Register of Foreign Ownership of Australian Assets: operational from 1 July 2023

By Ranny Fan and Conrad Smith

From 1 July 2023, the Register of Foreign Ownership of Australian Assets (Register) will come into operation, replacing the current ATO-managed registers of foreign-owned water, agricultural, commercial and residential land. However, existing registers of media assets and critical infrastructure assets will continue to operate separately.

The Australian Government passed various reforms (in December 2020) relating to foreign investment, including the creation of this new Register. Part 7A of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (Act) establishes the framework for the Register, including the circumstances in which a foreign person must give a ‘register notice’ to the Registrar and the consequences of failure to comply.

A ‘foreign person’ is defined in section 4 of the Act.

Circumstances in which register notice must be given

The circumstances in which a register notice must be given under the new Register requirements are set out in Division 3 of Part 7A of the Act and are summarised below.

Section	When a register notice is required	Registrable event day
s130ZA Foreign person acquires an interest in Australian land	Foreign person acquires interest, other than equitable interest, in Australian land.	Date of acquiring the interest
s130ZB Foreign person acquires interest in exploration tenement	Foreign person acquires interest, other than equitable interest, in exploration tenement.	Date of acquiring the interest
s130ZC Person becomes foreign person while holding interest in land	A person becomes a foreign person and holds any of the following interests: an interest (other than equitable interest) in Australian land; an equitable interest in leases or licences of over five years in Australian agricultural land; or an interest (other than equitable interest) in an exploration tenement.	Day on which the person becomes a foreign person
s130ZD Change in nature of interest in land	a foreign person is recorded in the Register as holding an interest in residential; commercial; agricultural; mining or production tenement or interest in an exploration tenement; that interest changes to become an interest in another of the above categories (eg the residential land held by the person becomes commercial land); and the foreign person is aware or ought reasonably to have become aware of the change.	Day on which the person becomes aware or ought reasonably to have become aware of the change
s130ZE Foreign person acquires registrable water interest	Foreign person acquires registrable water interest during financial year and still holds the interest at the end of the last day of the financial year.	Last day of the financial year
s130ZF Person becomes a foreign person while holding registrable water interest	Person becomes a foreign person during a financial year and at the end of the last day of the financial year is still a foreign person and holds a registrable water interest.	Last day of the financial year in which the person becomes a foreign person
s130ZG Change to certain circumstances of a registrable water interest	a registered circumstance exists under s130ZE or s130ZF; the volume of water or share of a water resource in the registrable water interest changes; and the foreign person holds the water interest at the end of the last day of the financial year.	Last day of the financial year
ss130ZH-130ZJ Significant and notifiable actions	Foreign person takes ‘significant action’ as defined in ss40-41 or certain ‘notifiable action’ under s47. Such actions include: acquiring a direct interest in an Australian agribusiness entity or business; acquiring interests in securities in an entity (corporation or unit trust); issuing securities in an entity controlled by a foreign person; entering an agreement or altering a constituent document such that senior officers of an entity would be directed by a foreign interest holder and there is a change of control of the entity; acquiring interests in assets of an Australian business; acquiring a substantial interest in an Australian entity; and entering or terminating a significant agreement with an Australian business, leading to a change in control, provided that the threshold test is met (as prescribed by the regulations).	For significant actions: depends on the action taken. For notifiable actions: the day on which the action is taken.
ss130ZK-130ZM National security actions	Foreign person takes certain ‘notifiable security action’ (s55B) or ‘reviewable national security action’ (s55D, s55E). These include: starting a national security business; acquiring a direct interest in a national security business; acquiring a direct interest in an entity that carries on a national security business; as well as other actions involving, among other things, acquisition of interests, issue of securities or entering into agreements that are not otherwise a significant action or notifiable action (ie threshold tests do not apply).	Depends on the type of action taken
s130ZN	Foreign person holding a registered interest in an entity or business becomes aware, or ought reasonably to have become aware, that their holding has changed by 5% or more.	First day on which the person became aware or ought reasonably to have become aware.
s130ZO	Person holding direct interest in Australian agribusiness or substantial interest in an entity becomes a foreign person	Day on which the person becomes a foreign person
s130ZP	Person carrying on or holding a direct interest in a national security business, or holding a direct interest in an entity carrying on a national security business, becomes a foreign person	Day on which the person becomes a foreign person

 

Procedure for giving notice

Section 130W of the Act specifies that a foreign person required to give a register notice must do so within 30 days after the registrable event day and in accordance with data standards. The ATO has published draft data standards which specify that, among other things, the Registrar may request relevant information or documents, and a signed declaration must be submitted together with any register notice.

Foreign persons must give register notices through the ATO’s ‘Online services for foreign investors‘ page, which will become active from 26 June 2023. There is no cost for registration. However, section 130ZV provides that failing to give a register notice to the Registrar within 30 days after the ‘registrable event day’ will lead to a civil penalty of 250 penalty units (currently $68,750, however this will change upon commencement of the Register as the value of a penalty unit will be indexed on that date under section 4A of the Crimes Act 1914 (Cth)).

All information which the Registrar obtains under Division 3 (ie all register notices received) must be added to the Register: section 103T(a).

Further regulations

On 3 March 2023, a set of draft regulations clarifying and expanding on numerous aspects of the Register’s operation (Draft Regulations) was published in an Exposure Draft for public consultation, with submissions closing 31 March. The Exposure Draft was accompanied by an explanatory statement providing summary notes on each proposed regulation.

Primarily, the Draft Regulations prescribe additional circumstances under which foreign persons are to give a register notice, however they also set out exceptions to registration requirements which are not present in the Act.

Additional registrable circumstances

The Draft Regulations provide a number of circumstances additional to the Act in which a foreign person is to give a register notice. These include:

• acquiring a direct interest in an Australian media business;
• if a foreign government investor acquires a direct interest in an Australian entity or business, starts an Australian business, acquires an interest in a tenement or 10% of the securities in a mining, production or exploration entity; and
• circumstances that would otherwise be a significant or notifiable action, but for the issuing of an exemption certificate exempting it from other parts of the Act.

Exemptions for certain kinds of interests

Regulation 58L of the Draft Regulations clarifies that the registration provisions do not apply to an interest in Australian land that is not:

• a freehold interest;
• a leasehold interest granting occupation rights over Australian land reasonably likely to exceed five years; or
• an interest in a mining or production tenement.

Furthermore, Regulation 22A replicates the existing exemption for water entitlements where such entitlements are held by an irrigation infrastructure operator to deliver water to other users, or to hold or take water from another irritation right holder.

Takeaways

The new Register imposes additional considerations that must be taken into account when advising foreign clients, including Australian corporate clients with a degree of foreign ownership.

Although foreign persons are already required to register ownership of certain assets, the new regime will require the issuing of a register notice in certain circumstances where FIRB approval or notification was not previously required. In some cases, there is no longer a value threshold before a register notice must be made, such as when acquiring any non-equitable interest in Australian land or an exploration tenement.

Similarly, Australian clients holding a registrable interest should be advised on whether they are at risk of becoming a ‘foreign person’. This may occur with corporations in which foreign entities are planning to acquire a substantial interest (20% or more), or with individual clients who move to reside overseas.

This article was written with the assistance of Stephen Lin, Law Graduate.