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:
|
Day on which the person becomes a foreign person |
| s130ZD Change in nature of interest in land |
|
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 |
|
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:
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:
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.
Contact
Ranny Fan
Partner
Ranny is a corporate and commercial lawyer with over 20 years' experience in international and domestic mergers and acquisitions.
Conrad Smith
Special Counsel
Conrad is a corporate & commercial lawyer with experience in mergers & acquisitions, restructures, succession, and insolvency.
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