Co-authored by Michael Kinsella
New reporting obligations for foreign investors are expected to commence on 1 July 2023. With funds assigned in the 2020-21 Budget, the Australian Taxation Office (ATO) has been tasked with building and maintaining a new register of foreign land interests to:
“Provide a streamlined experience for foreign investors to manage their investment affairs, support compliance with Australia’s foreign investment framework and increase the Government’s visibility of foreign investments made in Australia.” – ATO, 5 December 2022
The changes will repeal the Register of Foreign Ownership of Water or Agricultural Land Act 2015
Functions of the register
The register will replace foreign investment registers managed by the ATO, relating to agricultural and residential land, and water interests. Additionally, the type of assets to be registered will expand to include a broad range of Australian proprietary interests; commercial land of any value, business acquisitions and other assets irrespective of the Foreign Investment Review Board (FIRB) approval requirement.
The new register will hold details about foreign ownership in Australia relating to residential, commercial and agricultural land interests. It will also record mining, production and exploration tenements as well as business and entity related interests, where applicable. By consolidating various registers managed by the ATO, the new system aims to simplify the registration process for foreign investors.
It is crucial for foreign investors to be aware of the potential penalties for non-compliance with the new registration requirements. Failure to register an acquisition within 30 days can result in penalties of up to 250 penalty units per day, currently valued at $68,750.
Such penalties underscore the importance of timely and accurate registration to avoid financial liabilities and maintain compliance with the regulatory framework. Moreover, foreign investors and any representatives will need a ‘myGovID’ to use the ATO’s online portal service for interest registration.
Online service for foreign investors
To support foreign registration, the ATO is introducing an online service for foreign investors in order to meet their new obligations. As of 26 June 2023, foreign investors can register interests with the ATO online. This will allow investors to:
- Lodge foreign investment applications for residential land and pay associated fees;
- Manage your personal foreign investment details;
- Manage residential and non-residential asset registrations;
- View the history of their residential and non-residential assets (from 1 January 2021);
- Lodge vacancy fee returns and pay associated fees;
- Monitor their residential foreign investment application status;
- Review asset registrations;
- Review vacancy return lodgements;
- Review payment history; and
- Delegate authority to representatives to act on their behalf as an individual or for an entity without an ABN.
Pros and cons of the new register
The introduction of a new register and additional obligations for foreign investors to detail their interests is a positive step. It promotes transparency and accessibility within property law and taxation law; which can be confusing to navigate individually.
- Streamlined process: The new register offers a centralised platform, simplifying the registration process and reducing administrative burdens for foreign investors.
- Increased transparency: By expanding the scope of registered assets, the register enhances transparency and provides the Australian Government with better visibility of foreign investments in the country.
- Compliance support: The online service and digital portal aim to support foreign investors in meeting their obligations by offering user-friendly features and functionalities.
- Expanded compliance burden: The broader asset coverage and stringent penalties place a significant compliance burden on foreign investors, necessitating diligent and timely registration to avoid fines.
- Potential Administrative Challenges: The transition to the new register and online service may initially present challenges for investors adapting to the new system.
The introduction of Australia’s new register of foreign land interests marks a significant milestone in the country’s foreign investment framework. While the register aims to simplify and streamline the registration process, it also imposes additional compliance requirements on foreign investors. By expanding the scope of registered assets and introducing an online service, the register enhances transparency and provides a centralised platform for investors to manage their investment affairs effectively.
Foreign investors should familiarise themselves with the registration obligations and use the online service for compliance. Timely and accurate registration should be made to avoid potential penalties. Despite the challenges posed by these new requirements, the register ultimately aims to create a fair and transparent investment environment for both foreign investors and the Australian Government.
If you would like to find out more about the new reporting obligations, please contact Coleman Greig’s experienced Taxation team.