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FIRB changes commencing on 1 July 2023: New Reporting Obligations under Register of Foreign Ownership of Assets

Market Insight 30 June 2023 30 June 2023
Asia Pacific
Technology risk

From 1 July 2023, foreign persons who acquire relevant Australian interests will need to be aware of new reporting obligations under the new Register of Foreign Ownership of Australian Assets (Register) introduced by the Australian Taxation Office (ATO).

Some Australian entities may also be subject to these compliance requirements if such entities are considered to become a foreign entity due to ownership changes. These obligations are in addition to the existing approval processes and reporting obligations under Australia’s Foreign Acquisition and Takeovers Act 1975 (Cth) (FATA).

It is important to note that the draft regulations on the scope of the Register were released for consultation on 2 March 2023 (closed on 31 March 2023) and this article discusses the regulations to be made in such released form. Any amendments to the draft released regulations will update the below discussion.

Key takeaways in brief – once Register comes into effect on 1 July 2023:

Foreign investors will be required to provide notice to the ATO by relevant foreign persons within 30 days of the occurrence of a registerable event relating to interests in land, entities and businesses in Australia. This includes interests that have been acquired, held or disposed. An example of such interests relates to acquisition of interests in land notwithstanding the value of the interest.
Several current existing registers maintained by the ATO will be replaced by the new Register, thereby expanding upon the assets to be registered (including without limitation, business and entity related interests, where applicable). Note: The Register of Critical Infrastructure Assets administered by the Cyber and Infrastructure Security Centre and the Register of Foreign Owners of Media Assets administered by the Australian Communications and Media Authority will remain in effect.
Foreign persons will be required to notify through the online services for foreign investors portal.
Failure to provide notice will incur civil penalties.

Discussion in depth:

Key dates:

17 June 2023: the ATO started making most forms for foreign investors (Foreign Investment Review Board (FIRB) forms) unavailable in order to transition services to the ATO’s online platform. Several services relating to foreign investment were due to be unavailable between 17 June and 25 June 2023, including the residential real estate application form, vacancy fee form, land and water registration form, and FIRB update email form.
26 June 2023: the new online services for foreign investors platform were expected to be made available. The ATO website will provide further information on the procedure to set up access to the new platform and utilise its online services.
1 July 2023: the new Register is expected to be in effect.

Following 1 July, the new Register for foreign investors will provide several changes to the current regime, including the new reporting requirements. However, it is important to note that current obligations to register foreign interests in Australian residential land, agriculture and water as well as other assets will still apply before the new Register commences. We note the changes in the table below which may not currently be subject to reporting requirements.

Key Events	Remarks
Combined Registers	Post 1 July, the new Register will replace (and incorporate all information from) the following existing registers: Register of Residential Land; and Register of Foreign Ownership of Agricultural Land; and Register of Foreign Ownership of Water Entitlements. However, please note that there are several current registers that will not be replaced and relevant notification to these registers will remain effective: Register of Critical Infrastructure Assets; and Register of Foreign Owners of Media Assets.
A foreign person or entity acquires interest in Australian land and/or water	Notification is required if a foreign person or entity acquires: either a freehold interest, a long-term lease (likely exceeding 5 years) or an interest in a mining or production tenement; or an exploration tenement in certain circumstances (such as an exploration licence); or interest in agribusiness; a registrable water interest (as defined in the FATA) or a contractual right exceeding five (5) years). It must be noted that no thresholds apply to the new requirements to notify the ATO regarding land acquisitions. Land acquisitions that had not been subject to any requirements in the current regime would now require registration (e.g. developed (non-sensitive) commercial land below A$310 million).
Interest is held by an Australian person who later becomes a foreign person	Notification is required if the foreign person has or carries, or is intended to have or carry: land interest as discussed above, including freehold interests or exploration tenement; or lease likely exceeding five (5) years; or national security business it carries that would have been notifiable; or registrable water interest.
Interests in an Australian entity increases or decreases by at least 5%	Notwithstanding any prior notification to the Register, a foreign person must conduct notification for any subsequent increase of interest or decrease in their ownership in an Australian entity or business by at least 5%. These changes to interest include any passive increase or decrease (e.g. non participation of a shareholding buy-back or share dilution from fundraising).
Ceasing of interest or business activities or status	Notification is required in the following circumstances: the Australian entity is wound up, ceases to be a legal entity or the foreign person/foreign government investor ceases to be a foreign person/foreign government investor (e.g. cease in share ownership or the foreign government investor ceases to have such status); the business activities cease to be implemented.

Foreign person includes individuals that are not a resident in Australia, foreign government investors, and entities with substantial foreign ownership. This includes any Australian entities with sufficient foreign ownership (whether direct or indirect). We note that the Register will not be made public, and the information can be disclosed to other government agencies (to enable functions and powers under the FATA).

Exemptions

The exemptions that apply to foreign persons or entities from approval requirements under the FATA will also exempt such persons or entities from registration obligations under the New Register. This includes acquisitions from Australian government bodies, acquisitions of land by Australian citizens (who are not ordinarily resident in Australia, provided that such persons do not become foreign persons), acquisitions by moneylenders and foreign custodian entities.

Penalties

Where foreign persons or entities fail to provide notification within the required 30-day period and in the correct form, a civil penalty in the form of a fine could be imposed on such parties. Subject to any possible amendments on 1 July, the penalty incurred will be 250 penalty units per day.

What’s next?

Foreign persons or entities who have or intend to have Australian investments and acquisitions as well as Australian entities that could become “foreign” should consider whether there are any relevant investment activities or changes in their shareholding structure to require possible registration after 1 July 2023.

Prior to 17 June 2023, in light of the unavailability of forms and considering that the online portal is only expected to commence on 26 June 2023, early lodgement using current forms was recommended. Be aware of due dates relating to vacancy fee return (30 days after the end of the vacancy year) and asset registration (within 30 days of settlement date).

We will continue to monitor changes to this area and any updates made by the ATO regarding utilisation of the new online platform for foreign investors.

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