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By: Selwyn Black, Esq.
Carroll & O'Dea
Sydney, Australia

Recent investment activity in Australia from overseas has put our foreign investment rules in the spotlight. This includes record levels of foreign investment in residential real estate, the blocked sales of agricultural interests such as Graincorp and S. Kidman & Co, and the proposed sale of infrastructure assets such as Asciano and the port of Darwin.

The Foreign Acquisitions and Takeovers Legislation Amendment Act 2015 (Cth) and associated legislation came into effect on 1 December 2015. Key changes made to the rules governing foreign investment in Australia include:

  1. stronger criminal penalties for breaches of rules, including residential real estate rules:
    1. up to $135,000 in fines and/or 3 years imprisonment for individuals;
    2. up to $675,000 in fines for corporations;
  2. new civil penalties for breaches of residential real estate rules including:
    1. the forfeiture of any capital gains made on a subject property;
    2. fines for third parties who assist foreign persons to breach the rules;
  3. a greater role for the Australian Taxation Office in the enforcement of residential real estate rules;
  4. the introduction of application fees of up to $100,000 on foreign investment applications;
  5. the establishment of an agricultural land foreign ownership register, which will include residential land and water entitlements;
  6. the screening threshold for proposed foreign purchases of agricultural land has reduced from $252,000,000 to $15,000,000 for most foreign persons; and
  7. the screening threshold for proposed foreign purchases of agribusiness has reduced from $252,000,000 to $55,000,000 for most foreign persons.

There is a fine balance to strike between promoting Australia as an investor friendly nation and protecting potentially sensitive Australian assets.

The new measures attempt to increase transparency and confidence in our foreign investment regime.

The existence of different rules for foreign investors from nations with a free trade agreement with Australia means there is not a level playing field for all investors and may result in additional complexities.

It is crucial for foreign investors to seek advice before investing in Australia.

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