Welcome to the first article of the Foreign Investment Files series by our in-house foreign investment specialist, Thomas Hill.
If you, your entity or your trust have connections to overseas persons and you are considering acquiring interests in land in Australia, this article explores what you need to know with the new foreign ownership registration laws.
Foreign persons are now required to register all acquisitions of land with the Australian Taxation Office (ATO).
From 1 July 2023, if a “foreign person” acquires any Australian land interest (including certain leases), they are required to register that acquisition with the Register of Foreign Ownership of Australian Assets (“Foreign Ownership Register”), managed by the ATO. This must occur within 30 days of settlement. Penalties may apply if you do not register.
Foreign persons are also required to update the Foreign Ownership Register when their ownership changes.
Whilst the registration requirement covers acquisitions (land and other) that require approval by the Foreign Investment Review Board (“FIRB”), it also covers all land acquisitions regardless of value.
This new requirement has the biggest effect on commercial land acquisitions. The monetary threshold to require a foreign person to obtain FIRB approval for commercial land is very high, however, there is no monetary threshold to require a foreign person to register a commercial land acquisition on the Foreign Ownership Register.
The rules for obtaining FIRB approval for acquisitions remain generally the same.
There are two things to consider if you are acquiring an interest in land:
Am I a foreign person?
Am I acquiring an interest in Australian land?
Who is a foreign person?
An individual not ordinarily resident in Australia (you spend more than half the year outside Australia, however Australian citizens are excluded)
An entity (including a company) where a foreign person has an interest of 20% or more; or where two or more foreign persons have a combined interest of 40% or more
A trust where a foreign person holds at least a 20% beneficial interest; or where two or more foreign persons have a combined beneficial interest of 40% or more
What is an interest in Australian land?
A legal or equitable interest in Australian land
An interest of 20% or more in a company or trust if Australian Land accounts for 50% or more of that company’s or trust’s assets
An interest in a lease or licence giving right to occupy Australian land if the term of the lease or licence (including any extension or renewal) is reasonably likely, at the time the lease or licence is acquired, to exceed 5 years.
These points above cover the most common types of foreign person and interests in land, however, the Foreign Acquisitions and Takeovers Act is broad and contains many nuanced rules for specific situations.
If you, your entity or trust have connections to overseas persons and you are considering acquiring interests in land, we recommend you seek advice on how the FIRB regime and the Foreign Ownership Register requirements may apply to you.
How do I register?
To register an acquisition on the Foreign Ownership Register, you will need to create a MyGov ID. More information on this can be found at https://www.ato.gov.au/General/Online-services/Foreign-investors/Online-services-for-foreign-investors/.
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This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.