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FOREIGN ACQUISITIONS AND TAKEOVERS FEES IMPOSITION REGULATION 2015 (SLI NO 215 OF 2015)

EXPLANATORY STATEMENT

Select Legislative Instrument No 215, 2015

Issued by authority of the Treasurer

Foreign Acquisitions and Takeovers Fees Imposition Act 2015

Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015

Section 13 of the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act. Section 11 of the Act provides that for any fee amount in Part 2 of the Act, regulations may prescribe a lower fee 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 Fees Imposition Regulation 2015 (Regulation) is to prescribe the amount of the fee payable for actions or applications which are prescribed under the Foreign Acquisitions and Takeovers Regulation 2015 (Foreign Acquisitions Regulation).

The Regulation forms part of a broader foreign investment legislation reform package, one of the components of which is to introduce fees for certain foreign investment applications and actions.

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

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

•                 the fee for giving a notice of a notifiable action prescribed by Division 1 of Part 5 of the Foreign Acquisitions Regulation (item 6 of the table in subsection 7(1) of the Act).

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

The Statement of Compatibility is set out in Attachment B.

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

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

Exposure drafts of the Regulation and the Foreign Acquisitions Regulation were published on the website of the Department of the Treasury (Treasury) on 13 October 2015. Interested persons were invited to provide comments on the draft Regulation and the draft Foreign Acquisitions Regulation by 30 October 2015. Treasury received 15 submissions, none of which were designated non-confidential. Discussions were also had with a number of stakeholders during and post the exposure period. Several peak bodies, law firms (that act as agents for foreign persons), and entities that will be directly affected by the Regulation were amongst those who provided submissions. Treasury has also consulted with the Australian Taxation Office (ATO) generally about the Regulation.

The main issues raised by stakeholders included:

•                 the quantum of fees;

•                 whether the Regulation should provide that a fee is to be refunded if it is paid for a significant action or a notifiable action that ultimately does not proceed; and

•                 whether there should be an annual cap on the fees payable by any investor or wholly-owned group.

Following consultation, a few additional provisions were included to lower fees in certain circumstances.

The measures in the Regulation are covered by the Regulation Impact Statement (RIS) included at Chapter 15 of the explanatory memorandum to the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, the Foreign Acquisitions and Takeovers Fee Imposition Bill 2015 and the Register of Foreign Ownership of Agricultural Land Bill 2015.

The Regulation commenced on the later of:

•                 the commencement of section 5 of the Act; and

•                 the start of the day after the Regulation was  registered on the Federal Register of Legislative Instruments.

ATTACHMENT A

Details of the Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015

The Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015 (Regulation) prescribes the amount of the fees payable for actions or applications which are prescribed under the Foreign Acquisitions and Takeovers Regulation 2015 (Foreign Acquisitions Regulation).

Part 1 -- Preliminary

Section 1 -- Name

This section provides that the title of the Regulation is the Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015.

Section 2 -- Commencement

This section provides that the Regulation commences on the later of:

•                 the commencement of section 5 of the Act; and

•                 the day after it is registered.

The Act, and consequently the Regulation, will not commence if Schedule 1 to the Foreign Acquisitions and Takeovers Legislation Amendment Act 2015 does not commence.

Section 3 -- Authority

This section provides that the Regulation is made under the Foreign Acquisitions and Takeovers Fees Imposition Act 2015.

Section 4 -- Definitions

This section defines the following terms:

•                 'Act' as the Foreign Acquisitions and Takeovers Fees Imposition Act 2015; and

•                 'Foreign Acquisitions Regulation' as the Foreign Acquisitions and Takeovers Regulation 2015.

A number of expressions used in the Regulation are defined in the Act, the Foreign Acquisitions and Takeovers Act 1975 and the Foreign Acquisitions Regulation.

Part 2 -- Fees for things prescribed by the Foreign Acquisitions Regulation

Section 5 - Simplified outline of this Part

Section 5 explains that Part 2 prescribes the amount of the fees payable (as indexed annually under the Act to the All Groups Consumer Price Index) for actions or applications which are prescribed under the Foreign Acquisitions Regulation and lowers some fees.

Section 6 -- Fees for exemption certificates prescribed by the Foreign Acquisitions Regulation

A fee is prescribed for an application for an exemption certificate under sections 42 and 43 of the Foreign Acquisitions Regulation. Those sections are for a foreign person to acquire interests in securities in the course of the foreign person's business of underwriting securities and for a foreign person to acquire an interest in a tenement which is not an interest in land. The fee (for item 4 of the table in subsection 6(1) of the Act) is $25,000

Section 7 -- Fees for giving notice of notifiable actions prescribed by the Foreign Acquisitions Regulation

A fee is prescribed for giving a notice of a notifiable action prescribed by Division 2 of Part 5 of the Foreign Acquisitions Regulation (for item 6 of the table in subsection 7(1) of the Act). The fee is set out in the table below.

The table in subsection 7(2) of the Regulation contains five categories for which fees are payable, as follows:

Section 8 -- Lowering fees

Section 8 explains that a lower amount for some fees are prescribed for section 11 of the Act. For the fees specified in sections 6 to 10 of the Act, section 11 of the Act provides that regulations may be made prescribing a lower amount or a method of working out the lower amount.

The lower amount may be nil. It is possible to prescribe a lower amount or method for only some circumstances in which fees are payable. For example, a fee may be lowered for the acquisition of a particular type of land.

Section 9 -- Fee would otherwise be more than 25% of consideration

Where a fee that would otherwise be payable is more than 25 per cent of the consideration for an acquisition, the Regulation provides that there are some circumstances in which the fee is reduced to $1,000. These are where:

a)      the fee is specified in section 7 to 9 of the Act;

b)      the fee is payable for giving notice of a notifiable action or a proposal to take an action that is not a notifiable action;

c)      the action is the acquisition of an interest in securities, assets, Australian land or a mining, production or exploration tenement; and

d)     the action is not covered by item 2 of the table in subsection 8(1) of the Act (notice of actions that are not notifiable where the action is to acquire an interest in securities, issue securities or acquire interests in assets of an Australian business).

This section has no application to actions pursuant to an internal reorganisation.

Section 10 -- Majority owners

Where a foreign person already holds more than 50 per cent in an entity, the Regulation provides that the fee for further acquisitions is nil if:

a)      the fee is specified in section 7 to 9 of the Act;

b)      the fee is payable for giving notice of a notifiable action or a proposal to take action that is not a notifiable action; and

c)      the action is the acquisition of an interest in securities by a foreign person covered by paragraph 40(2)(b) of the Foreign Acquisitions Act.

This does not mean a fee is not payable if an action may be characterised in a different way. For example, if the acquisition is of an interest in a land entity, a fee may still be payable for an acquisition of an interest in land.

This section has no application to actions pursuant to an internal reorganisation.

Section 11 -- Acquisition of securities in a land entity

A land entity may hold more than one kind of land. If it would result in a lower fee, then section 11 provides that the fee that is payable for giving the notice is the fee that is payable for acquiring an interest in the entity's dominant land holding.

Without this section, the operation of section 9 of the Act would mean that the fee payable for notifying an acquisition of an interest in the entity would be the fee for the kind of land that results in the highest fee.

Section 11 provides a method for working out an entity's dominant land holding.

This section applies only for working out a fee where an entity holds more than one kind of land. The section does not reduce a fee that is worked out under section 12 where more than one kind of action is taken.

For subsections 11(3) and (5), a reasonable assessment of the value of the interests is to be made using available information. This extends to non-public information when this is available to the person making the assessment.

Section 12 -- Internal reorganisations by foreign government investors involving tenements

Section 12 complements section 10 of the Act. That section provides for a fee of $10,000 for internal reorganisations where there is an acquisition of land. Where there is an acquisition by a foreign government investor (the first entity), from another entity, of a tenement which is not an interest in Australian land, section 12 provides a similar rule.

A fee of $10,000 is payable if any of the following applies:

•                 both entities are subsidiaries of the same holding entity;

•                 the other entity is the holding entity of the first entity; or

•                 the other entity is a subsidiary of the first entity.

However, where the internal reorganisation forms part of an internal reorganisation for which a fee is payable by the foreign government investor (or another member of the same wholly-owned group) under section 10 of the Act, and they are the same internal reorganisation, then the fee is lowered to nil.

Section 13 -- Acquiring interests in residential land jointly

Section 13 applies where an individual gives notice of an acquisition of residential land which is to be acquired with one or more other individuals as joint tenants and under a single agreement. The fee is lowered to nil if a fee has already been paid by one of the other individuals. For example, this means that spouses buying residential land as joint tenants for $1.5 million may pay only one fee of $10,000 (the fee is based on the value of the consideration for the joint interest). If the husband paid the fee, then the wife is no longer liable to pay a fee as her fee becomes nil.

Section 14 -- Actions taken by wholly-owned groups

Where a wholly-owned group of entities wishes to make an acquisition through different entities in the group, section 14 makes a decision to do so 'fee neutral' in some circumstances.

The fee payable by an entity is lowered to nil if:

a)      the fee is payable for certain interests in an agribusiness, securities, assets, interests in Australian land or tenement;

b)      one or more entities from the same wholly owned group have or are to acquire more of the same interests;

c)      the acquisitions are dealt with in a single agreement or a notice is given stating that the entities propose to acquire the interests; and

d)     a fee is paid by one of the other entities.

For example, four entities in a wholly-owned group give notice to acquire interests in securities in non-agribusiness Corporation A, to increase the interest held by the wholly-owned group in Corporation A from 25 to 51 per cent (the consideration for the additional 26 per cent interest is less than $1 billion). If one of the entities in the wholly-owned group giving notice pays the fee, then the fees for the other entities are lowered to nil. Thus in effect, only one fee is paid although four entities have given notice to acquire an interest in securities in the same corporation.

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

The Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015 prescribes the amount of the fee payable for actions or applications which are prescribed under the Foreign Acquisitions and Takeovers Regulation 2015.

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.

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