on reasonable grounds that the person has contravened a civil penalty provision relating to land. The framework for the « use » of infringement notices in Part 5 of the Regulatory Powers Act applies to the issuing of infringement notices (new section 100).

No equivalent provision.

A charge on land is created in specified circumstances to secure the payment of a civil penalty (new Part 5, Division 4, Subdivision C).

No equivalent provisions.

Detailed explanation of new law

Offences and civil penalties

Failing to give notice

4.6                    A foreign person may commit an offence or contravene a civil penalty provision if the person takes a notifiable action without first notifying the Treasurer. If a person takes an action by entering an agreement, the agreement is entered into when the agreement becomes binding. [Schedule 1, item 4, sections 84, 91 and 94]

4.7                    The maximum penalty for an individual who commits this offence is imprisonment for three years, a fine equivalent to 750 penalty units [4] (currently $135,000), or both [Schedule   1, item   4, section   84] . If a body corporate is found guilty of this offence subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine equivalent to 3,750 penalty units (currently $675,000). [5]

4.8                    For actions which do not relate to residential land, if the relevant court is satisfied that an individual has contravened the civil penalty provision, it could order the person to pay a pecuniary penalty equivalent to 250 penalty units (currently $45,000). By virtue of paragraph 82(5)(a) of the Regulatory Powers Act the maximum pecuniary penalty that could be imposed on a body corporate that contravenes the provision is 1,250 penalty units (currently $225,000). [Schedule 1, item 4, section 90 and 91]

4.9                    For actions which relate to residential land there are additional civil penalties which are considered below.

Entering agreements before « end » of time period

4.10                If a foreign person gives a notice to the Treasurer stating that they propose to take a significant action (including a significant action that is a notifiable action) and the action is taken before the applicable day specified in new section 82, the person may commit an offence or be liable to a civil penalty. If a person takes an action by entering an agreement, and if a provision in an agreement does not become binding on a person until one or more conditions are met, the person is taken to have entered into the agreement only when the provisions become binding.

4.11                If an individual commits this offence the maximum penalty is imprisonment for three years, a fine equivalent to 750 penalty units (currently $135,000), or both. If a body corporate is found guilty of this offence subsection 4B(3) of the Crimes Act allows a court to impose a fine equivalent to 3,750 penalty units (currently $675,000). [Schedule 1, item 4, section 85]

4.12                For actions which do not relate to residential land, if a civil penalty order is sought and the relevant court is satisfied that an individual has contravened the provision the court could order the person to pay a pecuniary penalty equivalent to 250 penalty units (currently $45,000). By virtue of paragraph 82(5)(a) of the Regulatory Powers Act, the maximum pecuniary penalty that could be imposed on a body corporate who contravenes this provision is 1,250 penalty units (currently $225,000). [Schedule   1, item   4, sections 90 and 92]

4.13                For actions which relate to residential land there are additional civil penalties which are considered below.

Contravening orders under Part 3

4.14                A person may commit an offence or contravene a civil penalty provision if the person engages in conduct that contravenes an order made by the Treasurer under new Part 3.

4.15                If an individual commits this offence the maximum penalty is imprisonment for three years, a fine equivalent to 750 penalty units (currently $135,000), or both. If a body corporate is found guilty of this offence subsection 4B(3) of the Crimes Act allows a court to impose a fine equivalent to 3,750 penalty units (currently $675,000). [Schedule 1, item 4, section 86]

4.16                If the relevant court is satisfied that an individual has contravened the civil penalty provision it could order the person to pay a pecuniary penalty equivalent to 250 penalty units (currently $45,000). By virtue of paragraph 82(5)(a) of the Regulatory Powers Act the maximum pecuniary penalty that could be imposed on a body corporate that contravenes the provision is 1,250 penalty units (currently $225,000). [Schedule 1, item 4, section 89]

Contravening conditions

4.17                A person may commit an offence or contravene a civil penalty provision if the person engages in conduct that is contrary to a condition included in a no objection notification imposing conditions or an exemption certificate.

4.18                The maximum penalty that may be imposed on an individual who commits this offence is imprisonment for three years, a fine equivalent to 750 penalty units, or both. If a body corporate is found guilty of this offence subsection 4B(3) of the Crimes Act allows a court to impose a fine equivalent to 3,750 penalty units (currently $675,000). [Schedule 1, item 4, section 87]

4.19                For actions which do not relate to residential land, a person who fails to comply with a condition included in a no objection notification imposing conditions or imposed on an exemption certificate given by the Treasurer contravenes a civil penalty provision. If the relevant court is satisfied that an individual has contravened the provision the court could order the person to pay a pecuniary penalty equivalent to 250 penalty units (currently $45,000). By virtue of paragraph 82(5)(a) of the Regulatory Powers Act, the maximum pecuniary penalty that could be imposed on a body corporate who contravenes this civil penalty provision is 1,250 penalty units (currently $225,000). [Schedule 1, item 4, sections 90 and 93]

4.20                For actions which relate to residential land there are additional civil penalties which are considered below.

Failing to advertise new dwellings

4.21                In general terms, new section 57 enables the Treasurer to give a certificate to a property developer who is proposing to sell to foreign persons new dwellings that will be, are being, or have been constructed on land the property developer has an interest in. It is envisaged that such a certificate will generally include a condition imposed under new section 60 that requires the person to whom the certificate applies to advertise the new dwellings in Australia. A developer may commit an offence or contravene a civil penalty provision if the developer disposes of an interest in the dwelling to a foreign person without advertising the dwelling in accordance with the condition.

4.22                The maximum penalty that may be imposed on an individual who is found guilty of this offence is imprisonment for three years, a fine equivalent to 750 penalty units (currently $135,000), or both. If a body corporate is found guilty of this offence subsection 4B(3) of the Crimes Act allows a court to impose a fine equivalent to 3,750 penalty units (currently $675,000). These penalties are justified because of the importance of maximising the supply of residential properties that are available for purchase by Australians. [Schedule   1, item   4, section   88]

4.23                If the relevant court is satisfied that an individual has contravened the civil penalty provision it could order the person to pay a pecuniary penalty equivalent to 250 penalty units (currently $45,000). By virtue of paragraph 82(5)(a) of the Regulatory Powers Act the maximum pecuniary penalty that could be imposed on a body corporate that contravenes the provision is 1,250 penalty units (currently $225,000). [Schedule 1, item 4, paragraph 97(2)(b)]

Fine or imprisonment ratios for certain offences

4.24                The fine or imprisonment ratio for these offences differs from the standard ratio of one year imprisonment or 60 penalty units (or five penalty units or one month imprisonment), which is the ratio generally recommended in the Australian Government’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (Guide). [6] This departure is necessary because the maximum fine that can be imposed for the most serious contraventions must be sufficient to counter the potential financial gain that may be obtained by a person who commits the offence. However, if the ratio were maintained the maximum term of imprisonment that could be imposed for these offences would be twelve and a half years imprisonment - a punishment which would be disproportionate to the seriousness of the proscribed conduct. The ratio is also consistent with the ratio in current the Act.

Additional civil penalty provisions — residential land

4.25                There are different civil penalties for contraventions which involve residential land.

Acquisition of interests in residential land

4.26                A foreign person who takes a notifiable action relating to a residential land acquisition without notifying the Treasurer is liable to a civil penalty. A foreign person who gives notice of a significant action relating to a residential land acquisition but takes that action before the time calculated in accordance with new section 82 is also liable to a civil penalty.

4.27                An individual who contravenes this civil penalty provision is liable to a pecuniary penalty the equivalent of whichever is the greater of the following:

•        10 per cent of the consideration for the acquisition of the interest; or

•        10 per cent of the market value of the interest.

4.28                The penalty is fixed to the value of the interest so that it will have the same impact on any gain made regardless of the value of the interest. For that reason, if a body corporate contravenes the provision there is no provision that the person pay five times the penalty that could be imposed on an individual. [Schedule 1, item 4, section 94 and subsection 99(4)]

Acquisition of interests in established dwellings

4.29                A temporary resident (a term defined by new section 4) who holds an interest in more than one established dwelling at the same time contravenes a civil penalty provision. However, a person is not in contravention of a civil penalty provision if:

•        the temporary resident is making a genuine attempt to dispose of one or more of the interests;

•        if those interests were disposed of, the temporary resident would not have been holding an interest in more than one established dwelling; and

•        the person has been holding an interest in more than one established dwelling for less than six months.

[Schedule 1, item 4, section 95]

4.30                An individual who contravenes this civil penalty provision is liable to a pecuniary penalty the equivalent of whichever is the greater of the following:

•        the amount of the capital gain;

•        25 per cent of the consideration for the acquisition of that interest; or

•        25 per cent of the market value of that interest.

4.31                The « Bill » explains how the amount of capital gain that was made or would have been made is to be calculated. [Schedule 1, item 4, section 98]

4.32                The penalty is fixed to the gain or value of the interest so that it has the same impact on any gain made regardless of the gain or value of the interest. For that reason, if a body corporate contravenes the provision there is no provision that the person pay five times the penalty that could be imposed on an individual. [Schedule 1, item 4, subsection 99(4)]

Contravening conditions in relation to residential land

4.33                A person who fails to comply with a condition imposed on a no objection notification imposing conditions given under new section 74 relating to residential land is liable to a civil penalty. The maximum pecuniary penalty that could be imposed by a court on an individual who contravenes this civil penalty provision is whichever is the highest of the following:

•        the amount of the capital gain that was made or would be made on the disposal of that interest;

•        25 per cent of the consideration for the acquisition of that interest; or

•        25 per cent of the market value of the interest.

[Schedule 1, item 4, section 96]

4.34                The « Bill » explains how the amount of capital gain that was made or would have been made is to be calculated. [Schedule 1, item 4, section 98]

4.35                The penalty is fixed to the gain or value of the interest so that it has the same impact on any gain made regardless of the gain or value of the interest. For that reason, if a body corporate contravenes the provision there is no provision that the person pay five times the penalty that could be imposed on an individual. [Schedule 1, item 4, subsection 99(4)]

Miscellaneous matters — liability of persons and enforcement

Liability of officers of corporations

4.36                An officer of a corporation that is convicted of an offence against the Act or the regulations commits an offence and contravenes a civil penalty provision if the person authorised or permitted the commission of the offence by the corporation. The maximum penalty is the maximum penalty that could be imposed if the officer contravened the same provision the corporation contravened. [Schedule 1, item 4, section 102)]

4.37                It is appropriate that extended accessorial liability applies to officers of corporations given the importance of ensuring compliance with the obligations imposed by this Act is taken seriously by those ultimately responsible for the conduct of those corporations that engage in activities regulated by this Act. Liability is not being imposed simply because the person is an office holder at the relevant time, but because the officer was personally responsible for the corporation’s non-compliance with this Act. This approach ensures fairness and some protection to the individuals involved.

4.38                The officer might also be liable for an offence as a result of Part 2.4 of the Criminal Code .

Extended criminal liability

4.39                The provisions in Part 2.4 of the Criminal Code extend criminal liability to a person who may not directly or individually commit an offence against this Act, but who:

•        attempts to commit an offence;

•        is an accomplice to the commission of an offence;

•        jointly commits an offence;

•        procures the commission of an offence by an agent;

•        incites the commission of an offence; or

•        conspires with another person to commit an offence.

Civil penalties for officers of corporations

4.40                An officer of a corporation is liable to a civil penalty if the corporation contravenes a civil penalty provision and the officer knew that, or was reckless or negligent as to whether, the contravention would occur. However, the officer is only be liable to a civil penalty if he or she is in a position to influence the conduct of the corporation in relation to the contravention and the officer failed to take all reasonable steps to prevent it. [Schedule 1, item 4, section 103]

4.41                An officer is reckless as to whether the contravention would occur if the officer is aware of a substantial risk that the contravention would occur and, having regard to the circumstances known to the officer, it was unjustifiable to take that risk. An officer is negligent as to whether the contravention would occur if the officer’s conduct involves such a great falling short of the standard of care that a reasonable person would exercise in the circumstances and such a high risk that the contravention would occur that the conduct merits the imposition of a pecuniary penalty.

4.42                The terms reckless and negligent are defined because the provision is a civil penalty provision and the required standard of conduct should be made clear to enable corporate officers to comply with the law.

Enforcement of civil penalty provisions

4.43                Each civil penalty provision in the Act is enforceable under Part 4 of the Regulatory Powers Act, which sets out a framework for the « use » of civil penalties to enforce civil penalty provisions created by other Acts. An application for an order that a person has contravened a civil penalty provision must be made within four years of the alleged contravention (subsection 82(2) of the Regulatory Powers Act).

4.44                Part 4 of the Regulatory Powers Act permits an authorised applicant to apply to a relevant court for an order that a person who is alleged to have contravened a civil penalty provision to pay the Commonwealth a pecuniary penalty. The Treasurer is an authorised applicant and the Federal Court of Australia (Federal Court), Federal Circuit Court of Australia (Federal Circuit Court) and a Supreme Court of a State or Territory are relevant courts. [Schedule 1, item 4, section 99]

4.45                Criminal proceedings may be commenced against a person for conduct that is the same, or substantially the same, as conduct that would constitute a contravention of a civil penalty provision even if a civil penalty order has been made against the person in relation to the contravention (section 90 of the Regulatory Powers Act). However, a relevant court cannot make a civil penalty order against a person for a contravention of a civil penalty provision if the person has been convicted of an offence constituted by the conduct that is the same, or substantially the same, as the conduct constituting the contravention (section 88 of the Regulatory Powers Act).

Ancillary contravention of a civil penalty provision

4.46                The effect of subsection 92(1) of the Regulatory Powers Act is that conduct ancillary to the contravention of a civil penalty provision in this Act is considered to be a contravention of the provision itself. Ancillary conduct includes any attempt to contravene a provision that does not succeed, aiding or inducing a contravention of a civil penalty provision, and any conspiracy to contravene a civil penalty provision. This means, for example, that if a person aids a foreign person who is not a temporary resident to purchase an established dwelling (see new section 95), that person may also be liable to a civil penalty.

Infringement notices

4.47                An infringement notice may be given by an infringement officer with respect to the civil penalty provisions that relate to residential land [Schedule 1, item 4, subsection 100(1)] . Infringement notices allow action to be taken against those who engage in less serious contraventions of this Act more efficiently and effectively than through court action alone, and provide the potential for a speedier resolution of matters than may be possible through the courts.

4.48                The framework for the « use » of infringement notices created by Part 5 of the Regulatory Powers Act applies to these infringement notices. The Secretary may specify in writing that an individual is an infringement officer for the purposes of Part 5 of the Regulatory Powers Act. The Secretary may only appoint an individual who is an employee performing the duties of an APS 6 position under the Public Service Act 1999 , or an equivalent or higher position, within the Department or in the Australian Taxation Office (ATO). [Schedule 1, item 4, subsections 100(2) and (3)]

4.49                Under Part 5 of the Regulatory Powers Act, an infringement officer may give a person an infringement notice if the infringement officer believes on reasonable grounds that a person has contravened a provision subject to an infringement notice. An infringement notice must be given within 12 months after the day on which the contravention is alleged to have taken place.

4.50                A person who is given an infringement notice can choose to pay the amount specified in the notice as an alternative to having court proceedings brought against the person for a contravention of a provision subject to an infringement notice under Part 5 of the Act. Payment of the amount is not an admission of guilt or liability. However, if the person fails to pay the infringement notice the person is exposed to the risk that the Secretary may apply to a court for an order that the person pay a civil penalty. If the person pays the penalty then any liability that person has for the contravention of the relevant civil penalty provision is discharged and proceedings cannot be brought against the person for the contravention.

4.51                The Secretary of the Department is the relevant chief executive for the purposes of Part 5 of the Regulatory Powers Act. Under Part 5 of the Regulatory Powers Act the relevant chief executive may grant an extension to pay the amount specified in an infringement notice if a person to whom an infringement notice is given applies in writing for an extension before the period. A relevant chief executive may also withdraw an infringement notice given to a person in response to written representations from that person (section 106 of the Regulatory Powers Act).

4.52                The amount to be specified in an infringement notice for the alleged contravention of a civil penalty provision depends on whether the infringement notice is given for a tier 1 infringement notice or a tier 2 infringement notice . The amount payable for a tier 1 infringement notice is 60 penalty units (currently $10,800) if it is given to a body corporate and 12 penalty units (currently $2,160) if it is given to any other person. The amount payable for a tier 2 infringement notice is 300 penalty units (currently $54,000) if the notice is given to a body corporate, and 60 penalty units (currently $10,800) if given to any other person. [Schedule 1, item 4, subsection 100(6)]

4.53                An infringement notice is a tier 1 infringement notice if the notice relates to an alleged contravention of a civil penalty provision by a person who is discovered because the person informed the Commonwealth of the conduct that constituted the alleged contravention. An infringement notice is a tier 2 infringement notice if the Commonwealth discovers the conduct through some other means, such as information provided by a member of the public or by undertaking data-matching. [Schedule 1, item 4, section 101]

4.54                The amount payable under an infringement notice departs from the maximum that is generally recommended in the Guide (which is one fifth of the maximum penalty that a court could impose on a person, but not more than 12 penalty units for an individual and not more than 60 penalty units in the case of a body corporate). [7] This departure is necessary because the maximum penalty that could be imposed by a court is not fixed and the amount payable must be an adequate deterrent.

Recovering unpaid penalties

4.55                Where pecuniary penalties are ordered against a foreign person, recovery of debts will be difficult if the person is not in or has few assets in Australia. Subdivision C of Division 4 of Part 5 seeks to minimise the risk that proceeds are not available for payment of penalties.

4.56                If a person a court finds that a person has contravened Division 3 of Part 5 and a pecuniary penalty is imposed, the penalty is a debt that is due and payable. In addition, the Treasurer may in specified circumstances declare that a charge applies in relation to Australian land the person has an interest in to secure the payment of the penalty, and the charge has priority over any other interest in the land. A declaration made by the Treasurer must specify the period during which the declaration is in force and the land to which it applies. To assist readers the « Bill » expressly provides that a declaration made under subsection 105(1) or 105(2) is not a legislative instrument. Such a declaration is of an administrative character. [Schedule 1, item 4, sections 104 and 105]

4.57                The charge remains in force until the interest in the land is sold or all of the following are paid:

•        the penalty is paid;

•        any costs incurred by the Commonwealth in relation to the proceedings for the offence or civil penalty order; and

•        any costs incurred by the Commonwealth in relation to recovering the penalty.

The charge on the land is not affected by any change in ownership of the land. The Treasurer has power, on behalf of the Commonwealth, to do, or authorise the doing of, anything necessary or convenient to obtain the registration of the charge on a land register, including executing any instrument that is required to be executed or signing any certificate that states that a charge is created on land and specifies the land on which the charge is created. [Schedule 1, item 4, section 106]

If a charge is created under new section 104 and it is still in force three months after the pecuniary penalty was imposed on the person (or any longer period determined by the Treasurer or the court), the person’s interest in Australian land vests in equity in the Commonwealth and vests in the Commonwealth at law once all applicable registration requirements have been complied with. The Commonwealth is entitled to be registered on a land register as the owner of the property. However, new subsections 107(1) to (3) do not apply if at the « end » of the three month period (or any longer period determined by the court or the Treasurer), a restraining order is in force in relation to the land under Part 2-1 of the Proceeds of Crime Act 2002 ; a forfeiture order is in force in relation to the land under Part 2-2 of that Act; or an order of a kind prescribed by the regulations is in force in relation to the land under a law of the Commonwealth, a State or a Territory. [Schedule 1, item 4, section 107]

The Treasurer, and persons acting on the Commonwealth’s behalf, can generally dispose of, or otherwise deal with, a person’s interest in Australian land that vests under new section 107 only after the later of:

•        if the period provided for lodging an appeal against the finding that the person contravened a provision in Division 3 of Part 5 of the Act has expired without such an appeal having been filed, the « end » of that period; or

•        if an appeal is lodged against the finding that the person contravened a provision in Division 3 of Part 5 of the Act, the appeal lapses or is finally determined.

4.58                However, the Treasurer or other people on behalf of the Commonwealth could dispose or otherwise deal with the land at any earlier point in accordance with the leave of a court and in accordance with the directions of a court. [Schedule 1, item 4, section 108]

4.59                If the Treasurer sells the interest in the land, the Treasurer may give full and effective title to the land free of all other interests. This extinguishes all other interest in the land, allowing the purchaser to have full title. The Treasurer may make and execute any instruments or documents necessary for the purposes of selling the interest in the land such as the transfer of title documents and contracts of sale. [Schedule 1, item 4, section 109]

4.60                The Treasurer may apply the proceeds of the sale against:

•        the relevant penalty and any other penalty that is due and payable to the Commonwealth under this Act by the former owner of the land;

•        any costs incurred by the Commonwealth in relation to the proceedings for the offence or civil penalty order; and

•        any costs incurred by the Commonwealth in relation to recovering the penalty.

4.61                The provision sets out those to whom the Treasurer must pay the remainder [Schedule 1, item 4, subsection 109(6)] . No stamp duty or other tax or fee is payable under a law of a State or Territory in respect of a vesting of an interest in Australian land under new section 107, or anything connected with the vesting of that interest, if the Treasurer declares that the interest in the land has vested under new section 107 in an instrument which specifies the interest in the land. To assist the reader the « Bill » explicitly provides that an instrument made under new section 110 is not a legislative instrument. Such an instrument is of an administrative character, rather than a legislative character [Schedule 1, item 4, subsection 110] .

4.62                If the operation of Subdivision C of Division 4 of Part 5 would result in an acquisition of property from a person otherwise than on just terms (within the meaning of section 51(xxxi) of the Constitution), the Commonwealth is liable to pay a reasonable amount of compensation to the person. [Schedule 1, item 4, section 111]



       

Fees

Outline of chapter

5.0                    Part 6 of the « Bill » specifies:

•        when certain fees are payable;

•        the Treasurer is not required to take any action in relation to certain applications or notices before the applicable fee is paid; and

•        the Treasurer may waive the whole or part of a fee if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee.

Context of amendments

5.1                    Currently, no fees or charges are payable when making an application or giving a notice under the Act. The imposition of fees helps fund the costs of considering applications, the introduction of a specialised investigative and enforcement area within the Australian Taxation Office (ATO), improvements in the collection of data about foreign investment in Australia, and an increase in the resources dedicated to the investigation of alleged breaches of the Act. The introduction of fees is also consistent with the Australian Government’s policy that the full cost of regulating a particular sector should generally be recovered from that sector.

Detailed explanation of new law

When are fees payable?

5.2                    A person who applies for an exemption certificate, gives notice of a notifiable action, or gives a notice in relation to a proposal to take a significant action that is not a notifiable action must pay a fee when the notice is given or an application made. A fee is also payable if the Treasurer makes a decision or order under new Part 3 of the Act relating to a significant action and a person has not notified the Treasurer. A fee payable under this Act that does not relate to an application made or a notice given by the person may be recovered by the Treasurer, on behalf of the Commonwealth, as a debt due to the Commonwealth. [Schedule 1, item 4, section 113]

5.3                    To comply with section 55 of the Constitution, a fee imposed under new Part 6 is imposed as a tax by the Foreign Acquisition and Takeovers Fees Imposition « Bill » 2015 . The imposition of fees ensures that those who undertake activities regulated by this Act rather than the general community bear the costs relating to the administration of the Act, including the costs of monitoring compliance with the legislation, investigating alleged breaches and commencing enforcement proceedings in appropriate cases.

Requirement for fees to be paid before Treasurer exercises powers

5.4                    Where a fee is payable for making an application or giving a notice, a person is taken not to have given the notice or made the application until the fee has been paid or the fee has been waived. [Schedule 1, item 4, section 114]

Waiver and remissions of fees

5.5                    The Treasurer may waive or remit the whole or a part of a fee that is payable under this Act if the Treasurer is satisfied that it not contrary to the national interest to waive or remit the fee. [Schedule 1, item 4, section 115]



Outline of chapter

6.0                    New Part 7 of the Act requires certain records to be made and kept. New Part 7 also seeks to ensure that information provided under this Act is not disclosed unnecessarily or put to unauthorised « use » .

Context of amendments

6.1                    To support the operation of the Act and regulations, people must make and keep records to record and support their compliance with their obligations under the legislation.

6.2                    In examining significant proposals, the Treasurer and departmental officers frequently consult with Commonwealth, State and Territory government departments, agencies and authorities with responsibilities relevant to the proposals. The advice and comments provided by such agencies are important in assessing whether they raise any national interest issues.

Detailed explanation of new law

Record keeping

6.3                    A person must make and keep records of every action, transaction, event or circumstance relating to the matters shown for the length of time shown in the table below.

Action, transaction, event or circumstance

Length of time record must be kept

A significant action or notifiable action that is relevant to an order made or decision made under new Part 3.

Five years after the action is taken by the person.

An action taken by a person that is specified in an exemption certificate.

Five years after the action is taken by the person.

The person’s compliance with a condition in a no objection notification imposing conditions or an exemption certificate.

Two years after the condition ceases to apply to the person.

The disposal of an interest in residential land if the acquisition of the interest by the person was a significant action or notifiable action or would have been a significant action or a notifiable action if the action had not been specified in an exemption certificate.

Five years after the interest is disposed of by the person.

6.4                    The records must be in English or readily accessible so that they can be translated into English if necessary. Records may be kept in hard copy or electronic form. [Schedule 1, item 4, section 119]

6.5                    A person who fails to make and keep records in accordance with the Act may be guilty of an offence unless the Treasurer notified the person that they do not need to make or keep the record. The maximum penalty for this offence is 30 penalty units (currently $5,400). [Schedule 1, item 4, section 119]

6.6                    The offence is one of strict liability. In general terms, this means that it is only necessary for the prosecution to prove the alleged action, inaction or state of affairs - the person’s intention is irrelevant. It is considered appropriate for this offence to be one of strict liability because it would be difficult for the prosecution to prove the person’s intention and the maximum penalty is a fine rather than a period of imprisonment.

Confidentiality of information

Disclosure of protected information for a purpose not authorised by the Act or regulations is an offence

6.7                    It is an offence for a person to record, disclose or otherwise « use » protected information unless the making of the record, disclosure or « use » is authorised by new Part 7 of the Act or an exception applies. [Schedule 1, item 4, section 128]

6.8                    Protected information is defined by new section 120 to mean information that is obtained under, in accordance with, or for the purposes of the Act and regulations. The definition of ‘protected information’ excludes information specified in an exemption certificate for new dwellings or an exemption certificate provided for by the regulations. That is so that there is transparency where necessary. For example, buyers will be able to confirm whether an exemption certificate is valid. It also excludes information that is obtained by a person engaged under the Public Service Act 1999 who is employed in the Australian Taxation Office (ATO) who obtained the information under, in accordance with or for the purposes of this Act as a result of a delegation or subdelegation under new subsection 138, or as a result of a request by the Treasurer that the Commissioner of Taxation (Commissioner) exercise his or her powers under this Act. That is because such information will become subject to the information protection regime in the Taxation Administration Act 1953 (TAA 1953). [Schedule 1, item 4, section 120]

6.9                    The penalty for this offence is imprisonment for two years, a fine equivalent to 120 penalty units (currently $21,600), or both. If a body corporate is found guilty of this offence, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to 600 penalty units. These penalties are appropriate because of the damage that could be done to a person as the result of an unauthorised « use » or disclosure of information about that person.

Exception for « use » of information in good faith

6.10                The offence relating to protected information does not apply if the person makes a record of, or discloses or otherwise uses protected information in good faith in performing, or purportedly performing, his or her functions or duties under this Act, or in exercising or purportedly exercising his or her powers under this Act. [Schedule 1, item 4, section 129]

6.11                In any prosecution, the defendant bears the evidential burden with respect to this exception. This is justified because in many cases it is within the defendant’s knowledge as to why the person used or disclosed the protected information. The effect is that the defendant must adduce or point to evidence that suggests a reasonable possibility that one of the exceptions applies. Once this is done, the prosecution must refute this beyond reasonable doubt to obtain a conviction (see section 13.3 of the Criminal Code ).

Authorisation of disclosures of protected information for the purposes of this Act

6.12                To assess whether a particular foreign investment or proposed foreign investment may be contrary to the national interest it is often necessary for the official assisting the Treasurer to perform his or her functions under this Act to consult with a number of Commonwealth, State and Territory government agencies. The « Bill » therefore authorises a person to disclose protected information if it is for the purpose of performing the person’s functions or duties under the Act or regulations and the disclosure is to a person who is:

•        a Minister, an officer or an employee of the Commonwealth, a State, the Australian Capital Territory or the Northern Territory;

•        an officer or employee of a Commonwealth, State or Territory body; or

•        a person appointed by the Commonwealth for the purposes of this Act (for example, a member of the Foreign Investment Review Board, a non-statutory body established to advise the Treasurer on foreign investment, including applications made under this Act). [Schedule 1, item 4, subsection 121(1)]

6.13                A person who obtains protected information under new subsection 121(1) is also permitted to make a record of disclose or otherwise « use » the information for the purposes for which the information was disclosed to the person. The person may also disclose the protected information for the purposes for which it was disclosed, but only to:

•        a Minister, an officer or an employee of the Commonwealth, a State, the Australian Capital Territory or the Northern Territory;

•        an officer or employee of a Commonwealth, State or Territory body; or

•        a person appointed by the Commonwealth for purposes of this Act. [Schedule 1, item 4, subsection 121(2)]

Other circumstances in which protected information may be recorded, used or disclosed

6.14                In broad terms, a person is authorised to record, disclose or « use » protected information if:

•        the information is disclosed to a Minister responsible for the administration of specified Commonwealth statutes, or the accountable authority of a Commonwealth entity that deals with the administration of any of those Acts, for the purposes of administering those Acts; [Schedule 1, item 4, subsection 122(1)]

•        the information is disclosed to a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia for the purpose of enabling the Minister to discharge that responsibility; [Schedule 1, item 4, subsection 122(2)]

•        the information is disclosed to the Secretary of a Department administered by a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia for the purposes of assisting that Minister to discharge their responsibilities; [Schedule 1, item 4, section 122(3)]

•        the information is disclosed to an enforcement body [8] within the meaning of the Privacy   Act   1988 if the person reasonably believes it is reasonably necessary for one or more enforcement related activities [9] within the meaning of the Privacy Act conducted by an enforcement body; [Schedule 1, item 4, section 123]

•        the information specifies matters prescribed by the regulations for the purposes of reporting on the administration of this Act and the information does not identify, nor is reasonably capably of being used to identify, a person; [Schedule 1, item 4, section 124]

•        the protected information disclosed is already in the public domain (other than as a result of the contravention of new Division 3 of Part 7); [Schedule 1, item 4, section 125]

•        the record, disclosure or « use » is in accordance with the written consent of the person to whom it relates; or [Schedule 1, item 4, section 126]

•        the disclosure is to a court or tribunal, or in accordance with an order of a court or tribunal, for the purposes of proceedings if the Commonwealth is a party to the proceeding and the Treasurer is satisfied that it is not contrary to the national interest. [Schedule 1, item 4, section 127]

No requirement to provide information

6.15                The unauthorised release of protected information could cause significant harm, particularly where it is highly commercially sensitive. For that reason a person cannot be required to produce any document in his or her possession or to disclose any matter or thing of which she or he had notice to a court, tribunal, authority or person having power to require the production of documents or answering questions. [Schedule 1, item 4, section 130]



       

Miscellaneous

Outline of chapter

7.0                    New Part 8 of the « Bill » :

•        invests the Federal Court of Australia (Federal Court), the Federal Circuit Court of Australia (Federal Circuit Court) and the Supreme Court of a State or Territory with the power to enforce certain orders made by the Treasurer;

•        permits the Treasurer to require a person to give information or produce documents relating to matters relevant to the exercise of the Treasurer’s powers under this Act;

•        clarifies that a failure to comply with the Act or regulations does not invalidate an action;

•        enables the Secretary to specify the method that must be used by a person making an application or giving a notice;

•        permits the Treasurer and the Secretary to delegate their functions and powers under this Act to certain officers, including the Commissioner of Taxation (Commissioner);

•        enables the Commissioner to exercise certain information gathering and other investigatory powers when exercising delegated powers or performing functions under this Act or at the request of the Treasurer; and

•        confers a general regulation making power.

Summary of new law

7.1                    New Part 8 builds on Part III of the existing Act.

Comparison of key features of new law and current law

New law

Current law

The Federal Court, the Federal Circuit Court and the Supreme Court of a State or Territory may make a broad range of orders if a person has contravened an order made under new Part 3 or contravened a condition of a no objection notification imposing conditions. A court may make such an order regardless of whether the offender has been convicted of an offence or a civil penalty order has been made, and regardless of whether other proceedings relating to the contravention have been or are to be instituted (new section 132).

The Treasurer may apply to the Supreme Court of a State or Territory to make a broad range of orders if a person has failed to comply with an order made under Part II of the Act (which permits the Treasurer to prohibit certain proposals if they are contrary to the national interest, such as an order prohibiting a proposed acquisition of shares) (section 35).

The Treasurer can require a person to give the Treasurer any information or produce any documents relating to matters that are relevant to the exercise of the Treasurer’s powers under the Act or regulations. Failure to do so is a criminal offence and the maximum penalty for this offence is a fine equivalent to 30 penalty units, imprisonment for 6 months, or both (new section 133).

The Treasurer can require a person to give the Treasurer any information or produce any documents relating to matters that are relevant to the exercise of the Treasurer’s powers under the Act or any regulations made under it. Failure to do so is a criminal offence and the maximum penalty for this offence is a fine equivalent to 20 penalty units, imprisonment for 12 months, or both (section 36).

The Treasurer and the Secretary may delegate their powers under this Act, including to the Commissioner (new section 137).

No equivalent provision. However, the Treasurer has made a written instrument which authorises certain senior officials in the Treasury and the Australian Taxation Office (ATO) to exercise various powers under the Act and the Regulations.

The Commissioner can exercise a broad range of investigatory powers for the purposes of administering a function or power delegated to the Commissioner or at the request of the Treasurer (new section 138).

No equivalent provisions.

Detailed explanation of new law

Powers of courts to enforce Treasurer’s orders

7.2                    If a person (the offender) fails to comply with an order made by the Treasurer under new Part 3 of the Act or a condition of a no objection notification imposing conditions, the Treasurer may apply to the Federal Court, Federal Circuit Court or the Supreme Court of any State or Territory to make such order or orders as the court thinks fit for the purpose of giving effect to the order or condition imposed by the Treasurer. [Schedule 1, item 4, subsection 132(1)]

7.3                    The « Bill » includes a non-exhaustive list of the kinds of orders that might be made by a court [Schedule 1, item 4, subsection 132(3)] . A court may also make an order directing any person to do or refrain from doing a specified act for the purposes of securing compliance with any other order made under new section 132 as well as an order containing such ancillary or consequential provisions as the court thinks fit. [Schedule 1, item 4, subsection 132(4)]

7.4                    A court may rescind, vary or discharge an order it has made under new section 132. A court may suspend the operation of an order made by it under new section 132. [Schedule 1, item 4, subsection 132(6)]

7.5                    For the avoidance of doubt, the « Bill » clarifies that a court may make such an order regardless of whether the offender has been convicted of an offence or a civil penalty order has been made in relation to the contravention; the contravention is continuing or other proceedings relating to the contravention have been or are to be instituted. [Schedule 1, item 4, subsection 132(2)]

7.6                    These provisions provide additional enforcement options to achieve the objects of the Act. For example, where a civil penalty order is sought, the Treasurer may also seek an order restraining any dealings in property connected to the alleged breach so that the property is available to satisfy payment of a civil penalty order.

7.7                    The « Bill » clarifies that the powers conferred on a court under new section 132 of the « Bill » are in addition to, and not instead of, any other powers of the court conferred by the Act or otherwise. [Schedule 1, item 4, subsection 132(7)]

Treasurer may require information

7.8                    The Treasurer may require a person to give information or to produce documents if the Treasurer has reason to believe that the person is capable of giving information or producing documents relating to matters that are relevant to the exercise of the Treasurer’s powers under the Act and regulations. The notice given by the Treasurer must specify a period (of at least 14 days) within which the information must be given or documents produced and manner in which the person must give the information or produce the documents. The Treasurer may extend, or further extend, the period within which the information must be given or the documents produced if the Treasurer is satisfied that it is reasonable to do so.

7.9                    It is an offence not to comply with such a notice, and the maximum penalty that can be imposed under the provision is a fine equivalent to 30 penalty units (currently $5,400), imprisonment for six months, or both.

7.10                A person does not commit an offence if the person complies with the notice to the extent to which the person is capable of doing so. It is appropriate to include this matter in a defence (rather than specifying it as an element of the offence) because it is a matter that is peculiarly within the defendant’s knowledge and it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter.

7.11                The effect of sections 137.1 and 137.2 of the Criminal Code is that a person might commit an offence if they provide information or documents that are false or misleading.

7.12                A person is required to comply with the notice even if giving the information or producing the document might tend to incriminate him or her. Whilst the privilege against self-incrimination is abrogated in relation to this provision, the « Bill » provides individuals with the protection that self-incriminatory disclosures cannot be used against the person who makes the disclosure, either directly in any criminal proceedings on in proceedings for the recovery of a civil penalty (other than proceedings under this Act or sections 137.1 or 137.2 of the Criminal Code ) or indirectly to gather other evidence against the person. These exceptions are commonly referred to as a ‘ « use » and derivative « use » ’ immunity. However, the information could be used against a third party.

7.13                The removal of the privilege, subject to a « use » or derivative « use » immunity, assists the Treasurer and the Commissioner to monitor and enforce compliance with this Act and thereby assist in the effective administration of this Act. That is in circumstances where information may be held offshore and information necessary to administer the Act may not otherwise be available. The effective administration of this Act is vital to ensuring that the Australian public continues to have confidence in the way foreign investment is regulated in Australia.

7.14                The « Bill » does not abrogate the right of a person to claim legal professional privilege. This means that a person has the right to refuse to give information or produce a document on the ground that the information or document could be subject to legal professional privilege. [Schedule 1, item 4, section 133]

Validity of acts done in contravention of Act

7.15                An act is not invalidated simply because it constitutes an offence against or contravention of a civil liability provision in the Act or regulations. [Schedule 1, item 4, section 134]

Method of notification and application

7.16                A notice given, or an application made, under the Act or regulations made has no legal effect unless it is given using the method approved by the Secretary of the Department. For example, the Secretary might require applications to be made and notices given using an online portal. [Schedule 1, item 4, section 135]

Withdrawal of applications and notices

7.17                An application or notice that is withdrawn has no effect [Schedule 1, item 4, section 136] . This makes clear that if a person does not wish to proceed with an application, or significant action, the Treasurer does not need to make a decision to avoid the consequences which would otherwise flow from an application having been made (for example, under section 82).

Delegation of powers or functions

7.18                The Treasurer may generally delegate any of his or her powers or functions under this Act to the Secretary of the Treasury (Department), the Commissioner, or a person who is engaged under the Public Service Act 1999 who is employed in the Department or the ATO.

7.19                The Secretary may delegate any of his or her powers or functions under this Act to the Commissioner or a public servant employed in the Department or the ATO. If a power or function is delegated to the Commissioner, the Commissioner may subdelegate the power or function to a person engaged under the Public Service Act who is employed in the ATO. [Schedule 1, item 4, section 137]

7.20                It is anticipated that the Treasurer will delegate his powers and functions relating to residential land under this Act to the Commissioner.

7.21                The delegations powers included in the « Bill » are broad. This is appropriate because the decisions to be made under this Act range from those that involve only a limited exercise of discretion and which may give rise to a high volume of decisions. Other decisions under the Act involve weighing competing considerations including Australia’s national security and Australia’s relationship with other countries, which would generally be made by the Treasurer personally.

Extension of the Commissioner’s powers

7.22                The Commissioner is already permitted to access premises and gather documents and other information, whether held domestically or in foreign jurisdictions. The Commissioner can exercise these powers in relation to any ‘taxation law’. To enable the Commissioner to exercise most of his or her powers in relation to any taxation law with respect to any power or function under a provision in this Act that is delegated to the Commissioner, the « Bill » provides that the Commissioner has the general administration of this Act to the extent of administering the provision. [Schedule 1, item 4, subsections 138(1) and (2)]

7.23                Enabling the Commissioner to apply the Commissioner’s existing access and information gathering powers, including those in sections 353-10 and 353-15 of Schedule 1 to the Taxation Administration Act   1953 (TAA 1953), helps to minimise costs for both regulated persons and the ATO. This is because in many situations where information is required to administer this Act that same information is also be required to administer taxation laws. For example, if a foreign investor has acquired an interest in a property, in addition to questions about whether the person has complied with this Act, there may also be questions as to whether that property has been used for income producing purposes and, if so, how that income has been treated for taxation purposes.

7.24                The Commissioner can also exercise his or her powers under section 353-10 or 353-15 in Schedule 1 to the TAA 1953 with respect to a certain matter if requested in writing to do so by the Treasurer. This means, for example, that the Commissioner can investigate an alleged contravention of this Act if requested to do so by the Treasurer. If the Commissioner does receive such a request from the Treasurer, the Commissioner (or an individual authorised by the Commissioner) may exercise his or her powers under sections 353-10 or 353-15 as if a reference in those sections to a taxation law included a reference to this Act to the extent that it relates to the matter. [Schedule 1, item 4, subsections 138(3) and (4)]

Regulations

7.25                The Governor General may make regulations prescribing matters required or permitted by the Act to be prescribed or necessary or convenient to be prescribed for the purposes of carrying out or giving effect to the Act. This includes providing a method for indexing a value or an amount prescribed for the purposes of this Act. [Schedule 1, item 4, subsections 139(1) and (2)]

7.26                The regulations may provide in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in any other instrument or other writing as in force or existing from time to time. This provision overrides subsection 14(2) of the Legislative Instruments Act 2003 which provides that a legislative instrument may not make provisions in relation to any matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time unless the contrary intention appears. [Schedule 1, item 4, subsection 139(3)]

7.27                It is anticipated that this power will be used to define the meaning of the term ‘agribusiness’ to be a business that is carried on, wholly or partly, in any of certain classes of the Australian and New Zealand Standard Industrial Classification Codes as in force from time to time, published by the Australian Bureau of Statistics (ABS), and which is published on the ABS website and available free of charge.

7.28                It is also anticipated that a regulation will be made that defines the term ‘US national’ to mean a national of the United States of America, as defined in Title III of the Immigration and Nationality Act of the United States of America . Defining the meaning of the term US national in this way ensures consistency with the terms of the Australia-United States Free Trade Agreement. A number of websites provide access to this statute free of charge, including the Legal Information Institute. [10]

7.29                The Government will continue to assist people to comply with their obligations under this Act, including by taking steps to draw the attention of stakeholders to any relevant changes to any document which is incorporated by reference in the regulations, including by publishing information on the internet. However, it is not anticipated that a regulation would incorporate by reference any document which is frequently amended.



Outline of chapter

8.0                    Schedule 2 to this « Bill » provides for a number of consequential amendments to be made to the Act immediately after the Acts and Instruments (Framework Reform) Act 2015 comes into effect.

8.1                    In broad terms, the amendments made by Schedule 2 amends those provisions in the Act as amended by Schedule 1 which require certain orders to be published in the Commonwealth of Australia Gazette (Gazette) by instead requiring the orders to be registered on the new Federal Register of Legislation. For ease of reference this chapter assumes that the Act is amended in accordance with Schedule 1 to this « Bill » .

Context of amendments

8.2                    The Acts and Instruments (Framework Reform) Act 2015 makes a number of significant amendments to the Legislative Instruments Act 2003 which is to be renamed the Legislation Act 2003. Most relevantly to the provisions in Schedule 2, the Legislation Act establishes a new category of instruments called notifiable instruments, which will be able to be registered in authoritative form. The new category of notifiable instruments is designed to encompass instruments that are not appropriate to register as legislative instruments, but for which public accessibility and centralised management is desirable.

8.3                    Notifiable instruments will be published in a register known as the Federal Register of Legislation, which will also incorporate the existing Acts database established under the Acts Publication Act 1905 and the existing Federal Register of Legislative Instruments.

Detailed explanation of new law

Section 3

8.4                    Section 3 provides a simplified outline of the Act. The « amendment » to this provision reflects that once Schedule 2 comes into effect an interim order will be registered in the Federal Register of Legislation rather than published in the Gazette. [Schedule 2, item 1]

Section 66

8.5                    Section 71 provides a simplified outline of Part 3 of the Act. The « amendment » to this provision reflects that once Schedule 2 comes into effect an interim order will be registered in the Federal Register of Legislation rather than published in the Gazette. [Schedule 2, item 2]

Subsections 67(1) and (3) and 68(1)

8.6                    Subsection 67(1) of the Act permits the Treasurer to make an order in accordance with the table in subsection 67(2) if the Treasurer is satisfied that a significant action is proposed to be taken and that taking the significant action would be contrary to the national interest. As a result of the « amendment » to subsection 67(1) such an order must be made by notifiable instrument.

8.7                    Subsection 67(3) of the Act permits the Treasurer to make additional orders where the Treasurer makes an order under subsection 67(2) of the Act. As a result of the « amendment » to subsection 67(3) such additional orders must also be made by notifiable instrument.

8.8                    Section 68 of the Act permits the Treasurer to make an interim order. As a result of the « amendment » to subsection 68(1) any interim order must be made by notifiable instrument. [Schedule 2, item 3]

Subsection 68(2) (note)

8.9                    Subsection 68(2) of the Act includes a note which in general terms explains that the period during which an interim order has effect does not start until the order is published in the Gazette. The « Bill » amends the note so that it instead explains that the period during which the interim order has effect does not start until the order is registered in the Federal Register of Legislation. [Schedule 2, item 4]

Subsection 69(1)

8.10                Subsection 69(1) of the Act permits the Treasurer to make a disposal order if the Treasurer is satisfied that a significant action has been taken and the result of taking the significant action is contrary to the national interest. As a result of the « amendment » to subsection 69(1) any such order must be made by notifiable instrument. [Schedule 2, item 5]

Section 72 (heading)

8.11                This « amendment » would repeal the heading ‘Publication and commencement of orders’ in section 72 of the Act and substitute ‘Registration and commencement of orders’. This « amendment » is necessary because once Schedule 2 comes into effect an order made by the Treasurer must be registered in the Federal Register of Legislation instead of being published in the Gazette. [Schedule 2, item 6]

Subsection 72(1) (heading)

8.12                This « amendment » would repeal the heading ‘Publication of orders’ and substitute ‘Registration and commencement of orders’. This « amendment » is necessary because once Schedule 2 comes into effect an order made by the Treasurer must be registered in the Federal Register of Legislation instead of being published in the Gazette. [Schedule 2, item 7]

Paragraph 72(1)(b)

8.13                Under paragraph 72(1)(b) of the Act an order made by the Treasurer under Subdivision A of Division 2 of Part 3 of the Act must be published in the Gazette within 10 days after it is made. As a result of the « amendment » to paragraph 72(1)(b) any such order made by the Treasurer must be registered in the Federal Register of Legislation within 10 days after it is made. [Schedule 2, item 8]

Paragraphs 72(2)(a) and (b)

8.14                Paragraphs 72(2)(a) and (b) explain when certain orders commence by reference to when they are published in the Gazette. As a result of the amendments the orders commence by reference to when an order is registered. [Schedule 2, item 9]

Subparagraph 77(2)(c)(ii)

8.15                The effect of subsection 77(2) of the Act is that the Treasurer must not make certain orders or decisions in the circumstances set out in that provision, including where the Treasurer does not publish the order in the Gazette. As a result of the « amendment » made to subparagraph 75(2)(c)(ii) of the Act the Treasurer will not be able to make certain orders or decisions if the order is not registered in the Federal Register of Legislation. [Schedule 2, item 10]

Paragraph 77(3)(b) and subparagraph 77(3)(d)(i)

8.16                The effect of subsection 77(3) of the Act is that there are time limits on making certain orders or decisions after an interim order is made. Paragraph 77(3)(b) and subparagraph 77(3)(d)(i) are amended so that the orders referred to in those provisions will be registered in the Federal Register of Legislation rather than published in the Gazette. [Schedule 2, items 11 to 12]

Section 80

8.17                Section 80 provides a simplified outline of Part 4 of the Act. The « amendment » to section 80 reflects that an interim order must be registered in the Federal Register of Legislation rather than published in the Gazette. [Schedule 2, item 13]

Subsection 139(3)

8.18                The reference to the Legislative Instruments Act 2003 is amended to the Legislation Act 2003 . [Schedule 2, item 14]



Outline of chapter

9.0                    Schedule 3 to this « Bill » sets out various provisions that are necessary to provide for a smooth transition from the Act as it stands immediately before the provisions included in Schedule 1 come into effect and the provisions in the Act which come into effect immediately after the provisions included in Schedule 1 commence.

Detailed explanation of new law

Definitions

9.1                    The provisions in Schedule 3 to the « Bill » rely on the definitions of the following terms: new provisions , old provisions , Policy and transitional period .

9.2                    The term old provisions is defined to mean the Act as in force immediately before Schedule 1 to this « Bill » commences. New provisions is defined to mean the Act as in force immediately after Schedule 1 to this « Bill » commences. The term Policy refers to Australia’s Foreign Investment Policy, which provides guidance to foreign investors to assist understanding of the Government’s approach to administering the Act, as well as identifying certain other investments that the Treasurer must be informed of. Transitional period is defined to mean the period beginning on 1 March 2015 and ending on 30 November 2015. [Schedule 3, item 1]

Notices given before commencement

9.3                    The following table explains how notices given under the old provisions are treated once the new provisions come into force. [Schedule 3, item 2]

Notice given under old provision or Policy

is taken to be

Notice given under section 25 of the old provisions or the Policy.

A notice that a significant action (that is not a notifiable action) is to be taken (except in relation to new section 113 (fees)).

Sections 26 or 26A.

Given under section 81 (except in relation to new section 113 (fees)).

Section 36.

Section 133 (However, subsections 77(5) (effect of notice on time limits) and 133(7) and (8) (self-incrimination) apply only in relation to notices given under section 133 of the new provisions after commencement).

Notices given during the transitional period in relation to actions relating to rural land

9.4                    A notice given under sections 25 or 26 of the old provisions or the Policy during the transitional period in relation to rural land is taken, after commencement, to be a notice given under section 81 of the new provisions in relation to agricultural land. ‘Australian rural land’ is defined by old section 5 to mean land situated in Australia that is used wholly and exclusively for carrying on a business of primary production. The time limits on making orders and decisions specified in new section 77 apply to such a notice.

9.5                    A notice given by the Treasurer in accordance with the Policy during the transitional period in relation to an acquisition or proposed acquisition of Australian rural land binds the Commonwealth after commencement. [Schedule 3, item 3]

Actions taken during transitional period in relation to Australian rural land

9.6                    A foreign person who acquires an interest in Australian rural land during the period beginning on 1 March 2015 and ending on 30 November 2015 must notify the Treasurer in accordance with section 135 of the new provisions unless the person has already notified the Treasurer of the acquisition or proposed acquisition.

9.7                    The « Bill » makes it an offence for a foreign person to acquire an interest in Australian rural land during the transitional period if the person fails to notify the Treasurer of the acquisition during the transitional period or within 30 days of commencement. The maximum penalty for an individual who commits this offence is imprisonment for three years, a fine equivalent to 750 penalty units (currently $135,000), or both. If a body corporate commits this offence the maximum penalty that may be imposed is a fine equivalent to 3,750 penalty units (currently $675,000).

9.8                    A person who fails to comply with these requirements may also be liable to a civil penalty. The maximum penalty for the contravention is a pecuniary penalty of 250 penalty units. [Schedule 3, item 4]

Orders, advices and decisions

9.9                    The following table explains how an order or advice given, or a decision made, under the old provisions are taken to have been given or made under the new provisions.

Column   1     old provisions

Column   2     new provisions

Order given under:

•        subsection 18(2) (order prohibiting proposed acquisition of shares);

•        subsection 19(2) (order prohibiting proposed acquisition of assets of Australian business by prescribed corporation);

•        subsection 20(2) (order prohibiting agreement in relation to affairs of a corporation or altering a constituent document of the corporation);

•        subsection 21(2) (order prohibiting arrangements relating to control of an Australian business); and

•        subsection 21A(2) (order prohibiting acquisition of Australian land).

Subsection 67(2) (order prohibiting proposed significant actions).

Order given under:

•        subsection 18(3) (additional orders about control of a corporation);

•        subsection 19(3) (additional orders about acquisition of interests in an Australian business); and

•        subsection 21A(3)(additional orders about the acquisition of interests in Australian urban land).

Subsection 67(3) (additional orders).

Order given under:

•        subsection 18(4) (order directing person to dispose of shares);

•        subsection 19(4) (order directing person to dispose of assets of an Australian business);

•        subsection 20(3) (order directing person to restore control of the corporation);

•        subsection 21(3) (order directing person to restore control of Australian business); and

•        subsection 21A(4) (order directing person to dispose of interest in Australian urban land).

Subsection 69(2) (powers of Treasurer to require disposal of interests).

Order given under section 22 (interim orders).

Section 68 (interim orders).

Decision made under subsection 25(1A) where conditions have been imposed.

Subparagraph 74(2)(a) (no objection notification imposing conditions necessary to ensure that action, if taken, is not contrary to the national interest).

Decision made under subsection 25(1A) where conditions have been imposed.

Subparagraph 74(2)(a) (no objection notification imposing conditions necessary to ensure action already taken is not contrary to national interest).

Advice given under subsection 25(1B) where conditions have been imposed.

Paragraph 74(2)(b) (no objection notification imposing conditions).

Decision under subsection 25(1A) where conditions have not been imposed.

Paragraph 75(2)(a) (decide that the Commonwealth has no objection).

Advice given under subsection 25(1B) where conditions have not been imposed.

Paragraph 75(2)(b) (give a no objection notification not imposing conditions).

9.10                The new provisions apply, after commencement, in relation to orders and advices mentioned in column 1 of the table as if subparagraph 71(1)(ii) and paragraph 74(6)(b) does not apply. Paragraph 71(1)(i) of the new provisions permits the Treasurer to vary an order made under Subdivision A of Division 2 of Part 3 of the new provisions at any time if the Treasurer is satisfied that that the variation does not disadvantage the person. Paragraph 74(6)(b) of the new provisions enables the Treasurer to vary a no objection notification given to a person by imposing a new condition or varying an existing condition if the Treasurer is satisfied that the new condition or variation does not disadvantage the person. The purpose of providing that subparagraph 71(1)(ii) and paragraph 74(6)(b) do not apply to orders made or given under the old provisions is to ensure that the operation of old orders is certain.

9.11                If an order is published in the Commonwealth of Australia Gazette (Gazette) before the Acts and Instruments (Framework Reform) Act 2015 comes into effect and the period referred to in section 25 of the old provisions has not ended by that commencement, the new provisions apply as if a reference to the registration of a notifiable instrument were a reference to publication in the Gazette. [Schedule 3, item 5]

Disposal orders

9.12                Section 69 of the new provisions enables the Treasurer to make a wide range of orders if the Treasurer is satisfied that a significant action has been taken and the result of taking that action is contrary to the national interest. The Treasurer may also make an order under section 74 of the new provisions in relation to:

•        any significant action taken before commencement if the Treasurer would have had the power to make an order under subsections 18(4), 19(4), 20(3), 21(3) or 21A(4) of the old provisions in relation to the action;

•        any acquisition of an interest in Australian rural land taken during the transitional period; or

•        any significant action taken after commencement. [Schedule 3, item 6]

Anti-avoidance

9.13                Section 78 of the new provisions, which in general terms permits the Treasurer to make an order with respect to a scheme carried out for the sole or dominant purpose of avoiding the application of this Act, applies to any scheme whether entered into before or after the commencement of Schedule 1. [Schedule 3, item 7]

Certificates

Certificates given before commencement

9.14                Except for the purposes of section 113 of the new provisions (which specifies when fees are payable), a certificate given under paragraph 3(e) or (r) of the Foreign Acquisitions and Takeovers Regulations 1989 (Regulations) before commencement is taken after commencement to have been given under section 57 of the new provisions (exemptions certificates for new dwellings).

9.15                Except for the purposes of section 113 of the new provisions (which specifies when fees are payable), a certificate given under paragraph 3(h) of the Regulations before commencement is taken, after commencement, to have been given under section 58 of the new provisions (exemptions certificates for foreign persons).

Applications for certificates made before commencement

9.16                The Treasurer may give a certificate under sections 57 or 58 of the new provisions to a person if the person made an application for a certificate under paragraph 3(e), (h) or (r) of the Regulations before commencement and a decision on the application has not been made at that time. [Schedule 3, item 8]

Offences and civil penalties

9.17                With the exception of sections 102 (liability for officers of corporations) and 103 (civil penalties for officers of corporations), Part 5 of the new provisions apply in relation to any conduct engaged in after commencement.

9.18                Sections 102 and 103 of the new provisions apply in relation to any conduct engaged in after the commencement of Schedule 1 by an officer of a corporation if the corporation is convicted of an offence against this Act or a civil penalty provision is made against the corporation after commencement. [Schedule 3, item 9]

Fees

9.19                Section 113 (when fees are payable) of the new provisions applies in relation to:

•        applications made after commencement under the new provisions;

•        orders and notices given after commencement in relation to action taken in relation to rural land during the transition period; and

•        orders and notices given after commencement in relation to action taken after commencement . [Schedule 3, item 10]

Record keeping

9.20                Division 2 of Part 7 of the new provisions (which imposes record keeping requirements) applies in relation to:

•        any action taken by the person that is a significant action or a notifiable action that relates to an order or decision made under Part 3 of the new provisions after the commencement of Schedule 1;

•        any action, transaction, event or circumstance that relates to whether a person is complying with a condition in a no objection notification imposing conditions or an exemption certificate that occur after commencement taken by the person that is specified in an exemption certificate after the commencement of Schedule 1 (regardless of whether the notice or certificate is given before or after the commencement of Schedule 1); and

•        disposals of residential land that occur after the commencement of Schedule 1. [Schedule 3, item 11]

Confidentiality

9.21                Division 3 of Part 7 of the new provisions apply in relation to records, disclosures and uses or protected information made after commencement, regardless of whether the protected information was obtained before or after that time. [Schedule 3, item 12]

Transitional rules

9.22                The Treasurer may make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) relating to the amendments or repeals made by this Act. However, the rules may not create an offence or civil penalty; provide powers of arrest or detention or entry, search or seizure; impose a tax; set an amount to be appropriated from the Consolidated Revenue Fund under an appropriation in this Act or directly amend the text in this Act. [Schedule 3, item 13]



Outline of chapter

10.0                Schedule 4 to the « Bill » makes a number of consequential amendments to Schedule 1 to the Taxation Administration Act   1953 (TAA 1953). These amendments support the effective administration of the « Bill » and the Register of Foreign Ownership of Agricultural Land « Bill »  2015, which provides for the establishment of a Register of Foreign Ownership of Agricultural Land (Register) to be administered by the Commissioner of Taxation (Commissioner). Schedule 4 to the « Bill » also makes several other amendments that will assist the Australian Taxation Office (ATO) to perform its functions more effectively by allowing it to share information with the Australian Securities and Investments Commission (ASIC) and the Department of Immigration and Border Protection (DIBP) in a broader range of circumstances than is currently the case.

Context of amendments

10.1                Division 355 of Schedule 1 to the TAA 1953 prohibits the disclosure of information about the tax affairs of a particular entity except in specified circumstances. Consequential amendments to this Division are required to take account of the change in circumstances from one where the Commissioner is providing information to the Treasury (the Department) and the Minister to one where the Commissioner becomes a co-regulator. These amendments ensure that the provisions about confidentiality of information in the « Bill » and the TAA 1953 are consistent.

Detailed explanation of new law

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML Act)

10.2                The effect of subsection 125(1) of the AML Act is that the Commissioner and any taxation officer is entitled to access Australian Transaction Reports and Analysis Centre (AUSTRAC) information for any purpose relating to the facilitation of the administration or enforcement of a taxation law.

10.3                The « Bill » will repeal subsection 125(1) and substitute a provision which enables the Commissioner and any taxation officer to access AUSTRAC information for any purpose relating to the facilitation of the administration of a taxation law or the Act, if the Commissioner or officer is accessing the information because of a delegation to the Commissioner under new section 138 of the Act. [Schedule 4, item 1]

10.4                The « amendment » to section 125 of the AML Act applies in relation to the access of information on or after the commencement of Schedule 4, regardless of whether the information was obtained before, on or after the commencement of Schedule 4. [Schedule 4, subitem 12(1)]

Income Tax Assessment Act 1997 - definition of ‘property right or interest’

10.5                The « Bill » inserts a definition of the term ‘property right or interest’ in subsection 995-(1) of the Income Tax Assessment Act 1997 . The term is defined to have the meaning given by subsection 354-5(2) in Schedule 1 to the TAA 1953 (that is, a legal or equitable interest in the property or a right, power or privilege in connection with the property, whether present or future and whether vested or contingent). [Schedule 4, item 2]

New Division 354 in Schedule 1 to the TAA 1953 - power to obtain information about rights or interests in property

10.6                A person who has a legal interest in any real or personal property may be given a written notice by the Commissioner which requires the person to give the Commissioner any information the person has about any other property right or interest in the property that the Commissioner requires for the purposes of the administration or operation of a taxation law. ‘Property right or interest’ means a legal or equitable interest in the property or a right, power or privilege in connection with the property.

10.7                The information a person may be required to give the Commissioner includes details about that person’s interest in the property; details (including the name and address) of each other person who has a property right or interest in the property; details of any class of person who has a property right or interest in the property; and details of each property right or interest in the property, including the nature and extent of the right or interest and the circumstances giving rise to the right or interest. If the person does not have the information required by the notice, the person must make all reasonable efforts to obtain the information if another person has the information.

10.8                The notice must give the person at least 14 days to produce the information, unless the Commissioner is satisfied that a short period is necessary, in which case the person must give the information within that shorter period. [Schedule 4, item 3]

10.9                This gives the Commissioner a means to identify the beneficial owners of a property, which in some circumstances is difficult to identify by other means.

10.10            A person who fails to comply with a notice given under this provision may be guilty of an offence against subsection 8C(1) of the TAA 1953. In general terms, a person who refuses or fails, when as required under or pursuant to a taxation to (among other things) give any information or document to the Commissioner or to give the person information to the Commissioner in the manner in which it is required under a taxation law to be given, the person may be guilty of an offence against subsection 8C(1) of the TAA 1953. Subsection 8C(1) of the TAA 1953 is an offence of absolute liability.

10.11            The penalty for an offence against subsection 8C of the TAA 1953 is generally a fine not exceeding 20 penalty units, although in specified circumstances may be higher. [11]

Subsection 355-55(1) in Schedule 1 to the TAA 1953 - disclosure of information contained in the Register to certain Ministers

10.12            Section 355-25 in Schedule 1 to the TAA 1953 makes it an offence for a taxation officer to disclose tax information that identifies any entity, or is reasonably capable of being used to identify an entity, except in certain specified circumstances (the offence provision). Subsection 355-55(1) of Schedule 1 to the TAA 1953 provides that the offence provision does not apply if a taxation officer discloses certain classes of information to a Minister for various specified purposes. The « Bill » amends this provision so that the offence provision does not apply if a taxation officer discloses information contained in the Register to a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia for the purpose of enabling that Minister to discharge that responsibility. [Schedule 4, item 4]

Subsection 355-65(4) in Schedule 1 (table items 1-4) - disclosure of information to ASIC

10.13            In broad terms, the effect of section 355-65 in Schedule 1 to the TAA 1953 is that the offence provision does not apply if a taxation officer discloses particular classes of information to specified individuals for various government purposes.

10.14            The effect of items 1 to 4 in Table 3 in section 355-65 is that the offence provision does not apply if a taxation officer discloses information to ASIC for various specified purposes, including for the purpose of investigation or enforcement activities relating to a provision of a law that is administered by ASIC and imposes a pecuniary penalty or creates an offence. The « Bill » repeals items 1 to 4 in Table 3 and substitutes an item which has the effect that the offence provision does not apply if a taxation officer discloses information to ASIC for the purposes of performing any of its functions or exercising any of its powers. This allows the ATO to provide information to ASIC that will enable ASIC to undertake data-matching, thereby further enhancing ASIC’s ability to proactively assess whether persons are complying with laws administered by ASIC. [Schedule 4, item 5]

Subsection 355-65(4) in Schedule 1 (table item 7) - disclosure of information for the purposes of the Foreign Acquisitions and Takeovers Act 1975 (Act)

10.15            The effect of item 7 in Table 3 in section 355-65 is that the offence provision does not apply if a taxation officer discloses information to the Secretary for the purpose of briefing the Minister in relation to a decision that the Minister may make under the Act; briefing the Minister in relation to a decision that the Minister may make in accordance with Australia’s Foreign Investment Policy (Policy); or briefing an officer of the Department who is authorised by the Minister to make a decision under the Act or the Policy.

10.16            The « Bill » provides that compliance and investigation functions may be undertaken by the Commissioner for Taxation, while general administration of the Act remains with the Treasurer. For that reason the « Bill » repeals item 7 of the table in subsection 355-65(4) and replaces it with an item that authorises information to be disclosed to the Secretary of the Department for the purpose of administering the Act. [Schedule 4, item 6]

Subsection 355-65(8) in Schedule 1 (table items 3 and 4) - disclosure of information to the Immigration Secretary or the Australian Border Force Commissioner

10.17            The effect of subsection 355-65(8) in Schedule 1 to the TAA 1953 is that the offence provision does not apply to a taxation officer who discloses particular classes of information to specified individuals for a range of purposes. The ATO is currently able to disclose information to the ‘Immigration Secretary’ (that is, the Secretary to the ‘Immigration Department’ which in turns is defined to mean the Department administered by the Minister administering the Migration Act 1958 ) for the purposes of assisting in locating persons who are unlawfully in Australia and information relating to a holder (or former holder) of a visa or an approved sponsor (or former approved sponsor) for certain narrowly defined purposes.

10.18            The effect of the « amendment » is that the offence provision does not apply to a taxation officer who discloses information to the ‘Immigration Secretary’ or the Australian Border Force Commissioner for the purpose of administering any functions or exercising any of the powers administered by the Minister administering the Immigration Department. This « amendment » enables the ATO and the DIBP to cooperate more effectively in areas of mutual concern, including detecting people who are working in Australia illegally. [Schedule 4, item 7]

Subsection 355-65(8) in Schedule 1 (after table item 6) - disclosure of information in the Register to the Secretary of certain departments

10.19            The effect of subsection 355-65(8) in Schedule 1 to the TAA 1953 is that the offence provision does not apply to a taxation officer who discloses particular classes of information to specified individuals for a range of purposes. The effect of the « amendment » is that the offence provision does not apply to a taxation officer who discloses information contained in the Register to the Secretary of a Department administered by a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia. [Schedule 4, item 8]

Section 355-75 in Schedule 1 - limits on disclosure to courts and tribunals

10.20            The effect of existing section 355-75 in Schedule 1 to the TAA 1953 is that a taxation officer cannot be required to disclose to a court or tribunal protected information that was acquired by the person as a taxation officer except where it is necessary to do so for the purpose of carrying into effect the provisions of a taxation law.

10.21            Because taxation officers have duties, functions and powers under the « Bill » , the effect of the « amendment » to this provision is to make the TAA 1953 provision consistent with the « Bill » . Where a taxation officer has acquired protected information because of the exercise of duties and functions under the « Bill » , the taxation officer can be required to disclose that information to a court or a tribunal where it is necessary to do so for the purpose of carrying into effect the provisions under a taxation law or the Act. [Schedule 4, item 9]

Paragraph 355-155(b) of Schedule 1 - on-disclosure

10.22            In general terms, under section 355-155 of Schedule 1 to the TAA 1953 it is an offence for an entity to record information or to disclose information to another entity (sometimes referred to as an ‘on-disclosure’) if the information was acquired by the entity under certain exceptions in Subdivision 355-B and Subdivision 355-C of Schedule 1 to the TAA 1953. The effect of the « amendment » to paragraph 355-155(b) of Schedule 1 is that the prohibition on ‘on disclosure’ does not apply to information disclosed to the Secretary of the Department for the purpose of administering the Act. This is because the Secretary may disclose the information for the purposes authorised by new Division 3 of Part 7 of the Act. [Schedule 4, item 10]

Section 355-205 in Schedule 1 - limits on on-disclosure to courts or tribunals

10.23            The « Bill » repeals section 355-205 in Schedule 1 to the TAA 1953 and substitutes a new provision. Broadly, section 355-205 currently provides that an entity is not to be required to ‘on disclose’ protected information to a court or tribunal except where it is necessary to do so for the purposes of carrying into effect the provisions of a taxation law. The new section 355-205 in Schedule 1 is identical to the current provision except that because information is disclosed for the administration of the Act, the limit on on-disclosure to courts or tribunals would not apply for the purposes of carrying into effect the provisions of a taxation law or if the entity has or had duties, functions or powers under the Act. [Schedule 4, item 11]

Application

10.24            The amendments to Division 355 in Schedule 1 to the TAA 1953 made by Schedule 4 to this « Bill » apply in relation to records and disclosures of protected information made on or after the commencement of Schedule 4, whether the information became protected information before, on or after the commencement of Schedule 4. [Schedule 4, subitem 12(2)]



       

Finding table

Outline of chapter

      This Chapter contains a finding table to help you locate which provision in the ‘new law’ (that is, Schedule 1 to the Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill »  2015) broadly correspond to a provision in the current law (that is, the Foreign Acquisitions and « Amendment » Takeovers Act 1975 as it stands immediately before Schedule 1 to the « Bill » comes into effect).

      In the finding table ‘omitted’ means that the provision will not be re-enacted.

Table 11.1 : Finding table — current law to new law

Current law

New law

1

1

2

2

3

Omitted

4

35 and 36

5(1)

4

5(2)

24

5(3)

16

5(4)

25

5(5)

25

5(6)

28

5(8)

Omitted

5A

5

6

6

7

8

8

23

9(1)

4 (definition of ‘substantial interest’)

9(1A)

4 (definition of ‘aggregate substantial interest’)

9(1B)

18(1) and (2)

9(1C)

18(1) and (2)

9(2)

54(4) and (5)

9A

4 (definition of ‘substantial interest’), 18(3)

10

21

11

9, 13, 14, and 15(1)-(3)

12

10, 13, 14 and 15

12A

12, 14 and 15

12B

11, 13, 14 and 15

12C

19

13

Omitted

13A

Omitted

13B

Omitted

13C

4 (definition of ‘Australian land corporation’)

13D

4 (definition of ‘Australian land trust’)

14

22

15

Omitted

16

30 and 31

17

29

17A

Omitted

17B

Omitted

17C

Omitted

17D

Omitted

17E

Omitted

17F

4 (definition of ‘foreign government investor’)

17G

Omitted

17H

26

18

40, 54 and 67-69

19

41, 54, 67, 69 and 59

20

40(2)(e), 67(2) and 69(2)

21

41(2)(c), 54 and 67-69

21A

43, 67 and 69

22

68

23

71

24

72

25

70, 74 and 87

26

81 and 84

26A

81 and 84

27

135

28

74(7) and 75(4)

30

86

31

102

35

132

36

133

37

34

38

135

38A

78

39

139



Outline of chapter

12.0                Part 6 of the Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015 (Foreign Acquisitions  « Bill » ) specifies that:

•        the Treasurer is not required to take any action in relation to certain applications or notices before the applicable fee is paid; and

•        the Treasurer may waive the whole or part of a fee if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee.

12.1                This Chapter explains the operation of the Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015 (Imposition  « Bill » ), which imposes fees in relation to certain applications and actions that are made under the Foreign Acquisitions  « Bill » .

Context of amendments

12.2                Currently, no fees or charges are payable when making an application or giving a notice under the Act. The imposition of fees will cover the costs of considering applications, the introduction of a specialised investigative and enforcement area within the Australian Taxation Office (ATO), improvements in the collection of data about foreign investment in Australia, and an increase in the resources dedicated to the investigation of alleged breaches of the Act.

12.3                The imposition of fees will ensure that those who undertake activities regulated by the Foreign Acquisitions and Takeovers Act 1975 (Act) rather than the general community bear the costs relating to the administration of the Act, including the costs of monitoring compliance with the legislation, investigating alleged breaches and commencing enforcement proceedings in appropriate cases.

Summary of new law

12.4                The Imposition  « Bill » imposes fees in relation to applications and actions that are made under the Foreign Acquisitions  « Bill » . The Imposition  « Bill » also sets out the rates of the fees that apply and provides a power for regulations to prescribe the rate of the fee, subject to a maximum amount set out in the Imposition  « Bill » . The rates of the fees are also subject to annual indexation.

Detailed explanation of new law

When are fees payable?

12.5                A person who applies for an exemption certificate, gives notice of a notifiable action, or gives a notice in relation to a proposal to take a significant action that is not a notifiable action must pay a fee when the notice is given or an application is made. [Schedule 1, item 4, section 113, Foreign Acquisitions  « Bill » ]

12.6                To comply with section 55 of the Constitution, fees are imposed as a tax by the Imposition  « Bill » and the rates and indexation mechanism are also included in that « Bill » . [Section 5, Imposition  « Bill » ]

Fee amounts imposed by Imposition  « Bill »

12.7                The fee amounts are as follows:

Table 12.1 : Fee for exemption certificates

Provision reference

Fee category

*Fee amount

Table item 1 subsection 6(1)

New dwellings - developer application

An application for an exemption certificate for new dwellings under section 57 of the Foreign Acquisitions « Bill » .

$25,000.

Table item 2 subsection 6(1)

Interest in Australian land

An application by a foreign person for an exemption certificate under section 58 of the Foreign Acquisitions « Bill » , where the consideration specified in the application for the proposed acquisitions is:

(A) $1 billion or less; or

(B) more than $1 billion.

(A) $25,000

(B) $100,000.

Table item 3 subsection 6(1)

Established dwellings

An application by a foreign person for an exemption certificate for an interest in an established dwelling under section 59 of the Foreign Acquisitions « Bill » , where the consideration specified in the application for the proposed acquisition is:

(A) $1 million or less; or

(B) more than $1 million.

(A) $5,000

(B) see explanation in paragraphs 12.11 to 12.13 below.

Table item 4 subsection 6(1)

Exemption certificate prescribed by regulations

An exemption certificate prescribed by regulations under section 63 of the Foreign Acquisition « Bill » .

The amount not exceeding $25,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item.

Table item 5 subsection 6(1)

Exemption certificate variation

A variation of an exemption certification under section 62 of the Foreign Acquisitions « Bill » not contrary to the national interest.

$5,000.

[Subsection 6(1), Imposition  « Bill » ]

*The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.

Table 12.2 : Fees for giving notices of notifiable actions

Provision reference

Fee category

*Fee amount

Table item 1 subsection 7(1)

Interests in Australian businesses or entities

One of the following notifiable actions:

(a) to acquire a direct interest in an Australian entity or Australian business that is an agribusiness; or

(b) to acquire a substantial interest in an Australian entity where the consideration for the acquisition is;

(A) $1 billion or less; or

(B) more than $1 billion.

(A) $25,000

(B) $100,000.

Table item 2 subsection 7(1)

Residential or agricultural land

To acquire an interest in residential land or agricultural land, where the consideration for the acquisition is:

(A) $1 million or less; or

(B) more than $1 million.

(A) $5,000

(B) see explanation in paragraphs 12.11 to 12.13 below.

Table item 3 subsection 7(1)

Commercial land (not vacant)

To acquire an interest in commercial land (other than commercial land that is vacant).

$25,000.

Table item 4 subsection 7(1)

Vacant commercial land

To acquire an interest in commercial land that is vacant.

$10,000.

Table item 5 subsection 7(1)

Mining and production tenements

To acquire an interest in a mining or production tenement.

$25,000.

Table item 6 subsection 7(1)

Prescribed notifiable actions

To take a notifiable action prescribed by regulations under section 48 of the Foreign Acquisitions « Bill » .

The amount not exceeding $100,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item.

[Subsection 7(1), Imposition  « Bill » ]

* The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.

Other fees

12.8                The table below sets out the fees for:

•        a person (each table item in subsection 8(1)) for:

-       an order made by the Treasurer under Subdivision A of Division 2 of Part 3 of the Act in relation that person; or

-       a no objection notification given to that person;

•        giving a notice of a proposal to take an action that is not a notifiable action (table items 1, 2 and 4 of the table in subsection 8(1)).

Table 12.3 : Other fees

Provision reference

Fee category

*Fee amount

Paragraphs 8(1)(a) and (b) and table item 1 of subsection 8(1)

Issue securities, acquire businesses

(a) to acquire less than a substantial interest in securities in an entity;

(b) to issue securities in an entity; or

(c) to acquire interests in assets of an Australian business;

where the consideration for the issue or acquisition is:

(A) $1 billion or less; or

(B) more than $1 billion.

(A) $25,000

(B) $100,000.

Paragraphs 8(1)(a) and (b) and table item 2 of subsection 8(1)

Enter or terminate agreements

(a) to enter an agreement mentioned in paragraph 46(2)(d) of the Foreign Acquisitions « Bill » ;

(b) to alter a constituent document of an entity mentioned in paragraph 46(2)(e) of the Foreign Acquisitions « Bill » ; or

(c) to enter or terminate a significant agreement with an Australian business.

$25,000.

Paragraph 8(1)(b) and Table item 3 of subsection 8(1)

Significant and notifiable action

To take a significant action that is also a notifiable action.

The amount that would have been payable under the Imposition  « Bill » for an action if a notice relating to the action had been given by the person.

Paragraphs 8(1)(a) and (b) and table item 4 subsection 8(2)

Prescribed significant action non-notifiable

To take a significant action that is prescribed by regulations under section 49 of the Foreign Acquisitions « Bill » and that is not a notifiable action.

The amount not exceeding $100,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item.

[Subsection 8(1), Imposition  « Bill » ]

* The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.

Fee for variation or revocation of no objection notification

12.9                If a person applies under subsection 76(6) of the Foreign Acquisitions  « Bill » for a variation of a no objection notification imposing conditions then the amount of the fee is:

•        $5,000, if the action contained in the notification is an acquisition of an interest in Australian land; and

•        otherwise $10,000.

[Subsection 8(2), Imposition  « Bill » ]

Established dwellings and residential and agricultural land exceeding $1 million

12.10            A calculation is used to determine the fee payable for the following actions:

•        an application for an exemption certificate for an established dwelling under section 59 of the Foreign Acquisitions  « Bill » where the consideration for the proposed acquisition is more than $1 million; and

•        acquiring an interest in residential land or agricultural land, where the consideration for the acquisition is more than $1 million.

[Subsections 6(2) and 7(2), Imposition  « Bill » ]

12.11            The fee payable in both of the above circumstances is determined by first dividing the proposed consideration for the proposed acquisition by $1 million, and rounding the result down to the nearest whole number. The result of that calculation (the purchase price number) is then multiplied by $10,000 to determine the fee payable. [Subsections 6(2) and 7(2), Imposition  « Bill » ]

12.12            For agricultural land, the fee payable cannot exceed $100,000 as indexed each financial year. [Subsection 7(3), Imposition  « Bill » ]

Six monthly fees for developers

12.13            A further fee is payable by developers in addition to the fee for applications by developers for exemption certificates for new dwellings. The further fee applies if, during the six month period after the developer is given an exemption certificate (and subsequent six month periods), foreign persons have acquired from the developer one or more dwellings covered by the certificate. In this instance, at the « end » of that six month period the developer must pay a fee equal to the total of the amounts for those new dwelling acquisitions by foreign persons. The amount of the fee payable is the amount that would have been payable at the time of each acquisition, if:

•         each acquisition had been treated as an acquisition of residential land; and

•         assuming the acquisition had been a notifiable action.

[Schedule 1, item 4, subsections 113(2), (3), and (4), Foreign Acquisitions  « Bill » , subsection 6(3), Imposition  « Bill » ]

Internal reorganisation

12.14            If a fee is payable by a person under the Foreign Acquisitions « Bill » in relation to one or more actions that constitute an internal reorganisation, then the fee is $10,000. An internal reorganisation is an acquisition by an entity (first entity) of:

•        an interest in securities in another entity where the first entity and the other entity are subsidiaries of the same holding entity or the other entity is a subsidiary of the first entity;

•        an interest in an asset or Australian land from another entity if;

-       both entities are subsidiaries of the same holding entity;

-       the other entity is the holding entity of the first entity; or

-       the other entity is a subsidiary of the first entity.

[Section 4, definition of ‘internal reorganisation’, section 10, Imposition  « Bill » ]

Tie breaker rules if multiples fees could apply

12.15            If one agreement covers more than a single action for which a fee is payable, a separate fee is payable for each acquisition of an interest in residential land covered by the agreement. This ensures that the fees cannot be reduced for multiple acquisitions by including them in a single agreement. [Paragraph 9(1)(a), Imposition  « Bill » ]

12.16            Further, if, apart from acquisitions of interests in residential land, the agreement covers more than one other action, then the fee payable is the highest of the fees for those actions. [Paragraph 9(1)(b), Imposition  « Bill » ]

12.17            If a single action is either or both:

•        more than one of the following kinds of actions:

-       a significant action in relation to an entity (under subsection 40(2) of the Foreign Acquisitions  « Bill » );

-       a significant action in relation to a business (under subsection 41(2) of the Foreign Acquisitions  « Bill » );

-       the acquisition of an interest in Australian land by a foreign person (under paragraph 43(a) of the Foreign Acquisitions  « Bill » );

-       to take a significant action that is prescribed for the purposes of section 44 of the Foreign Acquisitions  « Bill » ;

•        a single action relating to land that satisfies more than one subsection in section 52 of the Foreign Acquisitions  « Bill » (agricultural or other land with a value above the threshold and land which is prescribed);

then the fee payable in relation to the single action is the highest of the amounts that apply.

[Subsection 9(2), Imposition  « Bill » ]

12.18            This provides a tie breaker rule to remove doubt about the relevant fee that applies if multiple fees could apply.

Indexation of fees

12.19            The amounts of the fees set out in the Imposition  « Bill » and any fee amounts prescribed in regulations under a regulation making power in the Imposition  « Bill » are subject to annual indexation. This includes both fees for which a dollar amount is included in the Imposition  « Bill » and fees that are calculated by reference to a formula such as fees for acquiring an interest in residential land or agricultural land, where the consideration for the acquisition is more than $1 million. [Subsections 12(1) and (2) and paragraph 12(9)(b), Imposition  « Bill » ]

12.20            The purchase price number used to determine the fees for acquisition of interests in residential land or agricultural land is not a fee and accordingly is not itself subject to indexation. Similarly, the threshold amounts for consideration of $1 billion, $1 million and the amount of $10,000 to which the purchase price number applies are not indexed. This ensures that indexation applies only once to the fee amount for acquisitions of residential or agricultural land. The maximum cap on the fees for prescribed exemption certificates, prescribed notifiable actions and prescribed significant actions that are not notifiable actions are also subject to annual indexation. The maximum cap on the fee payable for an acquisition of an interest in agricultural land is also subject to annual indexation . [Subsection 12(9), Imposition  « Bill » ]

12.21            Indexation applies each financial year commencing with the 2016-17 financial year. [Schedule 3, subitem 10(2), Foreign Acquisitions  « Bill » , subsections 12(2) and (3), Imposition  « Bill » ]

12.22            The indexed amount of fees for later financial years is calculated by multiplying the Base amount of the fee by the Indexation factor for the financial year. The indexation factor reflects the change in the CPI index numbers for each quarter for the 12 month period ending on 31 March before the relevant financial year compared to the index numbers for each quarter for the 12 month period ending on 31 March immediately before the base financial year for the base amount. [Subsections 12(2), (3) and (8), Imposition  « Bill » ]

12.23            The CPI index numbers (index number) used for determining the indexation factor refer to the original series of the eight capital cities weighted average All Groups Consumer Price Index number. Where a revised index number is published, the index number used is the most recently published index number provided that the index number is not published more than two weeks after the first date of publication for that number. An index number published more than two weeks after original publication is only used if it includes changes to the index reference period. [Subsections 12(5) and (8), Imposition  « Bill » ]

12.24            The indexation factor is rounded to three decimal places (rounded up if the result of the calculation for the fourth decimal place is five or more). The indexed fee that is calculated is then rounded down to the nearest multiple of $100. No indexation applies if applying indexation would result in a reduction in fees. Indexation instead occurs in later financial years once the indexation calculation results in an increase in the fee amounts. [Subsections 12(4), (6) and (7), Imposition  « Bill » ]

12.25            A regulation making power is included in the Imposition  « Bill » to enable a lower amount of fees (including a nil amount) to be prescribed, or for a method of working out that lower amount to be prescribed. This provides flexibility to reduce fee levels if required or to remove a fee that is imposed under the Imposition  « Bill » . [Subsection 11(1), Imposition  « Bill » ]

12.26            Where the amount of a fee is specified as payable in certain circumstances, the regulations may prescribe an amount or method in relation to only some of those specified circumstances. [Subsection 11(2), Imposition  « Bill » ]

12.27            The Imposition  « Bill » includes a number of definitions for the purposes of the « Bill » , including indexed amount, index number, base amount and quarter for the purposes of indexation. The Imposition  « Bill » also ensures that definitions in the « Bill » or regulations prescribed under a regulation making power under the « Bill » have the same meaning. [Section 4, Imposition  « Bill » ]

Example 12.1 Indexation of fees

The fee payable for an exemption certificate for a new dwelling payable under section 57 of the Foreign Acquisitions  « Bill » for the 2017-18 financial year is calculated as follows (assuming a lower fee amount has not been prescribed under regulations):

The fee for the 2015-16 financial year of $25,000 is multiplied by an indexation factor worked out by dividing the sum of the four index numbers for the quarters of the 12 month period ending on 31 March 2017 by the sum of the four index numbers for the quarters of the 12 month period ending on 31 March 2015. The indexation factor is rounded to three decimal places and the indexed fee amount calculated is the rounded down to the nearest multiple of $100.

General regulation making power

12.28            The Imposition  « Bill » includes a general regulation making power to prescribe matters required or permitted by the « Bill » or necessary or convenient to give effect to the « Bill » . [Section 13, Imposition  « Bill » ]

12.29            The Imposition  « Bill » extends to all Australian external territories. [Section 3, Imposition  « Bill » ]

Requirement for fees to be paid before Treasurer exercises powers

12.30            Where a fee is payable for making an application or giving a notice, a person is taken not to have given the notice or made the application until the fee has been paid or the fee has been waived. [Schedule 1, item 4, section 114, Foreign Acquisitions  « Bill » ]

Waiver and remissions of fees

12.31            The Treasurer may waive or remit the whole or a part of a fee that is payable if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee. [Schedule 1, item 4, section 115, Foreign Acquisitions  « Bill » ]

Application provisions

12.32            Fees apply from the later of:

•        the day after Royal Assent of the Imposition  « Bill » ; and

•        1 December 2015.

[Table item 2 in Subsection 2(1), Imposition  « Bill » ]

12.33            However, if the Foreign Acquisitions  « Bill » does not receive Royal Assent then fees do not apply. This ensures that all related legislation must be enacted before fees can apply.

[Subsection 2(1), table item 2, Imposition  « Bill » ]



Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act « 2011 »

Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015 and Foreign Acquisitions and Takeovers Fees Imposition « Bill » 2015

13.0                These Bills are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act « 2011 » .

Overview

13.1                The Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015 ( « Bill » ) makes the most far-reaching changes to Australia’s foreign investment framework since the Foreign Acquisitions and Takeovers Act 1975 (Act) was enacted. Australia welcomes foreign investment because of the important role it plays in the development of the economy. However, it is necessary to have a robust and flexible legal framework which permits the Treasurer to block or modify any proposed investment that is contrary to the national interest or to impose conditions on the way a proposal is, or an acquisition has been, implemented to ensure it is not contrary to the national interest. The framework provided by the « Bill » will increase the community’s confidence in foreign investment in Australia while at the same time providing a predictable and welcoming environment for foreign investors.

Who is regulated by the Bills?

13.2                The main amendments to the Act, which are in Schedule 1 to the « Bill » , primarily apply to certain actions taken by a foreign person. ‘Foreign person’ is relevantly defined by new section 4 of the Act to include an individual who is ‘not ordinarily resident in Australia’ as well as a trustee (who may be an individual) of certain trusts.

13.3                An individual who is not an Australian citizen is considered to be ‘ordinarily resident in Australia’ at a particular point in time if:

•        the individual has been in Australia during 200 or more days in the preceding 12 months; and

•        at the particular point in time the individual is in Australia and the individual’s continued presence is not subject to any limitation as to time imposed by law; or

•        if the individual is not in Australia at the particular point in time but immediately before the individual’s most recent departure from Australia the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law (see new section 5).

Regulated acquisitions

13.4                A foreign person must not take certain actions without first notifying the Treasurer (new section 81). These actions are called ‘notifiable actions’. The acquisition of certain interests in an agribusiness, an Australian entity, or an interest in Australian land, are all notifiable interests. Generally, an action is only a notifiable action if the entity, business or land meets the applicable monetary threshold (new section 47).

13.5                The « Bill » also gives the Treasurer certain powers over actions that are referred to as ‘significant actions’. Broadly, a significant action is an action to acquire interests in securities, assets or Australian land, or otherwise an action in relation to entities (that is, corporations and unit trusts) and businesses that have the requisite connection with Australia. An action in relation to an entity or business will only be a significant action if the action results in a change in control involving a foreign person or to be taken by a foreign person, unless an action related to an agribusiness or land (new section 40 to 43 and 51 to 54) .

13.6                If the Treasurer is notified that a person is proposing to take a significant action, the Treasurer may:

•        decide to not object to the action and give the person a no objection notification not imposing conditions;

•        decide not to object to the action provided the person complies with one or more conditions and give the person a no objection notification imposing conditions; or

•        decide that taking the action would be contrary to the national interest and make an order prohibiting the proposed significant action .

13.7                If a significant action has already been taken which the Treasurer is satisfied is contrary to the national interest, the Treasurer may make an order under new section   69, known as a disposal order, which is directed at undoing the action. For example, the Treasurer could order a person to dispose of their shares by a specified time. Alternatively, the Treasurer could impose conditions.

13.8                A foreign person is not obliged to inform the Treasurer that they are proposing to take a significant action unless the action is also a notifiable action. However, it is anticipated that some foreign persons will choose to notify the Treasurer because they will want the certainty offered by a no objection notification. Under new section   70, if a foreign person is given a no objection notification in relation to the significant action, provided the person does not take any action which is not specified by the notification, the Treasurer will generally not be able to make a disposal order.

13.9                The question of whether a particular investment is contrary to the national interest will be a matter for the Treasurer. While each proposal will be considered on a case-by-case basis, the factors that may be relevant to the Treasurer’s decision will include the impact of the proposed investment on Australia’s national security, the economy and the community, competition, other Government policies (including taxation), and the character of the investor. When considering an application to acquire an interest in residential land, generally consideration will also be given to whether the proposed investment would add to Australia’s housing stock.

Fees

13.10            Fees will be payable in relation to applications made and orders made, and notices and notifications given. The amounts of the fees are specified in the Foreign Acquisitions and Takeovers Fees Imposition « Bill »  2015 (Imposition  « Bill » ) . Fees are payable to ensure that foreign persons and others who take action regulated by the Act bear the costs relating to the administration of the Act.

Offences

13.11            A person may commit an offence or contravene a civil penalty provision if they fail to comply with certain obligations created by the new Act. An infringement notice may be given in relation to certain civil penalties. Most of the offences and all the civil penalty provisions created by the « Bill » are in new Part 5 of the Act.

Record keeping and confidentiality

13.12            New Part 7 of the Act seeks to ensure that information provided under this Act is not disclosed unnecessarily or put to unauthorised « use » . New Part 7 also requires certain records to be made and kept.

13.13            Information that is obtained for the purposes of this Act, which is called ‘protected information’, may be disclosed only for authorised purposes. New Division 3 of Part 7 of the Act sets out the circumstances in which information may be disclosed. A person who obtains, uses or discloses protected information other than as authorised by this Act may commit an offence.

Confidentiality requirements in other Acts

13.14            The « Bill » envisages that the Commissioner of Taxation (Commissioner) will exercise particular powers and functions under the Act. Schedule 4 to the « Bill » makes a number of consequential amendments to Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). These amendments support the effective administration of the « Bill » and the Register of Foreign Ownership of Agricultural Land « Bill » 2015, which provides for the establishment of a Register of Foreign Ownership of Agricultural Land (Register) to be administered by the Commissioner .

13.15            Schedule 4 to the « Bill » also makes several other amendments that will assist the Australian Taxation Office (ATO) to perform its functions more effectively by allowing it to share information with the Australian Securities and Investments Commission (ASIC) and the Department of Immigration and Border Protection (DIBP) in a broader range of circumstances than is currently the case.

Human rights implications

13.16            This « Bill » engages the following human rights and freedoms:

•        the right to be presumed innocent until proved guilty according to law;

•        the right to a fair and public hearing;

•        the right not to be compelled to testify against oneself or to confess guilt;

•        the right to protection from unlawful or arbitrary interferences with an individual’s privacy;

•        the right to freedom of expression; and

•        the right to freedom from discrimination on prohibited grounds.

Assessment of civil penalties

13.17            Practice Note 2: Offence provisions, civil penalties and human rights [12] observes that civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR), regardless of the distinction between criminal and civil penalties in domestic law. This is because the word ‘criminal’ has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a ‘criminal’ penalty for the purposes of the Articles 14 and 15 of the ICCPR.

13.18            The civil penalty provisions in the « Bill » (which are in new Division 3 of Part 5 of the « Bill » ) should not be considered ‘criminal’ for the purposes of international human rights law. While the civil penalty provisions included in the « Bill » are intended to deter people from not complying with the obligations imposed by the Act, none of the civil penalty provisions carry a penalty of imprisonment and there is no sanction of imprisonment for non-payment of any penalty. In addition, the maximum pecuniary penalty that may be imposed on an individual for contravening a civil penalty provision is generally lower than maximum pecuniary penalty that may be imposed for the corresponding criminal offence. The statement of compatibility therefore proceeds on the basis that the civil penalty provisions in the « Bill » do not create criminal offences for the purposes of Articles 14 and 15 of the ICCPR.

Presumption of innocence

13.19            Paragraph 2 of Article 14 of the ICCPR protects the right of a person charged with a criminal offence to be presumed innocent until proven guilty according to law. The presumption of innocence is also a fundamental principle of the common law. As the Human Rights Committee has observed, the presumption of innocence ‘imposes on the prosecution the burden of proving the charge, guarantees that no guilt can be presumed until the charge has been proved beyond reasonable doubt, ensures that the accused has the benefit of doubt, and requires that persons accused of a criminal act must be treated in accordance with this principle’. [13] The presumption of innocence generally requires the prosecution to prove each element of a criminal offence beyond reasonable doubt.

Offence provisions which carry an evidential burden

13.20            Any offence provision which requires a defendant to carry an evidential burden may be considered to engage the right to the presumption of innocence. New sections 129 and 133 of the Act engage the right to the presumption of innocence because a defendant bears an evidential burden in relation to matters in those provisions. In addition, Schedule 4 to the « Bill » relies on an absolute liability offence to enforce an obligation created by new section 354-1 of Schedule 1 to the TAA 1953 . Each of these provisions is considered in turn.

13.21            The effect of new section 129 is that new section 128 of the Act (which makes it an offence for a person to record, « use » or disclose protected information for a purpose not authorised by new Part 7) does not apply if the person records, discloses or otherwise uses protected information in good faith in performing, or purportedly informing, his or her functions under this Act. An evidential burden applies to this defence. The imposition of an evidential burden is justified because the reason why a defendant used or disclosed protected information will generally be a matter that is peculiarly within the defendant’s knowledge. Moreover, the effect of the limitation is that the defendant must merely adduce or point to evidence that suggests a reasonable possibility that he or she disclosed the information in good faith. Once this is done, the prosecution must refute this beyond reasonable doubt to obtain a conviction (see section 13.3 of the Criminal Code ). As a result, the risk that a person may be found guilty of an offence against new section 128 of the Act despite there being reasonable doubt about the person’s guilt is considered to be low. Accordingly, to the extent this provision might be considered to limit the presumption of innocence, the limitation is reasonable in all the circumstances.

13.22            New subsection 133(1) permits the Treasurer to issue a notice if the Treasurer has reason to believe that a person can give information or produce documents relating to matters that are relevant to the exercise by the Treasurer of his or her powers under this Act. A person who fails to comply with such a notice may be guilty of an offence which has a maximum penalty of imprisonment for six months, 30 units or both. However, this offence does not apply if the person complies with the notice to the extent to which the person is capable of complying with it. An evidential burden applies to this defence. This is appropriate because it is a matter that will be peculiarly within the defendant’s knowledge and it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. Once the person has adduced or pointed to evidence which suggests there is a reasonable possibility that the person has complied with the notice to the extent possible, the prosecution must refute this beyond reasonable doubt in order to obtain a conviction. For this reason it is again considered that the risk of a person being found guilty of an offence against subsection 133(5) of the Act is low, and to the extent this provision might be considered to limit the presumption of innocence the limitation is reasonable in all the circumstances.

13.23            New section 354(1) of Schedule 1 to the TAA 1953, which is inserted by item   3 of Schedule 4, is similar to new section 133 of the Act. A person who receives a notice under new section 354(1) of Schedule 1 to the TAA 1953 may be guilty of an offence against subsection 8C(1) of the TAA 1953. However, the effect of subsection 8C(1B) is that a person does not commit an offence to the extent to which the person is not capable of complying with the obligation. A defendant bears an evidential burden in relation to this matter. This is appropriate because generally only the defendant will know the reason why she or he will was unable to fully comply with the notice. For these reasons, to the extent this provision might be considered to limit the presumption of innocence the limitation is reasonable in all the circumstances.

Strict liability and absolute liability offences

13.24            Strict liability and absolute liability offences engage and limit the presumption of innocence because they allow for the imposition of criminal liability without the need to prove fault. The difference between strict and absolute liability is that strict liability allows a defence of honest and reasonable mistake to be raised, whereas an offence of absolute liability does not.

13.25            The « Bill » creates one strict liability offence and relies on an absolutely liability offence to enforce an obligation created by new section 354-1 of Schedule 1 to the TAA 1953.

13.26            New section 128 makes it an offence if a person fails to make and keep a record under Division 2 of Part 7 of the Act unless the Treasurer has notified the person that they do not need to make or keep the record. As the offence is one of strict liability it is only necessary for the prosecution to prove the person’s alleged inaction — the person’s intention is irrelevant. It is reasonable for this offence to be one of strict liability because the requirement is uncomplicated and easily satisfied, and the information is within the person’s control. The compliance burden would otherwise be high where it cannot be known if records exist and against this the penalty is low. The maximum penalty is a fine not exceeding 30 penalty units rather than a fine and or a period of imprisonment.

13.27            A person who fails to comply with a notice given under new section 354(1) of Schedule 1 to the TAA 1953 may be guilty of an offence against section 8C of the TAA 1953 which is an offence of absolute liability. The maximum penalty is generally a fine of 20 penalty units. However, in the case of a person who has two or more relevant convictions, the maximum penalty is a fine of 50 penalty units or 12 months imprisonment or both. The notice requirement is uncomplicated, readily understood and limited to a narrow class of information which is readily available to the person. It is necessary because it may otherwise not be possible to obtain information about complex and opaque offshore corporate and business structures and ownership arrangements. These are matters purely within the knowledge of those involved and about which they can be expected to have knowledge. Noting that a person need only comply to the extent they are capable of doing so, it is appropriate to rely on an offence of absolute liability to enforce this obligation.

Right to a fair and public hearing

13.28            Article 14 of the ICCPR ensures that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.

13.29            New section 100 of the Act might be considered to engage the right to a fair and public hearing because it permits an infringement notice to be given by an infringement officer if the officer believes on reasonable grounds that the person contravened a civil penalty provision relating to residential land. However, the right of a person to fair and public hearing by a competent, independent and impartial hearing is not limited by the « Bill » because the provisions in Part 5 of the Regulatory Powers (Standard Powers) Act   2014 (Regulatory Powers Act) allow a person to elect to have the matter heard by a court rather than pay the amount specified in the infringement notice. Moreover, the Regulatory Powers Act requires that this right must be stated in any infringement notice given to the person. For these reasons the « Bill » is not considered to limit the right to a fair and public hearing.

Right not to be compelled to testify against oneself or to confess guilt

13.30            Paragraph 3(g) of Article 14 of the ICCPR guarantees the right of an individual not to be compelled to testify against oneself or to confess guilt. The privilege against self-incrimination is recognised by the common law and applies unless it is expressly abrogated.

13.31            This right is engaged by new section 133 of the Act because it permits the Treasurer to give a person a written notice that requires the person to give information or documents to the Treasurer or a specified person acting on the Treasurer’s behalf. An individual is not excused from giving information or producing a document on the ground that to do so might tend to incriminate him or her. A person who fails to comply with a notice given under new section 133 may be guilty of an offence and liable to a maximum penalty of imprisonment for six months, or 30 penalty units, or both.

13.32            These limitations on the right to freedom from self-incrimination are reasonable because of the safeguards that have been included. Specifically, new section 133 provides that, in the case of an individual, the information given or documents produced is not admissible against the individual in any criminal proceedings or in proceedings for the recovery of a civil penalty, other than proceedings under this Act or section 137.1 or 137.2 of the Criminal Code ( « use » immunity). In addition, any information, document or thing obtained as a direct or indirect consequence of the individual giving the information, answer, document or thing is not admissible against the individual in any criminal proceedings or in proceedings under or in proceedings for the recovery of a civil penalty, other than proceedings under this Act or section 137.1 or 137.2 of the Criminal Code (derivative « use » immunity) . The provision therefore strikes a reasonable balance between the competing interest of obtaining information relevant to the administration of this Act and protecting an individual’s rights and is considered to be reasonable in all the circumstances.

Right to protection from unlawful or arbitrary interference with an individual’s privacy, family, home or correspondence

13.33            Article 17 of the ICCPR prohibits unlawful or arbitrary interferences with an individual’s privacy, family, home or correspondence. It also provides that everyone has the right to the protection of the law against such interference or attacks.

13.34            The Human Rights Committee has interpreted the term ‘unlawful’ to mean that no interference can take place except in cases envisaged by a law which comply with the provisions, aims and objectives of the ICCPR. The Human Rights Committee has also indicated that an interference will not be considered to be ‘arbitrary’ if it is provided for by law and is in accordance with the provisions, aims and objectives of the ICCPR and is reasonable in the particular circumstances. [14]

13.35            The following provisions in Schedule 1 to the « Bill » engage the rights protected by Article 17 of the ICCPR:

•        new Division 3 of Part 7 of the Act permits information to be recorded, used or disclosed in specified circumstances; and

•        new section 133 allows the Treasurer to require any individual to give information or documents (including information about a member of an individual’s family) relating to matters that are relevant to the exercise of the Treasurer’s powers under the Act.

13.36            Schedule 4 also engages the rights protected by Article 17 of the ICCPR because it allows the ATO to disclose information about individuals in a broader range of circumstances than is currently the case.

Protected information that may be collected, used or disclosed under new Division 3 of Part 7 of the Act

13.37            New Division 3 of Part 7 of the Act authorises the disclosure of protected information in a range of specified circumstances. However, to the extent these provisions authorise the disclosure of protected information about individuals or identifiable individuals, any interference with an individual’s privacy is not arbitrary because the interference is necessary to achieve a legitimate public purpose. The purpose of each of these provisions is briefly considered.

Disclosure for the purposes of this Act

13.38            New section   121 of the Act permits a person to record, disclose or otherwise « use » protected information for the purposes of this Act. In order to properly advise the Treasurer or his or her delegate about whether one of the actions regulated by this Act may be contrary to the national interest, it will generally be necessary for department officers to disclose protected information in order to consult with officers in other Commonwealth departments and agencies. Protected information about particular applications is also given to the States and Territories to enable them to provide comments about an application. The advice and comments provided by other agencies and departments directly informs the decision about whether a particular action is contrary to the national interest .

13.39            Under new subsection 121(2) of the Act a person who receives protected information under the « Bill » because they are consulted about a particular application under the Act is also permitted to record, disclose or otherwise « use » the information for the purposes for which the information was disclosed to the person. The person may also disclose the protected information for the purposes for which it was disclosed, but only to:

•        a Minister, an officer or an employee of the Commonwealth, a State, the Australian Capital Territory or the Northern Territory;

•        an officer or employee of a Commonwealth, State or Territory body; or

•        a person appointed by the Commonwealth for purposes of this Act.

13.40            This provision permits a person who obtains protected information for the purposes of this Act to consult with a colleague if it is necessary to do so in order to provide advice or comments about a particular application.

Other circumstances in which protected information may be recorded, used or disclosed

13.41            New subsection 122(1) of the Act permits a person to disclose protected information to the Minister responsible for administering specified Commonwealth statutes as well as the accountable authority of a Commonwealth entity that deals with the administration of any of those Acts.

Disclosures for the purposes of administering statutes that also impose restrictions on foreign ownership

13.42            Several statutes include provisions which impose supplementary or alternative requirements relating to foreign investment. Specifically,

•        foreign ownership of some airports is limited by the Airports   Act 1996;

•        foreign investment in the banking sector must be consistent with requirements in the Banking Act 1959 and the Financial   Sector (Shareholdings) Act 1998;

•        aggregate foreign ownership in Qantas Airways Limited is limited by the Qantas Sale Act 1992 ; and

•        aggregate foreign ownership of Telstra Corporation Limited is limited by the Telstra Corporation Act 1991 .

13.43            There are occasions when the disclosure of protected information to the Minister administering the above Acts or the accountable authority of a Commonwealth entity that deals with the administration of those Acts would assist those persons to perform their functions efficiently and effectively.

Disclosures to security agencies

13.44            An officer who is performing functions or exercising powers under this Act may occasionally collect information for the purposes of performing powers and functions under this Act that should be disclosed to intelligence agencies, or law enforcement agencies, relating to Australia’s national security and criminal activities such as organised crime. The « Bill » therefore enables protected information to be disclosed to the relevant Commonwealth Minister or the accountable authority that deals with the administration of the Australian Crimes Commission Act 2002 , Australian Security Intelligence Organisation 1979 , the Inspector-General of Intelligence and Security Act 1986 , the Intelligence   Services Act 2001 , and the Proceeds of Crimes Act 2002 .

Disclosures for the purposes of the administration of the Migration Act 1958

13.45            From time to time it may appear to a person who is performing functions or exercising powers under this Act that an individual has not complied with the conditions imposed on their visa. The « Bill » permits such information to be disclosed to the Commonwealth department responsible for the administration of the Migration Act (currently DIBP).

Disclosures for the purposes of the administration of a taxation law

13.46            The « Bill » allows protected information to be disclosed for the purposes of a taxation law within the meaning of section 995-1 of the Income Tax Assessment Act 1997 . This will allow information to be disclosed for the purpose of protecting public revenue, as well as for the purposes of administering the Register of Foreign Ownership of Agricultural Land Act 2015.

Disclosures to corporate regulators

13.47            The « Bill » allows protected information to be disclosed for the purposes of administering the Australian Prudential Regulation Authority Act 1998 , the Australian Securities and Investment Commission Act 2001 , and the Corporations Act 2001 . Such information will usually relate to bodies corporate rather than individuals. However, the ability to disclose information about individuals, such as directors and security holders, can assist the relevant regulator to efficiently and effectively administer particular provisions in these Acts (for example, the takeover provisions in Chapter 6 of the Corporations Act).

Disclosures for the purposes of assisting certain Ministers to perform their responsibilities

13.48            Subsections 122(2) and (3) permit a person to disclose protected information to a Commonwealth Minister responsible for agriculture; industry policy; investment promotion; taxation policy; and foreign investment in Australia. A person may also disclose protected information to the Secretary of a department administered by a Minister responsible for one of these areas for the purposes of assisting the Minister to discharge his or her responsibilities.

13.49            Ministers responsible for these areas sometimes receive representations from persons who are proposing to invest in Australia or who have invested in Australia and want to discuss their investment. The « Bill » therefore allows information to be disclosed for the purposes of briefing the relevant Minister. The disclosure of protected information will also contribute to the development of well-informed policy proposals.

Authorisation of disclosures for the purposes of law enforcement

13.50            New section 123 of the Act permits a person to disclose protected information to an enforcement body (within the meaning of the Privacy Act 1988 ) if the person reasonably believes that the disclosure is reasonably necessary for one of more enforcement related activities conducted by or on behalf of that body.

13.51            An officer who is performing functions or exercising powers under this Act may occasionally obtain information which suggests that an individual may have committed a criminal offence and it is in the public interest that officers can disclose this information to the appropriate law enforcement body.

Authorisation to « use » information for purposes of proceedings

13.52            A person who obtains protected information may disclose that information to a court or tribunal, or in accordance with an order made by a court or tribunal (for example, a subpoena) if the Commonwealth is a party to the proceeding and the Treasurer is satisfied that it is not contrary to the national interest. A person who receives protected information in these circumstances (for example, staff in the relevant court or tribunal) is permitted by new section 127 of the Act to make a record of, or disclose or otherwise « use » , the information for the purposes for which the information was disclosed.

13.53            This provision will ensure that where the Commonwealth is involved in proceedings of any kind relevant information and documents may be provided to a court or tribunal. This includes where a person applies for judicial review or where it would assist a tribunal to have evidence about the administration of the Act .

Safeguards

13.54            The « Bill » includes two safeguards that will minimise the risk of information about individuals being misused. First, a person who records, discloses or uses protected information for a purpose that is not authorised by new Part 7 of the Act may be guilty of an offence against new section 128 of the Act and liable to imprisonment for two years, 120 penalty units, or both. Secondly, new section 130 of the Act provides that a person must not, except for the purposes of this Act, be required to produce any document or give any information to a court, tribunal, authority or person having the power to require the production of documents or the answering of questions.

Conclusion

13.55            These provisions do not limit Article 17 because they do not permit an unlawful or arbitrary interference with an individual’s privacy. The Division ensures that that there is an appropriate balance between an individual’s right to information privacy whilst at the same time ensuring that information can be shared with other government departments and agencies for the legitimate purposes outlined above. The restrictions are also ‘lawful’ in the sense that the « Bill » adequately specifies the circumstances in which interferes with a person’s right to privacy will be permissible. Accordingly these provisions are compatible with Article 17 of the ICCPR.

Requirement to provide information or documents

13.56            New section 133 of the Act confers on the Treasurer the power to require a person to provide documents or give information, and this power could be exercised to incidentally require the provision of information about identified or identifiable individuals. A person who fails to comply with such a notice may be liable to a criminal offence that carries a penalty of imprisonment for six months, 30 penalty units, or both. Such a provision is needed to enable information to be gathered for the purpose of monitoring and enforcing compliance with the obligations imposed by the Act. However, the provision does not authorise an arbitrary interference with an individual’s privacy because the power can only be exercised by the Treasurer or the Treasurer’s delegate if they have reason to believe that the person can give information or produce documents relevant to the exercise of the Treasurer’s powers under the Act. The circumstances in which information may be collected and are clearly defined by the « Bill » and consequently any interference with an individual’s right to privacy is lawful.

13.57            The power conferred by this provision could also be exercised for the purpose of requiring a person to provide specified information or documents that might incriminate a close family member, including a person’s spouse, parent or child. A person is not able to object to the notice on the basis that they are being asked to provide information about a member of their family. In contrast, the Evidence Act 1995 provides that a person who is the spouse, de facto partner, parent or child of a defendant in a criminal proceeding may object to being required to give evidence, or to give evidence of a communication between the person and the defendant, as a witness for the prosecution. [15] However, in circumstances where arrangements about actions may be informal and impossible to otherwise discover, being able to obtain accurate information about the extent to which this Act is being complied with is considered to be of paramount importance. Moreover, the circumstances in which the discretion could be lawfully exercised is sufficiently clear from the provision. Accordingly this provision does not arbitrarily interfere with an individual right to privacy or family life.

Information that may be collected, used or disclosed under Schedule 4 to the « Bill »
Disclosure of information contained in the Register to certain Ministers

13.58            Section 355-25 in Schedule 1 to the TAA 1953 makes it an offence for a taxation officer to disclose tax information that identifies an entity, or is reasonably capable of being used to identify an entity, except in certain specified circumstances (the offence provision).

13.59            Subsection 355-55(1) of Schedule 1 to the TAA 1953 provides that the offence provision does not apply if a taxation officer discloses certain classes of information to a Minister for various specified purposes. This provision will be amended by item 4 of Schedule 4 so that the offence provision does not apply if a taxation officer discloses information contained in the Register to a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia for the purpose of enabling that Minister to discharge that responsibility. It is anticipated that this provision will enable officers at the ATO to disclose information about identified or identifiable individuals for the purposes of briefing these Ministers about issues raised by investors and potential investors. It will also enable officers to disclose information that is needed to develop well-informed public policy.

Disclosure of taxpayer information to ASIC

13.60            Subsection 355-65(4) of Schedule 1 to the TAA 1953 provides that the offence provision does not apply if a taxation officer discloses certain classes of information to certain entities (including ASIC) for purposes relating to corporate regulation, business research, or policy. Specifically, the ATO can give information to ASIC for the purpose of investigation or enforcement activities relating to a provision that is administered by ASIC and imposes a pecuniary penalty or creates an offence. A taxation officer can also disclose information to ASIC about information that was obtained under or in relation to the Superannuation (Unclaimed Money and Lost Members) Act 1999 for the purpose of ASIC performing any of its functions or exercising any of its power.

13.61            However, the ATO is not permitted to disclose information to ASIC for the purpose of enabling ASIC to undertake general data-matching. This is because ASIC needs to suspect a breach before it can receive information from the ATO, rather than using the relevant ATO information for data-matching to proactively assess and manage compliance risks.

13.62            The limited information sharing provision has also prevented the ATO and ASIC from co-operating in other areas where they co-regulate. For example, the ATO holds information that may better inform ASIC in its consideration of class order relief and other exemptions from filing statutory accounts in Australia, but the ATO cannot share this information unless there is evidence that an offence may have been committed or ASIC has commenced an investigation. To overcome these limitations the item 5 of Schedule 4 to the « Bill » enables a taxation officer to disclose information to ASIC for the purpose of performing any functions or exercising any powers under any Act or instrument (or part of any Act or instrument) of which ASIC has general administration.

Disclosure of taxpayer information to DIPB

13.63            The effect of subsection 355-65(8) in Schedule 1 to the TAA 1953 is that the offence provision does not apply to a taxation officer who discloses particular classes of information to specified individuals for a range of purposes. Relevantly, the offence provision does not apply to a taxation officer who discloses information to the ‘Immigration Secretary’ for the purposes of assisting in locating persons who are unlawfully in Australia and information relating to a holder (or former holder) of a visa or an approved sponsor (or former approved sponsor) for certain narrowly defined purposes.

13.64            Schedule 4 to item 7 of the « Bill » will allow taxpayer information to be disclosed to the ‘Immigration Secretary’ or the Australian Border Force Commissioner for the purpose of administering any functions or exercising any of the powers administered by the Minister administering the Immigration Department. This will improve the effectiveness of the ATO’s data-matching.

Limits on disclosure to courts and tribunals

13.65            The effect of existing section 355-75 in Schedule 1 to the TAA 1953 is that a taxation officer cannot be required to disclose to a court or tribunal protected information that was acquired by the person as a taxation officer except where it is necessary to do so for the purpose of carrying into effect the provisions of a taxation law.

13.66            Because taxation officers have duties, functions and powers under the « Bill » , the effect of the « amendment » to this provision made by item 9 of Schedule 4 is to make the TAA 1953 provision consistent with the « Bill » . Where a taxation officer has acquired protected information because of the exercise of duties and functions under the « Bill » , the taxation officer can be required to disclose that information to a court or a tribunal where it is necessary to do so for the purpose of carrying into effect the provisions under a taxation law or the Act.

Limits on on-disclosure to courts and tribunals

13.67            Item 11 of Schedule 4 to the « Bill » repeals section 355-205 in Schedule 1 to the TAA 1953 and substitutes a new provision. Broadly, section 355-205 currently provides that an entity cannot be required to ‘on disclose’ protected information to a court or tribunal except where it is necessary to do so for the purposes of carrying into effect the provisions of a taxation law. The new section 355-205 in Schedule 1 to the TAA 1953 is identical to the current provision except that because information is disclosed for the administration of the Act, the limit on on-disclosure to courts or tribunals would not apply for the purposes of carrying into effect the provisions of a taxation law or if the entity has or had duties, functions or powers under the Act.

Conclusion

13.68            None of the provisions in Schedule 4 limit Art 17 because they do not permit an unlawful or arbitrary interference with an individual’s privacy. The Schedule ensures that information can be shared with other government departments and agencies for the legitimate purposes outlined above. The restrictions are also ‘lawful’ in the sense that the « Bill » adequately specifies the circumstances in which interferes with a person’s right to privacy will be permissible. Accordingly these provisions are compatible with Art 17 of the ICCPR.

Right to freedom of expression

13.69            Paragraph 2 of Art 19 of the ICCPR requires States parties to guarantee the right of everyone to freedom of expression, including the ‘freedom to seek, receive and impart information and ideas of all kinds’. The right to freedom of expression includes the right not to impart information. New section 133 of the Act and item 3 in Schedule 4 to the « Bill » engage this right.

13.70            New section 133 engages the right to freedom of expression because it allows the Treasurer to require a person to provide information or produce documents. This restriction is necessary for the legitimate purpose of ensuring that the Treasurer can obtain the information and documents needed relating to his or her functions under the Act. There is a rational and proportionate connection between the purpose of the provision and the limitation of the right.

13.71            New section 354-5 in Schedule 1 to the TAA 1953 engages the right to freedom of expression in a very similar fashion because it enables the Commissioner to give a person a notice which requires the recipient of the notice to provide information the person has about any legal or equitable interest in the property or a right, power or privilege in connection with the property. The information a person may be required to give includes details about each other person who has a property right or interest in the property and information about the right or interest in the property.

13.72            The information available to the ATO suggests that obscure ownership arrangements are sometimes used to purchase property. The purpose of giving the Commissioner the power to issue such a tracing notice is to give the Commissioner another tool to find out who may have a beneficial interest in property. In addition to assisting the ATO to monitor compliance with this Act, the power would also be used in circumstances where the ATO believes that property has been purchased as a means of laundering money. The only other way the Commissioner could discover each person who has a beneficial interest in a property would be to undertake an intensive information gathering and audit process. Such a process is time-consuming and there is a risk that the process may not be completed before the person transfers their beneficial interest. Accordingly, while the provision limits the right to freedom of information, the limitation is reasonable because it will help ensure that the ATO has the legal powers it needs to investigate persons who may not be complying with their obligations under Australia’s taxation laws.

Right to be free from discrimination on prohibited grounds

13.73            Article 26 of the ICCPR recognises that all persons are equal before the law and are entitled without discrimination to the equal protection of the law. Article 26 further provides that ‘the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as national origin. However, the Human Rights Committee has recognised that ‘not every differentiation of treatment will constitute discrimination, if the criteria for such differentiation are reasonable and objective and if the aim is to achieve a purpose which is legitimate under the Covenant’. [16]

13.74            The « Bill » also generally engages the rights protected by the International Convention on the Elimination of All Forms of Racial Discrimination. Paragraph 1 of Article 1 of International Convention on the Elimination of All Forms of Racial Discrimination defines the term ‘racial discrimination’ to mean ‘any distinction, exclusion, restriction or preference based on race, colour descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural, or any other field of public life’. Under Article 2(a)(a) of the International Convention on the Elimination of All Forms of Racial Discrimination, [E]ach State Party undertakes to engage in no act or practice of racial discrimination against persons, groups of persons or institutions and to ensure that all public authorities and public institutions, national and local shall act in conformity with this obligation’. Under Article 5 of International Convention on the Elimination of All Forms of Racial Discrimination States Parties ‘undertake to prohibit and eliminate racial discrimination in all its forms and to guarantee the right of everyone, without distinction as to …national …origin, to equality before the law’ in the enjoyment of civil, political, economic, social and cultural rights, including the ‘right to own property alone as well as in association with others’.

13.75            The « Bill » limits Article 26 of the ICCPR and Articles 2 and 5 of International Convention on the Elimination of All Forms of Racial Discrimination because the core obligations imposed by the « Bill » only apply to a ‘foreign person’. While an Australian citizen who is not ordinarily resident in Australia may be a ‘foreign person’ for the purposes of this Act, it is anticipated that the majority of individuals who are directly affected by this « Bill » will not be Australian citizens.

13.76            Perhaps the most significant impact of the framework on foreign persons who are individuals is that they are generally not permitted to purchase existing residential real estate, although they may purchase real estate off-the-plan or a newly constructed residential dwelling. This reflects the Government’s policy that any foreign investment in residential real estate should be directed to increasing Australia’s housing stock. However, it is anticipated that the effect of this restriction will be ameliorated by the practice that permits temporary residents to buy one established dwelling for « use » as their residence in Australia.

13.77            While the « Bill » , if enacted, will primarily affect individuals who are citizens of countries other than Australia, there is no less restrictive way of achieving the objectives of the « Bill » . Accordingly those limitations are reasonable, necessary and proportionate.

Conclusion

13.78            The Bills are compatible with human rights because to the extent that they may limit human rights, those limitations are reasonable, necessary and proportionate.



Outline of chapter

14.0                The Register of Foreign Ownership of Agricultural Land « Bill »  2015 (Register  « Bill » ) establishes a Register of Foreign Ownership of Agricultural Land (Register) to be administered by the Commissioner of Taxation (Commissioner). The Register  « Bill » provides for the collection of information, and publication of statistics, about foreign interests in agricultural land in Australia. It allows increased scrutiny of foreign investment in agricultural land and increased transparency on the levels of foreign ownership of agricultural land in Australia.

Context of amendments

14.1                This measure was announced by the Prime Minister, the Treasurer and the Minister for Agriculture in the joint Media Release titled Government tightens rules on foreign purchases of agricultural land of 11 February 2015. The Government further announced on 2 May 2015 that it would strengthen Australia's foreign investment framework through a range of measures. The announcement followed public consultation on the Options Paper titled Strengthening Australia's Foreign Investment Framework of February 2015.

14.2                The announced changes will primarily be enacted through the Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015 and the Register  « Bill » .

•        The Foreign Acquisitions and Takeovers Legislation « Bill »  2015, if enacted, would substantially rewrite and modernise the Foreign Acquisitions and Takeovers Act 1975 (Act).

14.3                The Register  « Bill » establishes a Register from 1 July 2015 to allow increased scrutiny of foreign investment in agricultural land and increased transparency on the levels of foreign ownership in Australian agricultural land. The Register will contain a record of foreign persons with interests in Australian agricultural land. It will also contain statistics about foreign interests in agricultural land which will be published on a website. The Commissioner will provide to the Minister for presentation to Parliament statistics derived from the Register as soon as practicable after the « end » of each financial year.

14.4                Outside of Queensland, there is currently no comprehensive collection of foreign ownership of land information at any level of government. All the States and Territories collect a significant amount of relevant data as part of the land title transfer process. However, there is a lack of consistency on the type of data that States and Territories collect on land title transfers. The Register  « Bill » provides a timely and effective solution for implementing a foreign ownership register for agricultural land in Australia.

Summary of new law

14.5                The Register  « Bill » establishes the Register, which will be maintained by the Australian Taxation Office (ATO). The Register will include information about interests in Australian agricultural land held by foreign persons on or after 1 July 2015. While foreign persons are only required to report such interests in agricultural land to the ATO on or after 1 December 2015, if a person notifies the ATO of their interest before this, it is anticipated that the ATO would treat them as having complied with the requirement to give notice under the Register  « Bill » . The Register  « Bill » sets out what interests in agricultural land must be reported to the ATO, by whom and by when.

14.6                The Register will have two separate parts, a basic part (the full record) and the statistical part. The latter will be published by the Commissioner on a website. In addition, the Commissioner will derive statistics from the basic part of the Register on at least an annual basis to report to the Minister (in this case, the Treasurer). An annual report on the operation of the Act, including the statistics derived from the Register, will be presented to the Parliament by the Minister.

Comparison of key features of new law and current law

New law

Current law

Establishes the Register.

No equivalent.

The ATO is required to maintain the Register. The Register will contain two parts: the basic part and the statistical part. The Commissioner can add and correct information in the basic part.

No equivalent.

The ATO is required to publish the statistical part of the Register on a website and provide regular reports to the Minister.

No equivalent.

Foreign persons with interests in agricultural land or changes to holdings of interests in agricultural land and agricultural landholders and leaseholders whose foreign person status changes, are required to report those interests or changes to the ATO, generally within 30 days. However, interests held between 1 July 2015 and 30 November 2015 are not required to be reported to the ATO until on or after 1 December 2015. However, foreign persons are able to notify the ATO from 1 July onwards and it is anticipated that this will be taken as having complied with the requirement to give notice under the Register   « Bill » .

No equivalent.

The Commissioner has the general administration of the Act. This makes it a taxation law within the meaning of the Taxation Administration Act 1953 (TAA 1953). This means various provisions of the TAA 1953 apply to the Register   « Bill » . This includes provisions about the uniform penalty regime, access and information gathering powers, confidentiality of taxpayer information and approved forms.

 

Detailed explanation of new law

14.7                The Register  « Bill » :

•        establishes the Register (including the Commissioner's obligation to publish on a website statistics derived from the information contained in the Register);

•        sets out what interests in agricultural land must be reported to the ATO, by whom and by when;

•        sets out other circumstances that must be reported to the ATO, by whom and by when, such as a registered landholder ceasing to be a foreign person, or registered agricultural land ceasing to be agricultural land;

•        provides for the general administration of the Register; and

•        provides other provisions.

Establishment of the Register

14.8                The Register  « Bill » requires the Commissioner to keep the Register. The Register must be kept in two parts: a basic part, and a statistical part. [Sections   12 and 13, and subsection   14(1)]

14.9                The basic part must contain all information notified to the Commissioner by persons with foreign holdings of agricultural land held on or after 1 July 2015. The Commissioner can add information to the basic part of the Register which he or she otherwise obtains about holdings, or changes to holdings, of agricultural land by foreign persons. The Commissioner can add such information to the Register even if it was obtained by the Commissioner before the commencement of the Register  « Bill » . The Commissioner may also correct or update information in the basic part of the Register. For example, the Commissioner may become aware of updated contact details for a person whose details are on the Register (because the person has updated those details, for example through the lodgement of their income tax return) and the Commissioner will also be able to update those contact details for the Register . [Section   12, subsection   14(2), and sections   15 and 16]

14.10            The statistical part of the Register must contain statistics derived from information in the basic part of the Register. The Commissioner may correct or update information in the statistical part of the Register. The Commissioner must periodically publish the statistical part of the Register on a website. In addition, the Commissioner must annually report to the Minister on the operation of the Act including statistics derived from the basic part of the Register. Rules may require the Commissioner to report to the Minister more than once a year. As announced by the Prime Minister, and the Treasurer in the joint Media Release titled Government strengthens the foreign investment framework of 2 May 2015, the Government expects that the Commissioner will publish in the first half of 2016 aggregate data from the initial stocktake in 2015. [Section 12, subsection 14(3), and sections 16, 17, 31 and 34]

Reporting of interests in agricultural land

What interests must be reported

14.11            Foreign persons with certain interests in agricultural land held on or after 1 July 2015 must report those interests to the ATO . [Sections 18, 19 and 20]

Example 14.1  

Phil is an individual who is not ordinarily resident in Australia. He owns 20 per cent of the shares in the Australian incorporated Raoul Cheeses Co, which means that he holds a substantial interest in Raoul Cheeses Co. So although Raoul Cheeses Co is Australian incorporated, Raoul Cheeses Co is a foreign person.

Meaning of agricultural land

14.12            Agricultural land is land in Australia that is used, or that could reasonably be used, for a primary production business. This includes land which is partially used for a primary production business, or land where only part of the land could reasonably be used for a primary production business. An example of the latter is where part of the land is subject to an environmental protection zone that does not allow primary production activities within the zone. [Section 4]

14.13            Agricultural land also includes land which may, from time to time, be covered by water. However, agricultural land does not include a right to occupy areas of waterways, estuaries and bays, for purposes such as fish farming or oyster beds.

Example 14.2  

Following on from Example 14.1, Raoul Cheeses Co has a freehold interest in land in Australia which it uses for a primary production business. This business is maintaining dairy cows. The dairy cows are used to produce milk which is then used to produce cheese. Not all of the land is, or could reasonably be, used for a primary production business because a portion of the land is partially submerged by a large swamp and is therefore fenced off to prevent injuries to the dairy cows. Despite the fact that part of the land could not reasonably be used for a primary production business, it is still agricultural land because it is partially used for a primary production business.

14.14            Whether land could reasonably be used for a primary production business depends on the facts and circumstances of the land. Factors that may provide a reasonable indicator that the land could (or could not) reasonably be used, either alone or together with other factors, could include:

•        The primary uses allowed on the land under its zoning : These are likely to provide a reasonable indicator of if the land could reasonably be used for a primary production business. For example, if zoning allowed for primary production activities to be undertaken without the further approval of the local regulatory body, this would likely indicate that the land could reasonably be used for a primary production business. However, land within a rural residential zone, where zoning requirements either explicitly do not allow for primary production activities, or would only be approved in special circumstances, is unlikely to be land that could reasonably be used for a primary production business.

•        Land « use » history : If the land has been used in a primary production business in recent years, this is likely to indicate that the land again could reasonably be used for a primary production business, unless there has been one or more significant changes in the land in the meantime (for example, significant permanent environmental degradation, water depletion or pollution, or removal or loss of the earlier primary production business infrastructure). However, even though the land has not been used in a primary production business in recent years does not necessarily mean that it could not reasonably be used for a primary production business in the future. Examples of this could include if the land is not being used in a primary production business due to:

-       an extended extreme climatic event, such as a long term drought;

-       a recent natural disaster, such as bushfire or floods; or

-       other activities, such as mineral exploration and development on the land after which expected, or legally required, land remediation works would mean that the land in whole or part again could reasonably be used for a primary production business.

•        Land characteristics (for example, climate, crop yield, land size, remoteness, soil quality, stock holding capacity, topography, vegetation and water availability): While relevant to if the land could reasonably be used for a primary production business, a single characteristic such as land size, in isolation may be insufficient to make a reasonable assessment. It is also not necessary that the land be of sufficient size to allow for the operation of a stand-alone primary production business in some or all cases within the site. Remoteness of the land from goods transport and other infrastructure, as well as key agricultural service providers, is likely to mean that land could not reasonably be used for a primary production business, until such infrastructure and/or services became available to the locality.

•        Lease or licence conditions or limitations : Where there is a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) is reasonably likely to exceed five years, there may be land « use » conditions or restrictions attaching to the lease or licence:

-       Where these explicitly allow for primary production activities to be undertaken, the land could reasonably be used for a primary production business, irrespective of the lessee or licence holder's intention during the lease or licence term.

-       Where these do not permit « use » for a primary production business by the lessee or licence holder, this in isolation should not be taken as meaning the land could not reasonably be used for a primary production business. Other factors, such as those outlined above and the rationale for such a restriction on the lease or licence would be relevant to an assessment. For example, if a lessor has retained adjacent land on which they are operating a primary production business and has restricted the uses of the lessee so that they can incorporate the land back into their operations should they decide to so at the « end » of the lease term (after the land has been left fallow to raise productivity), then the land could reasonably be used for a primary production business.

14.15            Land includes a building or a part of a building. However, a building or a part of buildings that do not have any direct connection with land that is used or that could reasonably be used for a primary production business are not included within the meaning of agricultural land. For example, an administrative office for a primary production business that is on a strata title in an office block in a city centre is not included within the definition of agricultural land. It is also not generally expected that dwellings within city limits would be considered to be on land that could reasonably be used for a primary production business, although it may be feasible or legal for small scale intensive primary production activities, or administrative activities related to a primary production business to occur on such land in some cases. However, such land is agricultural land if non-ancillary activities of a primary production business are carried out on the land. For example, market gardens or propagating plants as part of a plant nursery. [Section 4]

14.16            Australia , when used in a geographical sense, includes the external territories. The Act applies both within and outside Australia. [Sections 4, 7 and 8]

14.17            Primary production business has the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 995-1(1) of the ITAA 1997 defines a primary production as a business of:

•        cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment;

•        maintaining animals for the purpose of selling them or their bodily produce (including natural increase);

•        manufacturing dairy produce from raw material that you produced;

•        conducting operations relating directly to taking or catching fish, turtles, dugong, bêche de mer, crustaceans or aquatic molluscs;

•        conducting operations relating directly to taking or culturing pearls or pearl shell;

•        planting or tending trees in a plantation or forest that are intended to be felled;

•        felling trees in a plantation or forest; or

•        transporting trees, or parts of trees, that you felled in a plantation or forest to the place where they are first to be milled or processed or from which they are to be transported to the place where they are first to be milled or processed.

[Section 4]

14.18            Despite land falling within the definition of agricultural land, rules made by the Minister may specify that land is not agricultural land. Such rules must be made via a legislative instrument and would be subject to Parliamentary disallowance. As this allows the rules to reduce (but not broaden) the scope of the term 'agricultural land', such rules would generally decrease the regulatory burden. Generally, rules may be made by the Minister where necessary or convenient to carry out or give effect to the Register  « Bill » . [Sections 4, 5, 31 and 35]

Meaning of foreign person

14.19            Foreign person has the same meaning as in the Foreign Acquisitions and Takeovers Act 1975 as amended by the Foreign Acquisitions and Takeovers Legislation « Amendment » « Bill » 2015 (FATA (as amended)). Section 4 of the FATA (as amended) defines a foreign person as:

•        an individual not ordinarily resident in Australia;

•        a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•        a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•        the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•        the trustee of a trust in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•        a foreign government; or

•        any other person, or any other person that meets the conditions, prescribed by the regulations to the FATA.

[Section 4]

14.20            Where the Register  « Bill » uses the term ‘person’ it is intended that ‘person’ be read in light of the definition of ‘foreign person’. ‘Person’ would therefore include an individual, a corporation, the trustee of a trust, a foreign government and any other person, or any other person that meets the conditions, prescribed by the regulations.

14.21            Section 5 of the FATA (as amended) defines when an individual who is not an Australian citizen is ordinarily resident in Australia. Under Section 4 of the FATA (as amended), a person holds a substantial interest in an entity (which is defined in section 4 of the FATA (as amended) as a corporation or a unit trust) or trust if the person holds:

•        for an entity - holds an interest of at least 20 per cent in the entity, alone or together with one or more associates of the person; or

•        for a trust (including a unit trust) - holds a beneficial interest, together with any one or more associates, in at least 20 per cent of the income or property of the trust.

14.22            Aggregate substantial interest requires that two or more persons hold an aggregate interest of at least 40 per cent in the entity or beneficial interests in at least 40 per cent of the income or property of the trust. Section 17 of the FATA (as amended) provides the meaning of interest and aggregate interest, including that interests of associates of the person are taken into account when calculating the person’s interest. Section 18 sets out rules relating to determining interests in such entities. Therefore, the foreign person definition would take into account indirect interests that make a corporation or trustee a foreign person.

Example 14.3  

Menfem Co has a freehold interest in land in Australia. It uses the land for a primary production business of tending and felling trees in a plantation. The land is therefore agricultural land.

Because of its ownership structure, Menfem Co is a foreign person as two or more persons (for example, individuals not ordinarily resident in Australia or foreign corporations) hold an aggregate substantial interest in Menfem Co (that is, because of its ownership structure paragraph (c) of the definition of foreign person in section 4 of the FATA (as amended) is relevant in working out if Menfem Co is a foreign person). Two or more persons hold an aggregate substantial interest in Menfem Co as they, together with any associates of any of them, are in a position to control at least 40 per cent of the voting power in Menfem Co (see section 4 and subsection 17(2) of the FATA (as amended)).

Essam and Casey each are in a position to control 10 per cent of the voting power in Menfem Co. They are not associates of one another and are both not ordinarily resident in Australia.

Cedwick Co is a foreign corporation which also has an interest in Menfem Co. Cedwick Co is in a position to control 10 per cent of the voting power. In addition, Michelle and Rebecca, who are both not ordinarily resident in Australia and are not associates, also are each in a position to control 10 per cent of the voting power in Menfem Co.

Essam, Casey, Cedwick Co, Michelle and Rebecca together control 50 per cent of the voting power in Menfem Co. Menfem Co is therefore a foreign person.

What types of interests in agricultural land must be reported

14.23            There are two types of interests, or changes to interests, in agricultural land that a foreign person must report:

•        freehold interests, and

•        rights to occupy agricultural land under a lease (including a sublease) or licence where the term of the lease or licence (including any extension or renewal) is reasonably likely to exceed five years.

[Subsection 19(1) and sections 21, 22, 23, 24, 25 and 26]

14.24            A freehold interest in land means a legal interest in an estate in fee simple that the person holds alone, as a tenant in common or as a joint tenant. The term ‘hold’ takes its ordinary meaning and encompasses direct legal interests in freehold interests in land or rights to occupy land. Where the agricultural land that a foreign person takes a freehold interest in, or holds rights to occupy over, is on more than one legal title, as can be the case with a farm and other primary production businesses, the freehold or leasehold interest in each title that is agricultural land is its own reporting event. [Section 4]

Example 14.4  

This means that, having regard to the facts in Example 14.3, even though Menfem Co is a corporation, under the Register  « Bill » it is a foreign person and has any relevant reporting obligations for the Register in relation to the land on which the primary production business is being conducted because it is the legal owner of the land.

14.25            A person starts to hold a freehold interest in land or a right to occupy land even if they:

•        start to hold it with one or more persons, or

•        they already hold or have previously held such an interest or right in other land.

[Section 4 and subsection 6(1)]

14.26            A person ceases to hold a freehold interest in, or right occupy, agricultural land even if they continue to hold another freehold interest in or right to occupy other land. [Section 4 and subsection 6(2)]

14.27            It should be noted that, while the Register  « Bill » provides these clarifications about instances of where interests are starting or ceasing to be held, these instances are not limiting. Therefore there can be other circumstances in which a person may start or cease to hold an interest in land . [Subsection 6(3)]

What events which must be reported ?

14.28            The Register  « Bill » creates two distinct reporting obligations.

•        First, Register  « Bill » requires foreign persons who held interests in agricultural land on 1 July 2015 to notify the Commissioner, in the approved form, following commencement of the Register  « Bill » .

•        Second, the Register  « Bill » requires foreign persons (and persons who have since ceased to be foreign persons) to notify the Commissioner of certain events involving agricultural land that occur on or after 1 July 2015.

[Sections 18, 19 and 20]

14.29            The events that must be notified if they occur on or after 1 July 2015 are:

•        a foreign person starts to hold:

-       a freehold interest in land that is agricultural land, or

-       right to occupy land that is agricultural land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years after the person starts to hold the right an example of a lease that is reasonably likely to exceed five years could be a lease with a term of three years with a three year renewal option that is likely to be exercised;

[Sections 4 and 21]

•        a foreign person ceases to hold a:

-       freehold interest in land that is agricultural land, or

-       right to occupy land that is agricultural land under a lease or licence whose term (including extensions and renewals) was reasonably likely to exceed five years after the latest of when the person started to hold it, when the person became a foreign person, when the land became agricultural land, and the start of 1 July 2015;

[Sections 4 and 22]

•        a person becomes a foreign person while holding a:

-       freehold interest in agricultural land, or

-       right to occupy agricultural land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years after the person became a foreign person;

[Section 23]

•        a person ceases to be a foreign person while holding a:

-       freehold interest in agricultural land, or

-                right to occupy land under a lease or licence whose term (including extensions and renewals) was reasonably likely to exceed five years after the latest of when the person started to hold the right, when the person became a foreign person, when the land became agricultural land and the start of 1 July 2015;

[Sections 4 and 24]

•        land becomes agricultural land while a foreign person holds a:

-       freehold interest in the land, or

-       right to occupy the land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years from the time the land becomes agricultural land; and

[Section 25]

•        land ceases to be agricultural land while held by a foreign person as a:

-       freehold interest in the land, or

-       right to occupy the land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years from the latest of when the person started to hold the right, when they became a foreign person, when the land became agricultural land, and the start of 1 July 2015.

[Sections 4 and 26]

Who must report or may report

14.30            Generally, the person with the direct legal interest is required to notify the ATO of their interest in agricultural land. That is, the person who holds the freehold interest (alone, as a tenant in common or a joint tenant) or the right to occupy land under a lease (including a sublease) or licence. Where there are multiple foreign persons with a legal interest in agricultural land, each foreign person has an obligation to report their interest. However, an agent may give notice on their behalf. [Sections 4, 19, 20 and 29]

14.31            If a natural person is required to give notice but dies before doing so, the executor or administrator of their estate must give the notice, even if the person dies before 1 December 2015. [Sections 18 and 27]

14.32            If a corporation is required to give notice but is wound up before it gives notice, then the liquidator of the corporation must give the notice, even if the corporation is wound up before 1 December 2015. In the case where a corporation is under administration, but still in existence, the corporation continues to have a reporting obligation. This could be discharged by the administrator (or another person) as an agent. [Sections 18, 28 and 29]

14.33            Rules made by the Minister may provide that all persons, or some persons, are not required to give the Commissioner information about foreign holdings of agricultural land. These rules may not impose additional reporting obligations. They must be made via legislative instrument and would be subject to Parliamentary disallowance. These rules could reduce the regulatory burden by exempting certain persons from notifying of changes to foreign holdings of agricultural land. [Sections 18, 30, 31 and 35]

When interests in agricultural land must be reported

Interests held on 1 July 2015

14.34            Foreign persons with interests in agricultural land held on 1 July 2015 must give notice of those interests to the ATO in the approved form by 30 December 2015, or within a deferred time approved by the Commissioner (see section 388-55 of Schedule 1 to the TAA 1953). The Commissioner can determine the content of an approved form and the manner in which it is given to the Commissioner, including by electronic means (see section 388-50 of Schedule 1 to the TAA 1953). [Sections 19 and 32]

14.35            If a foreign person notifies the ATO of their interests in agricultural land before the Register  « Bill » commences, it is anticipated that the ATO would treat them as having complied with the requirement to give notice under the Register  « Bill » . The Commissioner would be able to make additions to the Register to take into account the matters reported prior to the commencement of the Register  « Bill » , because the Commissioner’s ability to make additions to the Register is not restricted to matters that are required to be reported under Part 3. [Section 15]

Changes to interests after 1 July 2015

14.36            A person who is required to notify of a change to a holding of an interest in agricultural land after the start of 1 July 2015 must give notice to the ATO in the approved form by the later of 30 December 2015, or within 30 days of the event occurring for which notice must be given. The Commissioner may provide further time to notify (see section 388-55 of Schedule 1 to the TAA 1953). As noted in paragraph 13.36, the Commissioner can determine the content of an approved form and the manner in which it is given to the Commissioner, including by electronic means (see section 388-50 of Schedule 1 to the TAA 1953). [Sections 20 and 32]

General administration

14.37            The Commissioner has the general administration of the Act. This means the Act is a taxation law for the purposes of the TAA 1953. The TAA 1953 defines a taxation law by reference to the ITAA 1997. The ITAA 1997 defines a taxation law in subsection 995-1(1) to include an Act of which the Commissioner has the general administration and legislative instruments made under such an Act. [Sections 31 and 32]

14.38            The effect of the Act being a taxation law is that existing provisions in the TAA 1953 apply for the purposes of the Act. This includes the:

•        approved form provisions in Subdivision 388B of Schedule 1;

•        powers to obtain information and evidence in Division 353 of Schedule 1;

•        confidentiality of taxpayer information provisions in Division 355 of Schedule 1 (which imposes strict obligations on the handling of confidential taxpayer information and specifies the circumstances in which the ATO may disclose information to certain recipients, for example, the Secretary of the Treasury and certain Ministers); and

•        administrative penalties such as:

-       the administrative penalties for statements in Division 284 of Schedule 1;

-                penalties for failing to lodge documents on time in Division 286 of Schedule 1; and

-                the miscellaneous administrative penalties in Division 288 of Schedule 1; and

•        offence provisions such as:

-       the offence in section 8C for failing to comply with requirements under a taxation law; and

-       the offences in section 8D for refusing or failing to answer questions, produce a document, or take an oath or make an affirmation when attending before the Commissioner.

[Section 32]

Other provisions

Simplified outline of the Act

14.39            The simplified outline of the Act provides an overview of the Act and the simplified outlines of Parts 2 to 4 provide an overview of the respective Parts. While simplified outlines are included to assist readers to understand the substantive provisions, they are not intended to be comprehensive. It is intended that readers should rely on the substantive provisions. [Sections 3, 12, 18 and 31]

Binding on the Crown

14.40            The Commonwealth, State and Territory Governments are bound by the Act. In line with normal practice, the Crown is not liable to a pecuniary penalty or to be prosecuted for an offence. [Section 9]

Access powers and information gathering

14.41            As noted at paragraph 13.39, because the Act is a taxation law, the Commissioner could « use » the access and information gathering powers in sections 353-10 and 353-15 of Schedule 1 to the TAA 1953 for the purpose of administering the Register. Those provisions apply to a broad range of persons, including government entities and those who may be, or may have been, required to register interests in agricultural land. Section 353-10 allows the Commissioner to require the production of information or documents or attendance to give evidence. Section 353-15 allows the Commissioner (or a person authorised by the Commissioner) to access land, premises or places in Australia for the purpose of a taxation law. [Section 32]

14.42            Section 264A of the Income Tax Assessment Act 1936 (ITAA 1936) is being modified so that it applies for the purposes of the Register  « Bill » . This allows the Commissioner to require a person to provide information or documents which the Commissioner has reason to believe is held offshore, for the purposes of determining whether that person has, or had, an obligation to notify the Commissioner of an interest (or change to an interest) in agricultural land, and/or whether a person has complied with such an obligation. [Sections 31 and 33]

14.43            Where a notice for offshore information issued by the Commissioner is not complied with, the information or documents requested may not be admissible as evidence in proceedings before a court or the Administrative Appeals Tribunal in which the person disputes an obligation to notify the Commissioner of an interest in agricultural land, or a change to an interest in agricultural land. [Sections 31 and 33]

Example 14.5  

Matt Co has a freehold interest in agricultural land in Australia of which it has not notified the ATO. It has shareholders overseas. The ATO has reason to believe it is a foreign person because of its overseas shareholding and that information or documents about that shareholding are held offshore. The ATO issues Matt Co with an offshore information notice, requiring it to produce information and documents about its foreign shareholding so that the ATO can determine whether it has an obligation to notify the ATO of its interest in agricultural land.

Constitutional provisions

14.44            For the purposes of section 109 of the Constitution, the Register  « Bill » is not intended to limit the operation of a law of a State or Territory which is capable of operating concurrently with the Register  « Bill » . [Section 10]

14.45            The Register  « Bill » is enacted on the basis that it is supported by the Commonwealth’s statistics power in paragraph 51(xi) of the Constitution. Nevertheless, the Register  « Bill » provides for the continued operation of the Act (or provisions of the Act) in the event of a successful constitutional challenge. It sets out the various constitutional heads of power upon which the Act can draw if its operation is expressly confined to persons under those constitutional powers. This gives the Register  « Bill » the widest possible operation consistent with Commonwealth constitutional legislative power. [Sections 11 and 17, and paragraph 34(1)(b)]

14.46            In relation to the places power, the Register  « Bill » also has the effect it would have if each reference to land was expressly confined to land within a Territory. [Subsection 11(6)]

Application and transitional provisions

14.47            The Register  « Bill » commences on 1 December 2015 but applies to interests in agricultural land in Australia held by foreign persons on or after 1 July 2015. [Sections 2, 18, 19 and 20]

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act « 2011 »

Register of Foreign Ownership of Agricultural Land « Bill » 2015

14.48            The Register  « Bill » is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act « 2011 » .

Overview

14.49            The Register  « Bill » establishes a Register to be administered by the Commissioner. The Register will include information about the interests held by foreign persons in agricultural land in Australia, thereby allowing increased scrutiny of foreign investment in agricultural land and increased transparency of the levels of foreign ownership of agricultural land in Australia. ‘Agricultural land’ is defined by section 4 to refer to land in Australia that is used, or that could reasonably be used, for a primary production business within the meaning of the ITAA 1997.

14.50            Section 14 provides that the Register will have two parts — a basic part, which comprises the full record, and the statistical part. The statistical part must not identify, or be reasonably capable of being used to identify, a person.

14.51            The Commissioner is required by section 17 to publish the statistical part of the Register on the internet.

14.52            Under section 34, the Commissioner is required, on an at least annual basis, to give the Minister a report for presentation to the Parliament, on the operation of this Act which includes statistics from the basic part of the Register.

14.53            The Commissioner has the general administration of the Act. This means the Act will be a taxation law for the purposes of the TAA 1953. The effect of the Act being a taxation law is that existing provisions in the TAA 1953 will apply for the purposes of the Act. Most relevantly, this includes the provisions which regulate the confidentiality of taxpayer information in Division 355 of Schedule 1 to the TAA 1953.

Human rights implications

14.54            The Register  « Bill » engages the following human rights and freedoms:

•        the right to protection from unlawful or arbitrary interferences with an individual’s privacy;

•        the right to freedom of expression; and

•        the right to be free from discrimination.

Right to privacy

14.55            Article 17 of the International Covenant on Civil and Political Rights (ICCPR) prohibits unlawful or arbitrary interferences with a person’s privacy, family, home or correspondence. It also provides that everyone has the right to the protection of the law against such interference or attacks. The Human Rights Committee has interpreted the term ‘unlawful’ to mean that no interference can take place except in cases envisaged by law, which itself must comply with the provisions, aims and objectives of the ICCPR. The Human Rights Committee has also indicated that an interference will not be considered to be ‘arbitrary’ if it is provided for by law and is in accordance with the provisions, aims and objectives of the ICCPR and is reasonable in the particular circumstances. [17]

14.56            Privacy is a concept which is broad in scope and includes a right to information privacy. The Register  « Bill » directly engages the right to privacy under Article 17 of the ICCPR because it requires the provision of information by and authorises the « use » and disclosure of certain information about individuals for inclusion in the Register. Specifically, the « Bill » provides that the following persons must give notice in the approved form to the Commissioner if:

•        on 1 July 2015 a foreign person held a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose remaining term (including any extension or renewal) was (on 1 July 2015) reasonably likely to exceed five years (section 19);

•        on or after 1 July 2015 a foreign person starts to hold a freehold interest in agricultural land or a right to occupy agricultural land under a lease or a licence whose term (including any extension or renewal) after the person starts to hold the right is reasonably likely to exceed five years (sections 20 and 21);

•        a foreign person ceases to hold a freehold interest in agricultural land under a lease or licence whose term (including any extension or renewal) after the person starts to hold the right is reasonably likely to exceed five years (sections 20 and 22);

•        a person becomes a foreign person while holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) after the registration trigger time [18] was reasonably likely to exceed five years (sections 20 and 23);

•        a person ceases to be a foreign person while holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) after the registration trigger time was reasonably likely to exceed five years(sections 20 and 24);

•        land becomes agricultural land while the person holds an interest in the land or a right to occupy the land under a lease or licence whose term (including any extension or renewal) after the time the land becomes agricultural land is (at that time) reasonably likely to exceed five years (sections 20 and 25); and

•        land ceases to be agricultural land while a foreign person holds a freehold interest in the land or right to occupy the land under a lease or licence whose term (including any extension or renewal) after the registration trigger time was (at that time) reasonably likely to exceed five years (sections 20 and 26).

14.57            It is anticipated that the approved form will require an individual who is or was a foreign person to provide the Commissioner with their name, contact details, information about the land (including the location of the land, land title details and its market value) and the purposes for which the land is currently used or intended to be used. If a person who is required to give notice to the Commissioner dies before giving the notice, section 27 requires that the executor of that person’s estate must instead give the required notice.

14.58            The Commissioner may also collect information about an individual by serving an offshore information notice on an individual. The effect of section 33 is that the Commissioner may give an offshore notice to a person if the Commissioner has reason to believe that information or documents that may be relevant to determining whether a person has or had an obligation to notify the Commissioner of an interest (or change in interest) in agricultural land.

14.59            If a person fails to comply with obligations under the Act the person may be liable to an administrative penalty under subsection 286-75(1) of Schedule 1 to the TAA 1953. The amount of that penalty would be worked out in accordance with subsection 286-80, but would not be more than five penalty units in any circumstance.

14.60            The information collected under this statute may only be used or disclosed for the purposes authorised by this Act or under a taxation law. Taxation officers must comply with Division 355 of Schedule 1 to the TAA 1953. In general terms, Division 355 makes it an offence for information about the tax affairs of a particular entity to be disclosed except in circumstances specified in detail by that Division. The maximum penalty for this offence is imprisonment for two years. In addition, information about individuals must also be handled in accordance with the obligations imposed by the Privacy Act 1988 . This minimises the risk of information about identified or identifiable individuals being used or disclosed for an unauthorised purpose.

14.61            The circumstances in which information may be collected and used are clearly defined by the « Bill » and are therefore a lawful interference with the right to privacy. Moreover, as it would not be possible to achieve the objectives of the statute without collecting some information about identifiable individuals, these limitations on the right to privacy are reasonable in the circumstances and do not interfere with the right to privacy of those individuals more than is necessary to achieve the legitimate objective of allowing the Government to scrutinise over time the levels of foreign ownership of agricultural land in Australia.

Right to freedom of expression

14.62            Paragraph 2 of Article 19 of the ICCPR requires States parties to guarantee the right of everyone to freedom of expression, including the ‘freedom to seek, receive and impart information and ideas of all kinds’. The right to freedom of expression includes the right not to impart information.

14.63            Divisions 2 and 3 of Part 3 of the Register  « Bill » engage paragraph 2 of Article 19 of the ICCPR because they require individuals to provide information in the approved form. There is no less restrictive means of achieving the legitimate purpose the limitation seeks to achieve. Moreover, to the extent the Register  « Bill » interferes with the right to freedom of expression the interference is relatively minor and has a clear legal basis. These limitations and therefore reasonable, necessary and proportionate.

Right to be free from discrimination

14.64            The Register