Roles in the administration of Australia’s foreign investment policies are shared between the Foreign Investment Review Board (“FIRB”) and the Australian Taxation Office (“ATO”).
There are controlling measures for the kinds of investment requiring approval, investment approval thresholds and application fees, compliance and penalties and the setting of related conditions when deemed appropriate.
The FIRB considers the implications of investment proposals in the national interest, with the Federal Treasurer having ultimate decision-making powers.
The ATO manages and keeps records of applications for foreign investment in residential real estate and the agricultural land register. This includes collection of the application fees, upfront screening processes, compliance and enforcement.
Guidance: Tax Residence of Foreign Companies
Practical Compliance Draft Guideline PCG 2018/D3 provides guidance for determining the tax residence of foreign companies according to the central management and control test.
See also: Taxation Ruling TR 2018/5 Income tax: central management and control test of residency
26 July 2018 – “Removing tax loopholes”
Rules are to be tightened on stapled structures that have been used by foreigners to reduce the tax paid on the income they earn from their Australian investments and foreign investors to be allowed access to the concessional Managed Investment Trust rate if they invest in affordable housing. See Removing tax loopholes
- Taxation Determination TD 2018/12 – The purpose of section 177DA is to ensure that foreign multinational entities cannot avoid the attribution of business profits to Australia, by avoiding a taxable presence in Australia.
- Dec 5, 2017 Recent Developments in Transfer Pricing and the Taxation of Multinational Companies in Australia
16 May 2017: ATO guidance on cross-border related party financing
- New ATO guidance on cross-border related party financing and see
- PCG 2017/D4 ATO compliance approach to taxation issues associated with cross-border related party financing arrangements and related transactions
From 9 May 2017: Residential vacancy fee
Annual vacancy fees for foreign owners
In a 2017 budget measure, an annual vacancy fee for foreign owners of residential real estate is to be introduced where residential property is not occupied or genuinely available on the rental market for at least 6 months in a 12 month period.
The fee applies from 7:30PM (AEST) on 9 May 2017. The fee is that which was payable at the time of the foreign investment application.
You must lodge your Vacancy fee return within 30 days of the end of each vacancy year.
Returns are due annually within 30 days of the anniversary of settlement for each dwelling owned.
Vacancy fee amount
The vacancy fee is equivalent to the foreign investment application fee paid at the time of application.
The Australian Tax Office administers the charge. See Annual vacancy fee for foreign owners
22 Feb 2016: Taxation risk and the national interest
With immediate effect, the Government has announced new “national interest” requirements on foreign investment applications aimed at getting multinational companies investing in Australia to pay tax on what they earn in Australia. The rules require companies to report tax-related information to the FIRB on an annual basis, and enable additional conditions to be set where a “significant tax risk” is identified.
Key investment approval thresholds – rural land
From 1 March 2015, privately-owned foreign investors require prior approval for an acquisition of rural land holdings over $15 million
EXCEPT for the following trade agreement countries:
- Investors from Singaporean and Thailand require prior approval for acquisition of a substantial interest in a primary production business valued above $50 million
- Investors from United States, New Zealand and Chile require prior approval for acquisition of a substantial interest in a primary production business valued above $1,094 million
A substantial interest is 15% for a single foreign person (and any associates) or several foreign persons (and any associates) with 40% or more control of a corporation. From 1 December 2015 the 15% threshold will be increased to 20% (along with other changes – see below).
Rural land is land situated in Australia that is used wholly and exclusively for carrying on a business of primary production.
Foreign Interests Land Register
From 1 July 2015 all foreign investors who hold interests in agricultural land must register with the Australian Taxation Office.
Existing holdings must be registered by
31 December 2015 29 February 2016 (date extended) and any new (i.e. from 1 February 2016) interests registered within 30 days.
The register will be publicly available from 2016, with the system is being strengthened through stricter penalties for non-compliance and higher FIRB application fees.
Foreign investment in residential real estate
The Government has announced a reduced penalty period for foreign investors who disclose breaches of the foreign investment rules for purchases of Australian residential real estate. The Tax Office administers the penalties on behalf of the Foreign Investment Review Board.
The reduced penalty period ended on 30 November 2015, after which the new criminal and civil penalties apply. This means that until 1 December 2015 investors were allowed up to 12 months to divest property rather than a shorter period, and will not be referred for criminal prosecution.
Criminal penalties applying from 1 December 2015 for most breaches include 750 penalty units (currently $127,500) or 3 years imprisonment for individuals and 3,750 penalty units (currently $637,500) for companies.
New civil and criminal penalties will be introduced for third parties who knowingly assist a breach of the rules including fines of $42,500 for individuals and $212,500 for companies, and in more serious breaches involving residential property, will be calculated by reference to the greater of the property’s cost, its sale price or profit on sale.
- Media release – Government orders forced sale of properties
- Details of the new penalty regime are attached to the Minister’s media release.
- From 1 December 2015 the breach report form to use is here.
Agricultural land, and proposed definitions: “Agribusiness”, “Agricultural land”
The scrutiny and approvals around foreign investment in rural assets and enterprises are to be tightened.
The Minister’s announcement of 2 May 2015 confirms that there will be a $55 million threshold (based on the value of the investment) for investments in “agribusinesses”.
The proposed definition of “agribusiness” will include primary production businesses and certain first stage downstream manufacturing businesses (including meat, poultry, seafood, dairy, fruit and vegetable processing and sugar, grain and oil and fat manufacturing).
The screening threshold for agricultural land has been reduced from $252 million to $15 million (cumulative) from 1 March 2015.
Agricultural land is land in Australia that is used, or that could reasonably be used (or partially used), for a primary production business. A “primary production business” is as defined under the Income Tax Assessment Act 1997 section 995(1).
For further information see:
Foreign Investment Reforms
The Australian Government manages its foreign investment rules and approvals through the Foreign Investment Review Board.
Recently the extent and impact of foreign investment in Australian assets has become a more prominent political issue. The Government’s responses to the perceived need for reform include the following legislation.
Legislative amendments taking effect from 1 December 2015:
- Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 (passed 24 Nov 2015)
- Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 (passed 11 Nov 2015)
- Register of Foreign Ownership of Agricultural Land Bill 2015 (passed 11 Nov 2015)
Reforms contained in the package include:
- the definition of foreign person is to be extended to include foreign governments
- the threshold 15% for FIRB approval of a substantial interest will be increased to 20%
- stronger enforcement of the rules, including the residential real estate functions transferred to the Australian Taxation Office
- stronger penalties
- higher application fees to offset costs borne by Australian taxpayers
- increased scrutiny around foreign investment in agriculture
- establishment of the Foreign Interests Land Register
- simplification of the foreign investment framework.
- Stronger foreign investment regime comes into force – Minister’s Media Release 1 Dec 2015 and
- “Shake up of Australia’s Foreign Investment Laws – Draft Bills Released” – (pdf) PWC 31 Aug 2015
Foreign Investment – publications
and ATO: Foreign investment in Australia: what you need to know (accessed April 2016)
- Non-residents’ Australian tax rates
- Non-residents and Capital Gains Tax
- Australian Government response: Foreign Investment in Residential Real Estate (Treasury)
- Property transactions involving foreign parties
This page was last modified 2019-01-09