As of 1 July 2023, the Australian Government will introduce a new Register of Foreign Ownership of Australian Assets (Register).  

The Register will be administered by the Australian Tax Office (ATO) and will record foreign interests in a broad range of Australian land, entities, businesses, and assets. The primary purpose of the Register is to consolidate the existing reporting framework for foreign ownership of Australian assets into a single, comprehensive database. It will replace existing registers covering residential land, agricultural land, and water rights, and incorporate reporting obligations covering a wider range of transactions. Importantly, reporting requirements in relation to the Register may apply irrespective of whether Foreign Investment Review Board (FIRB) approval is required for a transaction.

Significant penalties may be imposed for failure to comply with reporting requirements.

When will notification be required?

From 1 July 2023, “foreign persons” (as defined in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) must make a notification via the ATO’s online portal within 30 days of a trigger for notification occurring.

What constitutes a trigger for notification differs depending on the type of asset(s) involved.

Businesses

Numerous notification triggers apply to the acquisition of interests in Australian businesses or entities by foreign persons, including where a foreign person takes an action that is:

1. a ‘significant action’ under section 40 or 41 of the FATA;
2. a ‘notifiable action’ under section 47 of the FATA involving the acquisition of a direct interest in an agribusiness or substantial interest in an Australian entity;
3. a ‘notifiable national security action’ under section 55B of the FATA; and
4. a ‘reviewable national security action’ under section 55D or 55E of the FATA.

If a foreign person acquires an interest in an Australian entity or business which was previously notified to the Register, it must also report any subsequent increase in its interest of 5% or more.

The notification requirements also apply to an Australian entity that becomes a foreign person, for example via acquisition. If this occurs, the Australian entity will need to report interests that would have required approval under the FATA if they had been acquired immediately after the Australian entity became a foreign person.

Land

Where Australian land is concerned, a foreign person must generally notify the ATO where they acquire (for example):

1. a freehold interest in any Australian land;
2. an interest as lessee in a lease giving rights to occupy Australian land if the term of the lease (including any extension or renewal) likely to exceed five years; or
3. an interest in a mining or production tenement, such as a mining lease.

The ATO must also be notified if:

1. a person holding any of the above interests in land becomes a foreign person; or  
2. the nature of the land changes, for example, from commercial to residential, and the foreign person ought reasonably to have been aware of the change.

Other

Reporting requirements also apply in respect of interests in exploration tenements and registrable water interests.

Key changes

The introduction of the Register will increase compliance obligations for foreign persons as it captures a broader set of transactions than those currently required to be reported. For instance, the Register will cover not only acquisitions and disposals, but changes occurring while an interest in the asset is held, such as changes in the nature of Australia land and changes to the quantum of the foreign person’s interest in a business or entity.

Currently, the acquisition of freehold or leasehold interests exceeding five years in commercial land does not require reporting unless FIRB approval is required and the relevant approval contains a reporting condition. Going forward, all acquisitions of interests of this type will need to be notified to the ATO for inclusion in the Register.

Australian entities will be required to report ownership of certain assets if they become foreign persons. An Australian entity can become a foreign person for the purposes of the FATA due to changes in its direct or indirect ownership. Tracing rules apply which mean companies incorporated in Australia can be classified as foreign persons under the FATA due to upstream interests.

More detail on reporting requirements is provided in amendments to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth).

Conclusion

The introduction of the Register marks a significant change in the reporting and compliance landscape for foreign investors in Australia. With increased obligations and potential penalties for non-compliance, foreign persons should familiarise themselves with the new requirements and seek appropriate advice to ensure they remain compliant in an evolving regulatory environment.

The law regulating foreign investment in Australia is complex, and the information provided here is intended for general informational purposes only. This article should not be relied upon as a substitute for obtaining specific advice tailored to your circumstances. If you are considering foreign investment in Australia, we recommend you seek professional advice that takes account of your specific situation.