Commonwealth Numbered Regulations - Explanatory Statements

[Index] [Search] [Download] [Related Items] [Help]

FOREIGN ACQUISITIONS AND TAKEOVERS FEES IMPOSITION AMENDMENT (FEE STREAMLINING) REGULATIONS 2017 (F2017L00803)

EXPLANATORY STATEMENT

Issued by the Authority of the Treasurer

Foreign Acquisitions and Takeovers Fees Imposition Act 2015

Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining) Regulations 2017

Section 13 of the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (the Fees Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Fees Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Fees Act. Section 11 of the Fees Act provides that for any fee amount in Part 2 of the Fees Act (or the amount indexed under section 12), regulations may prescribe a lower fee amount (including a nil amount) or a method for working out a lower fee amount that applies in all or some specified circumstances.

The purpose of the Foreign Acquisitions and Takeovers Amendment (Fee Streamlining) Regulations 2017 (the Regulations) was to streamline and simplify the commercial fee framework. The amended fee framework reduced complexity, achieved more equitable fee outcomes and minimised the regulatory burden on stakeholders.

The Regulations form part of a broader foreign investment legislation reform package, announced as part of the 2017-18 Budget. This instrument gives effect to proposals to streamline and simplify the fees for commercial foreign investment applications and actions. Other measures to streamline and enhance the foreign investment framework include introducing new exemption certificates and clarifying the treatment of residential land used for a commercial purpose which will be given effect to in Foreign Acquisitions and Takeovers Amendment (Exemptions and Other Measures) Regulations 2017

Generally, when a fee is payable under the Foreign Acquisitions and Takeovers Act 1975 the amount of fees imposed are set out in the Fees Act. However, the fee amount (as indexed to the consumer price index) is prescribed under the Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015 (Regulation), subject to an upper (indexed) limit set in the Fees Act, in the following circumstances:

•                 the fee for an application for an exemption certificate under section 42, 43, 43A and 43B of the Foreign Acquisitions Regulation (item 4 of the table in subsection 6(1) of the Fees Act); and

•                 the fee for giving a notice of a notifiable action under section 55 or 56 of the Foreign Acquisitions Regulation (item 6 of the table in subsection 7(1) of the Fees Act).

The amendments are consistent with the implementation of a flatter fee structure to reduce the administrative burden associated with the foreign investment regime. Additionally the proposed amendments will introduce new lower fee rules which replace previous discretionary processes for lowering fees.

The amendments were informed by a four week public consultation and stakeholder engagement process in March 2017, as well as additional stakeholder meetings held in May and June. Over 32 submissions were received as part of the Foreign Investment Framework 2017 Legislative Package Consultation Paper. Stakeholders overwhelming supported a flatter fee structure which is given effect to in the proposed amendments.

Further details of the Regulations are set out in Attachment A.

The Statement of Compatibility is set out in Attachment B.

The Fees Act does not specify any conditions that need to be met before the power to make the Regulations may be exercised.

The Regulations is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations commenced at the same time as Schedule 1 to the Foreign Acquisitions and Takeovers Fee Imposition Amendment (Fee Streamlining and Other Measures) Act 2017 commences.

ATTACHMENT A

Section 1 -- Name

This is the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining) Regulations 2017.

Section 2 -- Commencement

This instrument commenced at the same time as Schedule 1 to the Foreign Acquisitions and Takeovers Fee Imposition Amendment (Fee Streamlining and Other Measures) Act 2017 commenced.

Section 3 -- Authority

This instrument was made under the Foreign Acquisitions and Takeovers Fees Imposition Act 2015.

Section 4 -- Schedules

Each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.

Schedule 1 -- Amendments

The Schedule amended the Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015 (the Regulation).

Items 1: Definitions

These items inserted the following definitions into section 4 of the Regulation:

•                 'Dominant land holding' which has the same meaning as section 11 of the Regulation.

'Dominant land holding' is used in determining the appropriate fee treatment for acquisitions of land entities, including the lower fee rule in section 16 of the Regulation.

•                 'Foreign business person' which means a foreign person, except an individual not ordinarily resident in Australia, carrying on a business in Australia or elsewhere.

The Australian Taxation Office provides guidance for Australian tax purposes as to whether a person is carrying on a business.

The definition of 'foreign business person' also incorporates businesses which are undertaken on a not-for-profit basis.

An individual could not meet this definition unless the action is taken by them when acting in another capacity such as a trustee for a trust.

This definition ensures that only foreign persons carrying on a business can benefit from the lower fee rules relating to acquisitions of residential land as set out in sections 10, 15 and 16 of the Regulation.

Item 2: Fees for businesses or entities certificates

This item inserted a new section 5A before section 6. The new section set the fee payable for businesses or entities exemption certificates under section 42 of the Foreign Acquisitions Regulation to be $35,000 in 2017-18.

This is consistent with the fee payable for the exemption certificates for foreign persons for one or more kinds of interests in Australian land given under section 58 of the Foreign Acquisitions Act.

Item 3: Section 6 heading updated to 'Fees for tenements and mining, production or exploration entities certificates'

This item updated the section heading in the Regulation as shown above.

Items 4 to 6: Section 6 -- Fees for tenements and mining, production or exploration entities certificate

These items increased the fee payable for exemption certificates given under section 43 (certain interests in tenements and mining, production or exploration entities) of the Foreign Acquisitions Regulation from $25,300 in 2016-17 to $35,000 in 2017-18 and updated provision cross-references.

This is consistent with the fee payable for the exemption certificates for foreign persons for one or more kinds of interests in Australian land given under section 58 of the Foreign Acquisitions Act.

Subsection 6(2) of the Regulation prescribes that this fee is nil if another fee is payable by the person or an entity that is a member of the same wholly‑owned group for an exemption certificate under section 58 of the Foreign Acquisitions Act and the applications for this exemption certificate and the section 43 exemption certificate were made within 7 days of each other.

Item 7: Fees for residential land related exemption certificates

This item inserted two new sections that set the fees for residential land exemption certificates included at sections 43A and 43B of the Foreign Acquisitions Regulation.

Section 6A Fees for residential land (near-new dwelling interests) certificates

This item set the fee payable for applications for the residential land (near-new dwelling interests) certificates.

The fee that applies when applying for this exemption certificate is $25,700 in 2017-18.

This item also provides for a nil fee where a person has also applied for, or has been given an exemption certificate under section 57 of the Act; provided the section 57 certificate and the residential land (near-new dwelling interests) certificate cover (or will cover) interests in relation to the same development. 

Subject to an amendment to the Foreign Acquisitions Act, as is the case for new dwelling exemption certificates under section 57 of the Foreign Acquisitions Act, a periodic reconciliation payment will be payable.

Section 6B Fees for residential land (other than established dwellings) certificates

This item set the fee payable for applications for the residential land (other than established dwellings) certificate (given under section 43B of the Foreign Acquisitions Regulation).

The fee that applies when applying for this exemption certificate is tiered and depends on the consideration for the acquisition specified in the exemption certificate application. The fee tiers are identical to the fees payable for the established dwelling exemption certificate under section 59 of the Foreign Acquisitions Act.

For acquisitions of $1 million or less the fee payable in 2017-18 is $5,500. For acquisitions of $10 million or less the fee payable in 2017-18 is the amount calculated applying the formula in subsection (2). For acquisitions of above $10 million the fee payable in 2017-18 is the amount calculated applying the formula in subsection (3).

Example 1.1 

Mr Hans has recently arrived in Australia as a temporary resident. Mr Hans is unsure of the particular type of residential land he would like to purchase. He has decided that he wishes to spend no more than $12 million on a property, which he can apply to have covered in an exemption certificate for residential land other than established dwellings under section 43B of the Foreign Acquisitions Regulation.

If the exemption certificate is granted, he will be approved to purchase only one of the following: an interest in a new dwelling, a near-new dwelling interest and an interest in vacant residential land with a consideration up to, and including the value of $12 million. The certificate will include other conditions that Mr Hans must comply with if he is successful in purchasing residential land under the certificate.

The relevant fee payable for the exemption certificate will be determined based on the Method Statement under subsection 6B(3), which applies to applications for exemption certificates under section 43B of the Foreign Acquisitions Regulation where the consideration is more than $10 million. The fee will be automatically calculated through the foreign investment online application portal.

Item 8

This item applies the correct Division for the applicable fee for giving notice of a notifiable action prescribed by the Foreign Acquisitions Regulation.

Item 9: Updated fees for giving notice of notifiable actions prescribed by the Foreign Acquisitions Regulation

This item amended item 1 of the table in section 7 of the Regulation by updating the fee consideration tiers and fee amounts for notifiable actions for a foreign person acquiring an interest of at least 5 per cent in an entity or business that wholly or partly carries on an Australian media business or for a foreign government investor to acquire a direct interest in an Australian entity or Australian business.

The fee that applies for these notifiable actions is tiered depending on the consideration for the acquisition. In 2017-18, a $2,000 fee applies for acquisitions of $10 million and less; a $25,300 fee applies for acquisitions where the consideration is more than $10 million and $1 billion or less; and a $101,500 fee applies for acquisitions where the consideration is above $1 billion.

Item 10: Updated fee for certain notifiable actions of foreign government prescribed by the Foreign Acquisitions Regulation

This item amended item 2 of the table in section 7 of the Regulation by updating the fee amount for a foreign government investor to start an Australian business; acquire a legal or equitable interest in a tenement; or to acquire an interest of at least 10 per cent in a mining, production or exploration entity to $10,100 in 2017-18, which is unchanged from the fee in 2016-17.

Item 11: Insertion of a note to section 7

This item inserted a note to section 7 of the Regulation. The note makes it clear that the amounts of consideration specified in item 1 of the table are not indexed as these amounts are not fees.

Item 12: Exemption certificate fees where there are related exemption certificate applications

This item inserted two new sections after section 8 of the Regulation:

•                 The first, section 8A set the fee payable for a second residential exemption certificate where the person has only one proposal to acquire an interest in a residential dwelling under the two residential land exemption certificates.

•                 The second, section 8B set the fee payable for a second exemption certificate application as nil where the foreign person pays the fee that is payable on the first exemption certificate application. This section applies where there is one exemption certificate application for a businesses and entities certificate and one exemption certificate application under section 58 of the Foreign Acquisitions Act (which applies to interests in Australian land)

Section 8A Applications for residential land certificates covering a single proposed acquisition

This section applies if applications are made for both an established dwelling exemption certificate (given under section 59 of the Foreign Acquisitions Act) and for a residential land (other than established dwellings) exemption certificate (given under section 43B of the Foreign Acquisitions Regulation), but the applications only allow for the acquisition of a single dwelling or single title of vacant residential land. The fee for the second certificate is nil where the conditions set out in section 8A are met.

This section ensures that a foreign person who only wants to acquire a single dwelling or single title of vacant residential land can apply for exemption certificates for multiple types of residential land and pay only the fee amount applicable to the maximum consideration for the acquisition specified in the two exemption certificate applications.

Section 8B Applications made for businesses and entities certificates

This section applies if applications are made for both an exemption certificate for foreign persons under section 58 of the Foreign Acquisitions Act (which applies to interests in Australian land) and a businesses and entities exemption certificate (which is given under section 42 of the Foreign Acquisitions Regulation).

Where the application for the second certificate is made within 14 days after the first certificate is made (after the applicable fee has been paid) and the person pays the fee that is payable for the application for the first certificate or has already paid this fee, the fee payable for the second certificate is nil. In the absence of this section applying, the fee in 2017-18 for an application for each of these certificates is $35,000.

Example 1.2

Beta Co submits an application for an exemption certificate under section 58 of the Foreign Acquisitions Act (first certificate).  Beta Co then pays the applicable fee for this exemption certificate which is $35,000 in 2017-18.

Following this Beta Co has from the time it pays the applicable fee for the first certificate or within 14 days afterwards to submit an application for an exemption certificate for the other type of exemption certificate — the businesses and entities exemption certificate (second certificate).

Beta Co submits an application for a businesses and entities exemption certificate (second certificate) within 14 days of paying the applicable fee for the first certificate. The fee for the second certificate will be nil.

If the first certificate and second certificate had been applied for at the same time the fee for the second certificate would only be nil after the fee for the first certificate was paid.

Item 13: Updated section 9 for where the fee would otherwise be more than 25 per cent of consideration

This item replaced the previous lower fee rule in section 9 of the Regulation which provided concessional fee treatment where a notice was given and the fee payable would otherwise be more than 25 per cent of the consideration. The previous lower fee rule applied to most actions, except where the action was an action that constituted an internal reorganisation. Section 9 now only affects actions related to residential land or mining or production or exploration tenements, as the introduction of three tier categories for a range of other actions with a new lower fee tier (at $2,000 in 2017-18) removed the need for the lower fee rule to remain applicable to these other actions.

Under subsection 9(1), a $2,000 fee in 2017-18 is payable where the fee otherwise payable would make up more than 25 per cent of the consideration for an interest in a mining or production tenement or the acquisition by a foreign government investor of a legal or equitable interest in a tenement, or an interest of at least 10 per cent in securities in a mining or production or exploration entity.

Under subsection 9(2), a $1,000 fee in 2017-18 is payable for interests in residential land where the fee otherwise payable would represent more than 25 per cent of the consideration. This is unchanged from the fee for 2016-17.

This section does not apply to actions that constitute an internal organisation (subsection 9(3)).

Item 14: Updated section 10 for majority owners

This item replaced the previous lower fee rule in section 10 of the Regulation which provided a nil fee for majority owners (where a foreign person holds an interest of greater than 50 per cent in the target prior to the transaction) where the action was characterised as an interest in securities in an entity covered by paragraph 40(2)(b) of the Foreign Acquisitions Act. Where the action could be characterised in another way and a higher fee applied to that characterisation, the higher fee still applied. For example, if the action was also an acquisition of a direct interest by a foreign government investor, or also the acquisition of an interest in an Australian land entity, any higher fee apply to such an action still applied, irrespective of a nil fee applying under section 10.

The new majority owner lower fee rule has broad application as it applies where before the acquisition the person holds an interest of more than 50 per cent in the land, entity, assets or tenement and the acquisition results in the person increasing the interest. The fee that applies for acquisitions which meet the conditions in section 10 of the Regulation is $2,000 in 2017-18:

For example, foreign corporation F Co holds a 60 per cent interest in securities in an Australian entity Aus Co that is also a land entity and will increase this interest to 80 per cent. The applicable thresholds are met for both the acquisition of an interest in securities and the acquisition of an interest in Australian land (but not residential land). So the single action, which in this instance can be characterised as two different kinds of actions, will be a notifiable action for the acquisition of both the interest in securities and the interest in Australian land. This rule applies to make the fee amount for each of these actions $2,000. Then, applying subsection 9(2) of the Act, the highest fee is payable. That is, a single fee of $2,000 in 2017-18.

The rule does not apply to a situation where an agreement is entered into that gives rise to a new interest:

For example, where a foreign person materially alters or varies a leasehold interest to increase the term of the lease or expand the land covered by the lease, this rule does not apply. However, if the foreign person was increasing their interest in the lease by buying-out the remaining 30 per cent interest in the lease held by their joint venture party, this rule could apply.

The majority owner lower fee rule applies to residential land provided the acquirer is a foreign business person.

•                 Section 4 of the Regulation defines 'foreign business person' to mean a foreign person, except an individual not ordinarily resident in Australia, carrying on a business, whether in Australia or elsewhere.

The Australian Taxation Office provides guidance for Australian tax purposes as to whether a person is carrying on a business.

The definition of 'foreign business person' also incorporates businesses which are undertaken on a not-for-profit basis.

An individual could not meet this definition unless the action is taken by them when acting in another capacity such as a trustee for a trust.

This definition ensures that only foreign persons carrying on a business could benefit from the lower fee rules relating to acquisitions of residential land as set out in this section and sections 15 and 16 of the Regulation.

The majority owner lower fee rule applies to acquisitions of an interest in an entity or business that wholly or partly carries on an Australian media business.

This section does not apply to actions that constitute an internal organisation (subsection 10(2)).

Item 15: Acquisition of leasehold interest after sale of freehold interest

This item inserted a new section after section 10 of the Regulation to provide equivalent fee treatment to the sale and leaseback of land as is provided to other majority owners acquisitions.

This provided a lower fee treatment of $2,000 in 2017-18 for foreign persons undertaking a sale of freehold interests in land and subsequently acquiring leasehold interests in the land, provided the acquisition meets the conditions in subsection 10A(1) of the Regulation.

This section does not apply to actions that constitute an internal organisation (subsection 10A(2) of the Regulation).

Item 16: Updated fee for internal reorganisations by foreign government investors involving tenements

This item amended subsection 12(1) of the Regulation by updating the applicable fee for 2017-18 to $10,100, so that it did not change from the fee in 2016-17 (that is, indexation did not apply on 1 July 2017).

Item 17: Inclusion of additional lower fee rules to reflect situations where fee waivers have generally been given prior to 1 July 2017

This item inserted three new sections at the end of Division 3 to introduce new lower fee rules which replace the previous discretionary process for lowering the fee for these actions. In addition, in certain situations new section 18 lowers the fee amount that would otherwise be applicable to an application to vary a no objection notification.

Section 15 Acquisition of two or more interests in residential land by foreign business person

The introduction of this new lower fee rule replaces the previous discretionary process for lowering the fee for multiple acquisitions of residential land for entities carrying on a business.

This section provides a lower fee where a foreign business person acquires more than one interest in residential land under one agreement. The fee that would apply is the highest fee applicable for multiple actions occurring under the one agreement.

•                 Section 4 of the Regulation defines 'foreign business person' to mean a foreign person, except an individual not ordinarily resident in Australia, carrying on a business, whether in Australia or elsewhere.

The Australian Taxation Office provides guidance for Australian tax purposes as to whether a person is carrying on a business.

The definition of 'foreign business person' also incorporates businesses which are undertaken on a not-for-profit basis.

An individual could not meet this definition unless the action is taken by them when acting in another capacity such as a trustee for a trust.

This definition ensures that only foreign persons carrying on a business could benefit from the lower fee rules relating to acquisitions of residential land as set out in this section and sections 10 and 16 of the Regulation.

This lower fee rule applies across multiple actions including residential land, commercial land and agricultural land. For example if a foreign business person submitted an application for an acquisition of residential land and agricultural land under the 'one agreement', the applicable fee is based on the highest fee amount for the acquisition of individual residential land and agricultural land titles that would have applied.  

 Section 16 Acquisition of interest in securities by foreign business person

The introduction of this new lower fee rule replaces the previous discretionary process for lowering the fee for acquisitions of residential land through a land entity for entities carrying on a business.

This section provides a lower fee of $25,300 in 2017-18 if the foreign business person acquires an interest in an Australian land corporation with a dominant land holding in residential land; or an Australian land trust with a dominant land holding in residential land. This is only where the consideration for the acquisition is $1 billion or less. Where the consideration is greater than $1 billion then the fee of $101,500 in 2017-18 would apply.

Where a foreign business person acquires securities in an Australian land trust with a dominant land holding in residential land, and the trustee of the trust is a corporation, the amount of fee payable for acquiring an interest in securities in the corporation is nil.

That is if a foreign business person is acquiring an interest in an Australian land trust with a dominant land holding in residential land and is acquiring an interest in a corporation which is the trustee of that land trust they will pay a nil fee for the acquisition of the trustee.

•                 Section 4 of the Regulation defines 'foreign business person' to mean a foreign person, except an individual not ordinarily resident in Australia, carrying on a business, whether in Australia or elsewhere.

The Australian Taxation Office provides guidance for Australian tax purposes as to whether a person is carrying on a business.

The definition of 'foreign business person' also incorporates businesses which are undertaken on a not-for-profit basis.

An individual could not meet this definition unless the action is taken by them when acting in another capacity such as a trustee for a trust.

This definition ensures that only foreign persons carrying on a business could benefit from the lower fee rules relating to acquisitions of residential land as set out in this section and sections 10 and 15 of the Regulation.

Section 17 Acquisitions of non-vacant commercial land by foreign government investors

The introduction of this new lower fee rule replaces the previous discretionary process for lowering the fee for acquisitions of non-vacant commercial land by foreign government investors where the consideration was $55 million or less.

Acquisitions of non-vacant commercial land up to $55 million by foreign government investors are subject to a fee of $2,000 in 2017-18.

If the non-vacant commercial land is being acquired through a land entity the standard fee for an interest in an Australian entity action will continue to apply.

Some acquisitions of non-vacant commercial land involve the acquisition of a direct interest in an Australian business -- as the land acquired represents more than 10 per cent of the assets of the business. For the direct interest in an Australian business action the fee will be nil. This results in the acquisition of non-vacant commercial land with consideration of less than $55 million having a fee of $2,000 in 2017-18.

Section 18 Fee for variation of no objection notifications and certain exemption certificates

With the introduction of a new lower fee tier ($2,000 in 2017-18) there is the possibility that a variation to a no objection notification could have a higher fee for the variation to the no objection notification than the initial fee (before any fee waivers or remissions) for the no objection notification.  

This lower fee rule means that the fee for a variation to a no objection notification does not exceed the fee that:

a)             was payable for the notice or notification mentioned in subsection 18(1(b)); and

b)             would have been payable for the notice or the notification mentioned in subsection 18(1(b)) in relation to the no objection notification as it is proposed to be varied.

This section also sets the fee for the variation to a residential land (near-new dwelling interests) certificate as nil if the person had applied or been given an exemption certificate under section 57 of the Act, provided both the residential land (near-new dwelling interests) certificate and the section 57 certificate as it is varied, cover (or will cover) interests in relation to the same development.

Item 18: Application provisions

Part 3 of the Regulations provides that he provisions of the Regulation apply on or after commencement. Part 3 will self-repeal at the end of June 2018.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

This instrument streamlines and simplifies the foreign investment fee framework, including by legislating standard fee waivers.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.