The Commonwealth Government is taking action to strengthen the integrity of the foreign investment framework.
Foreign investment is integral to Australia’s economy and we welcome all investment that is not contrary to our national interest.
After extensive consultations on our Options Paper, we are announcing important reforms to foreign investment that will help to demonstrate that it is for our country’s benefit.
We will ensure stronger enforcement of new and existing foreign investment rules by transferring all residential real estate functions to the Australian Taxation Office.
The ATO will use its data-matching systems to identify possible breaches and the Commonwealth will pursue those foreign investors who break the rules.
Australia’s foreign investment regime generally does not allow foreign investors to purchase existing residential properties.
There will now be stricter penalties to make it easier to pursue foreign investors who breach the rules. Criminal penalties will be increased to $127,500 or three years imprisonment for individuals and to $637,500 for companies.
Divestment orders will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches.
The Government will also ensure that people who break the rules do not profit by introducing a civil penalty to capture any capital gain made on divestment of a property.
Third parties who knowingly assist a foreign investor to breach the rules will also now be subject to civil and criminal penalties, including fines of $42,500 for individuals and $212,500 for companies.
Australian taxpayers will no longer foot the bill for screening foreign investment application applications. Fees will be levied on all foreign investment applications. For residential properties valued at $1 million or less, foreign investors will pay a fee of $5,000. Higher fees will apply to more expensive residential properties as well as business, agriculture and commercial real estate applications.
Australia’s foreign investment policy for residential real estate is designed to increase Australia’s housing stock, but lack of enforcement over recent years has threatened the integrity of the framework.
We will enforce the rules, ensuring that all foreign investors follow the rules and don’t profit from breaking them.
The Government will introduce legislation into Parliament in the Spring Sittings to ensure that the reforms will commence on 1 December 2015.
There will also be increased scrutiny around foreign investment in agriculture and increased transparency on the levels of foreign ownership in Australia through a comprehensive land register.
Attachments
Overview
- Stronger enforcement of the existing foreign investment rules by transferring all of the residential real estate functions to the Australian Taxation Office (between now and 1 December 2015). The Australian Taxation Office will improve compliance and enforcement through sophisticated data‑matching systems and specialised staff with compliance expertise.
- Stricter penalties that will make it easier to pursue foreign investors that breach the rules.
- The existing criminal penalties (which will be increased from $85,000 to $127,500 for individuals) and divestment orders will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches of the residential real estate rules.
- Third parties who knowingly assist a foreign investor to breach the rules will also now be subject to civil and criminal penalties.
- Application fees to ensure that Australian taxpayers no longer have to fund the cost of administering the screening of foreign investment applications.
- Increased scrutiny around foreign investment in agriculture.
- From 1 March 2015, the screening threshold for agricultural land was lowered from $252 million to $15 million (cumulative).
- From 1 December 2015, a $55 million threshold (based on the value of the investment) for investments in agribusiness will be introduced.
- Increased transparency on the levels of foreign ownership in Australia through a comprehensive land register.
- An agricultural land register with information provided directly to the Australian Taxation Office by investors will be established from 1 July 2015.
- The Government is in negotiations with the states and territories to use their land titles data to expand the register to include all land (including residential real estate).
- A more modern and simpler foreign investment framework.
- The Government will undertake further consultation on options to simplify the system.
New Penalty Regime
Penalties for breaches of rules which apply to residential real estate
| Breach of current rule | Proposed new penalties |
|---|---|
|
Foreign person acquires new property without approval Temporary resident acquires established property without approval |
Increased Criminal Penalty Maximum criminal penalty of
Civil Penalty Maximum civil penalty is the greater of the following:
Tier 1 Infringement notice — Voluntary complied by coming forward
Tier 2 Infringement notice — Identified through compliance activities
Either an infringement notice or civil penalty would be sought but not both. |
|
Non-resident acquires established property or temporary resident acquires more than one established property Temporary resident fails to sell established property when it ceases to be their principal residence Temporary resident rents out an established property Failure to begin construction within 24 months without seeking extension |
Increased Criminal Penalty Maximum criminal penalty of
Civil Penalty Maximum civil penalty is the greater of the following:
|
|
Developer fails to market apartments in Australia |
Criminal Penalty Maximum criminal penalty of:
Civil Penalty Maximum civil penalty of:
|
|
Property developer fails to comply with reporting conditions associated with approval Foreign person fails to comply with reporting condition which requires them to notify of actual purchase and sale of established properties |
Civil penalty Maximum civil penalty of:
Tier 1 Infringement notice — Voluntary complied by coming forward
Tier 2 Infringement notice — Identified through compliance activities
Either an infringement notice or civil penalty would be sought but not both. |
|
Third party assists foreign investor to breach rules |
Civil penalty Maximum civil penalty, the same as the primary breach, of:
Criminal Penalty Knowingly assisting another person to commit a criminal offence is an offence under Section 11.2 of the Criminal Code (maximum penalty is the same as the primary offence). |
Penalties for breaches of rules which apply to the business and agriculture investments
| Breach of current rule | Proposed new penalties |
|---|---|
| Foreign person makes an acquisition without approval (approval would normally have been granted) |
Increased Criminal Penalty Maximum criminal penalty of
Civil penalty Maximum civil penalty of:
|
| Foreign person fails to comply with a condition of approval |
Increased Criminal Penalty Maximum criminal penalty of
Civil penalty Maximum civil penalty of:
|
| Third party assists foreign investor to breach rules |
There is currently no civil pecuniary penalty under the Act for knowingly assisting breaches of the Act. Civil penalty Maximum civil penalty, the same as the primary breach, of:
Criminal Penalty Knowingly assisting another person to commit a criminal offence is an offence under Section 11.2 of the Criminal Code (maximum penalty is the same as the primary offence). |
Foreign investment threshold changes and application fees
Real estate investments
| Type of investor | Type of acquisition | Previous threshold | New threshold | Application Fee from 1 December 20151 |
|---|---|---|---|---|
| All investors (unless exempt) | Residential properties valued at $1 million or less | $0 | $0 | $5,000 |
| Residential properties valued at greater than $1 million | $0 | $0 | $10,000 (then $10,000 incremental fee increase per additional $1 million in property value) | |
| Advanced off-the-plan certificates | $0 | $0 | $25,000 upfront, with a six monthly reconciliation of properties sold to foreign persons based on rates above | |
| Annual Programs | $0 | $0 | $25,000 (or $100,000 where proposed investment is greater than $1 billion) |
Investment in the business, commercial real estate and agriculture sectors
| Type of investor | Type of acquisition | Previous threshold | New threshold | Application Fee from 1 December 20151 |
|---|---|---|---|---|
| Privately owned investors from FTA partner countries that have the higher threshold | Developed commercial real estate (including heritage-listed properties) | $1,094 million (indexed annually) | $1,094 million (indexed annually) | $25,000 |
| Vacant commercial land | $0 | $0 | $10,000 | |
| Business acquisitions in non-sensitive sectors2 | $1,094 million (indexed annually) | $1,094 million (indexed annually) | $25,000 (or $100,000 for business acquisitions where the value of the transaction is greater than $1 billion) $10,000 if an internal reorganisation |
|
| Business acquisitions in sensitive sectors3 | $252 million (indexed annually) | $252 million (indexed annually) | $25,000 (or $100,000 for business acquisitions where the value of the transaction is greater than $1 billion) $10,000 if an internal reorganisation |
|
| Rural land | $1,094 million (indexed annually) | $1,094 million (indexed annually) for US, NZ and Chile. $15 million (cumulative) for China, Japan and Korea.4 |
Rural land less than $1 million: $5,000 | |
| Rural land equal to or greater than $1 million: $10,000, (then $10,000 incremental fee per additional $1 million in rural land value, capped at $100,000) | ||||
| Agribusinesses | $1,094 million (indexed annually) | $1,094 million (indexed annually) for US, NZ and Chile. $55 million (indexed annually) for China, Japan and Korea.5 |
$25,000 (or $100,000 for agribusiness acquisitions where the value of the transaction is greater than $1 billion) | |
| Privately owned investors from non-FTA countries and FTA countries that do not have the higher threshold | Developed commercial real estate | $55 million (indexed annually) | $55 million (indexed annually) | $25,000 |
| Heritage-listed developed commercial real estate | $5 million | $5 million | $25,000 | |
| Vacant commercial land | $0 | $0 | $10,000 | |
| Business acquisitions in (sensitive and non-sensitive sectors) | $252 million (indexed annually) | $252 million (indexed annually) | $25,000 (or $100,000 for business acquisitions where the value of the transaction is greater than $1 billion) $10,000 if an internal reorganisation |
|
| Rural land | $252 million (indexed annually) | $15 million (cumulative)4 $50 million for Singapore and Thailand6 |
Rural land less than $1 million: $5,000 | |
| Rural land equal to or greater than $1 million: $10,000, (then $10,000 incremental fee per additional $1 million in rural land value, capped at $100,000) | ||||
| Agribusinesses | $252 million (indexed annually) | $55 million (indexed annually) | $25,000 (or $100,000 for agribusiness acquisitions where the value of the transaction is greater than $1 billion) | |
| Foreign Government Investors | All direct investments (regardless of the sector) | $0 | $0 | Based on the applicable fee above. |
| New business proposals | $0 | $0 | $10,000 | |
| Interests in land (including rural land) | $0 | $0 | Based on the applicable fee above. |
Agricultural investments
Scope of agribusiness definition
The proposed definition of agribusiness for the $55 million screening threshold will include primary production businesses (generally those within Division A of the Australian and New Zealand Standard Industrial Classification Codes) and certain first stage downstream manufacturing businesses (including meat, poultry, seafood, dairy, fruit and vegetable processing and sugar, grain and oil and fat manufacturing).
Agricultural land definition
The lower $15 million cumulative screening threshold for agricultural land was implemented on 1 March 2015 through Australia’s Foreign Investment Policy. While the existing concept of 'rural land' has been temporarily employed to give effect to the lower threshold, it does not adequately reflect a common understanding of 'agricultural land'.
The Government will introduce a clearer definition that better captures ‘productive’ agricultural land. Agricultural land will be defined as 'land used, or that could reasonably be used, for a primary production business' ('primary production business' is defined under the Income Tax Assessment Act 1997).
Foreign ownership register
Consistent with the Government's 11 February 2015 press release, the ATO will commence collecting agricultural land data on 1 July 2015. The changes will initially occur through changes to Australia's Foreign Investment Policy, with supporting legislation to be introduced by 1 December 2015 (aligning with the rest of the reform package). The stocktake will occur between 1 July 2015 and 31 December 2015, with aggregate data published in the first half of 2016.
1 Application fees are indexed by the consumer price index on 1 July annually.
2 Free Trade Agreement partner countries — the higher threshold currently applies to investors from the US, NZ, Japan, Korea and Chile. It will also apply to Chinese investors once the China-Australia free trade agreement enters-into-force.
3 The prescribed sensitive sectors (where the higher screening threshold does not apply) are: media; telecommunications; transport; defence and military related industries; and the extraction of uranium or plutonium or the operation of nuclear facilities.
4 The $15 million cumulative threshold took effect on 1 March 2015.
5 The $55 million threshold will take effect from 1 December 2015.
6 Consistent with the commitments in the Singapore and Thailand free trade agreements.