Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 12 - Foreign Acquisitions and Takeovers Fees Imposition Bill 2015
Outline of chapter
12.1 Part 6 of the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 (Foreign Acquisitions Bill) specifies that:
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- the Treasurer is not required to take any action in relation to certain applications or notices before the applicable fee is paid; and
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- the Treasurer may waive the whole or part of a fee if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee.
12.2 This Chapter explains the operation of the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 (Imposition Bill), which imposes fees in relation to certain applications and actions that are made under the Foreign Acquisitions Bill.
Context of amendments
12.3 Currently, no fees or charges are payable when making an application or giving a notice under the Act. The imposition of fees will cover the costs of considering applications, the introduction of a specialised investigative and enforcement area within the Australian Taxation Office (ATO), improvements in the collection of data about foreign investment in Australia, and an increase in the resources dedicated to the investigation of alleged breaches of the Act.
12.4 The imposition of fees will ensure that those who undertake activities regulated by the Foreign Acquisitions and Takeovers Act 1975 (Act) rather than the general community bear the costs relating to the administration of the Act, including the costs of monitoring compliance with the legislation, investigating alleged breaches and commencing enforcement proceedings in appropriate cases.
Summary of new law
12.5 The Imposition Bill imposes fees in relation to applications and actions that are made under the Foreign Acquisitions Bill. The Imposition Bill also sets out the rates of the fees that apply and provides a power for regulations to prescribe the rate of the fee, subject to a maximum amount set out in the Imposition Bill. The rates of the fees are also subject to annual indexation.
Detailed explanation of new law
When are fees payable?
12.6 A person who applies for an exemption certificate, gives notice of a notifiable action, or gives a notice in relation to a proposal to take a significant action that is not a notifiable action must pay a fee when the notice is given or an application is made. [Schedule 1, item 4, section 113, Foreign Acquisitions Bill]
12.7 To comply with section 55 of the Constitution, fees are imposed as a tax by the Imposition Bill and the rates and indexation mechanism are also included in that Bill. [Section 5, Imposition Bill]
Fee amounts imposed by Imposition Bill
12.8 The fee amounts are as follows:
| Provision reference | Fee category | *Fee amount |
| Table item 1 subsection 6(1) |
New dwellings - developer application
An application for an exemption certificate for new dwellings under section 57 of the Foreign Acquisitions Bill. |
$25,000. |
| Table item 2 subsection 6(1) |
Interest in Australian land
An application by a foreign person for an exemption certificate under section 58 of the Foreign Acquisitions Bill, where the consideration specified in the application for the proposed acquisitions is: (A) $1 billion or less; or (B) more than $1 billion. |
(A) $25,000
(B) $100,000. |
| Table item 3 subsection 6(1) |
Established dwellings
An application by a foreign person for an exemption certificate for an interest in an established dwelling under section 59 of the Foreign Acquisitions Bill, where the consideration specified in the application for the proposed acquisition is: (A) $1 million or less; or (B) more than $1 million. |
(A) $5,000
(B) see explanation in paragraphs 12.11 to 12.13 below. |
| Table item 4 subsection 6(1) |
Exemption certificate prescribed by regulations
An exemption certificate prescribed by regulations under section 63 of the Foreign Acquisition Bill. |
The amount not exceeding $25,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item. |
| Table item 5 subsection 6(1) |
Exemption certificate variation
A variation of an exemption certification under section 62 of the Foreign Acquisitions Bill not contrary to the national interest. |
$5,000. |
[Subsection 6(1), Imposition Bill]
*The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.
| Provision reference | Fee category | *Fee amount |
| Table item 1 subsection 7(1) |
Interests in Australian businesses or entities
One of the following notifiable actions: (a) to acquire a direct interest in an Australian entity or Australian business that is an agribusiness; or (b) to acquire a substantial interest in an Australian entity where the consideration for the acquisition is; (A) $1 billion or less; or (B) more than $1 billion. |
(A) $25,000
(B) $100,000. |
| Table item 2 subsection 7(1) |
Residential or agricultural land
To acquire an interest in residential land or agricultural land, where the consideration for the acquisition is: (A) $1 million or less; or (B) more than $1 million. |
(A) $5,000
(B) see explanation in paragraphs 12.11 to 12.13 below. |
| Table item 3 subsection 7(1) |
Commercial land (not vacant)
To acquire an interest in commercial land (other than commercial land that is vacant). |
$25,000. |
| Table item 4 subsection 7(1) |
Vacant commercial land
To acquire an interest in commercial land that is vacant. |
$10,000. |
| Table item 5 subsection 7(1) |
Mining and production tenements
To acquire an interest in a mining or production tenement. |
$25,000. |
| Table item 6 subsection 7(1) |
Prescribed notifiable actions
To take a notifiable action prescribed by regulations under section 48 of the Foreign Acquisitions Bill. |
The amount not exceeding $100,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item. |
[Subsection 7(1), Imposition Bill]
* The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.
Other fees
12.9 The table below sets out the fees for:
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- a person (each table item in subsection 8(1)) for:
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- an order made by the Treasurer under Subdivision A of Division 2 of Part 3 of the Act in relation that person; or
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- a no objection notification given to that person;
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- giving a notice of a proposal to take an action that is not a notifiable action (table items 1, 2 and 4 of the table in subsection 8(1)).
| Provision reference | Fee category | *Fee amount |
| Paragraphs 8(1)(a) and (b) and table item 1 of subsection 8(1) |
Issue securities, acquire businesses
(a) to acquire less than a substantial interest in securities in an entity; (b) to issue securities in an entity; or (c) to acquire interests in assets of an Australian business; where the consideration for the issue or acquisition is: (A) $1 billion or less; or (B) more than $1 billion. |
(A) $25,000
(B) $100,000. |
| Paragraphs 8(1)(a) and (b) and table item 2 of subsection 8(1) |
Enter or terminate agreements
(a) to enter an agreement mentioned in paragraph 46(2)(d) of the Foreign Acquisitions Bill; (b) to alter a constituent document of an entity mentioned in paragraph 46(2)(e) of the Foreign Acquisitions Bill; or (c) to enter or terminate a significant agreement with an Australian business. |
$25,000. |
| Paragraph 8(1)(b) and Table item 3 of subsection 8(1) |
Significant and notifiable action
To take a significant action that is also a notifiable action. |
The amount that would have been payable under the Imposition Bill for an action if a notice relating to the action had been given by the person. |
| Paragraphs 8(1)(a) and (b) and table item 4 subsection 8(2) |
Prescribed significant action non-notifiable
To take a significant action that is prescribed by regulations under section 49 of the Foreign Acquisitions Bill and that is not a notifiable action. |
The amount not exceeding $100,000, that is prescribed by regulations, or worked out using the method prescribed by regulations, made for the purposes of this item. |
[Subsection 8(1), Imposition Bill]
* The fee amounts and maximum thresholds are subject to indexation each financial year from 1 July 2016.
Fee for variation or revocation of no objection notification
12.10 If a person applies under subsection 76(6) of the Foreign Acquisitions Bill for a variation of a no objection notification imposing conditions then the amount of the fee is:
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- $5,000, if the action contained in the notification is an acquisition of an interest in Australian land; and
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- otherwise $10,000.
[Subsection 8(2), Imposition Bill]
Established dwellings and residential and agricultural land exceeding $1 million
12.11 A calculation is used to determine the fee payable for the following actions:
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- an application for an exemption certificate for an established dwelling under section 59 of the Foreign Acquisitions Bill where the consideration for the proposed acquisition is more than $1 million; and
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- acquiring an interest in residential land or agricultural land, where the consideration for the acquisition is more than $1 million.
[Subsections 6(2) and 7(2), Imposition Bill]
12.12 The fee payable in both of the above circumstances is determined by first dividing the proposed consideration for the proposed acquisition by $1 million, and rounding the result down to the nearest whole number. The result of that calculation (the purchase price number) is then multiplied by $10,000 to determine the fee payable. [Subsections 6(2) and 7(2), Imposition Bill]
12.13 For agricultural land, the fee payable cannot exceed $100,000 as indexed each financial year. [Subsection 7(3), Imposition Bill]
Six monthly fees for developers
12.14 A further fee is payable by developers in addition to the fee for applications by developers for exemption certificates for new dwellings. The further fee applies if, during the six month period after the developer is given an exemption certificate (and subsequent six month periods), foreign persons have acquired from the developer one or more dwellings covered by the certificate. In this instance, at the end of that six month period the developer must pay a fee equal to the total of the amounts for those new dwelling acquisitions by foreign persons. The amount of the fee payable is the amount that would have been payable at the time of each acquisition, if:
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- each acquisition had been treated as an acquisition of residential land; and
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- assuming the acquisition had been a notifiable action.
[Schedule 1, item 4, subsections 113(2), (3), and (4), Foreign Acquisitions Bill, subsection 6(3), Imposition Bill]
Internal reorganisation
12.15 If a fee is payable by a person under the Foreign Acquisitions Bill in relation to one or more actions that constitute an internal reorganisation, then the fee is $10,000. An internal reorganisation is an acquisition by an entity (first entity) of:
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- an interest in securities in another entity where the first entity and the other entity are subsidiaries of the same holding entity or the other entity is a subsidiary of the first entity;
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- an interest in an asset or Australian land from another entity if;
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- both entities are subsidiaries of the same holding entity;
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- the other entity is the holding entity of the first entity; or
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- the other entity is a subsidiary of the first entity.
[Section 4, definition of 'internal reorganisation', section 10, Imposition Bill]
Tie breaker rules if multiples fees could apply
12.16 If one agreement covers more than a single action for which a fee is payable, a separate fee is payable for each acquisition of an interest in residential land covered by the agreement. This ensures that the fees cannot be reduced for multiple acquisitions by including them in a single agreement. [Paragraph 9(1)(a), Imposition Bill]
12.17 Further, if, apart from acquisitions of interests in residential land, the agreement covers more than one other action, then the fee payable is the highest of the fees for those actions. [Paragraph 9(1)(b), Imposition Bill]
12.18 If a single action is either or both:
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- more than one of the following kinds of actions:
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- a significant action in relation to an entity (under subsection 40(2) of the Foreign Acquisitions Bill);
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- a significant action in relation to a business (under subsection 41(2) of the Foreign Acquisitions Bill);
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- the acquisition of an interest in Australian land by a foreign person (under paragraph 43(a) of the Foreign Acquisitions Bill);
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- to take a significant action that is prescribed for the purposes of section 44 of the Foreign Acquisitions Bill;
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- a single action relating to land that satisfies more than one subsection in section 52 of the Foreign Acquisitions Bill (agricultural or other land with a value above the threshold and land which is prescribed);
then the fee payable in relation to the single action is the highest of the amounts that apply.
[Subsection 9(2), Imposition Bill]
12.19 This provides a tie breaker rule to remove doubt about the relevant fee that applies if multiple fees could apply.
Indexation of fees
12.20 The amounts of the fees set out in the Imposition Bill and any fee amounts prescribed in regulations under a regulation making power in the Imposition Bill are subject to annual indexation. This includes both fees for which a dollar amount is included in the Imposition Bill and fees that are calculated by reference to a formula such as fees for acquiring an interest in residential land or agricultural land, where the consideration for the acquisition is more than $1 million. [Subsections 12(1) and (2) and paragraph 12(9)(b), Imposition Bill]
12.21 The purchase price number used to determine the fees for acquisition of interests in residential land or agricultural land is not a fee and accordingly is not itself subject to indexation. Similarly, the threshold amounts for consideration of $1 billion, $1 million and the amount of $10,000 to which the purchase price number applies are not indexed. This ensures that indexation applies only once to the fee amount for acquisitions of residential or agricultural land. The maximum cap on the fees for prescribed exemption certificates, prescribed notifiable actions and prescribed significant actions that are not notifiable actions are also subject to annual indexation. The maximum cap on the fee payable for an acquisition of an interest in agricultural land is also subject to annual indexation. [Subsection 12(9), Imposition Bill]
12.22 Indexation applies each financial year commencing with the 2016-17 financial year. [Schedule 3, subitem 10(2), Foreign Acquisitions Bill, subsections 12(2) and (3), Imposition Bill]
12.23 The indexed amount of fees for later financial years is calculated by multiplying the Base amount of the fee by the Indexation factor for the financial year. The indexation factor reflects the change in the CPI index numbers for each quarter for the 12 month period ending on 31 March before the relevant financial year compared to the index numbers for each quarter for the 12 month period ending on 31 March immediately before the base financial year for the base amount. [Subsections 12(2), (3) and (8), Imposition Bill]
12.24 The CPI index numbers (index number) used for determining the indexation factor refer to the original series of the eight capital cities weighted average All Groups Consumer Price Index number. Where a revised index number is published, the index number used is the most recently published index number provided that the index number is not published more than two weeks after the first date of publication for that number. An index number published more than two weeks after original publication is only used if it includes changes to the index reference period. [Subsections 12(5) and (8), Imposition Bill]
12.25 The indexation factor is rounded to three decimal places (rounded up if the result of the calculation for the fourth decimal place is five or more). The indexed fee that is calculated is then rounded down to the nearest multiple of $100. No indexation applies if applying indexation would result in a reduction in fees. Indexation instead occurs in later financial years once the indexation calculation results in an increase in the fee amounts. [Subsections 12(4), (6) and (7), Imposition Bill]
12.26 A regulation making power is included in the Imposition Bill to enable a lower amount of fees (including a nil amount) to be prescribed, or for a method of working out that lower amount to be prescribed. This provides flexibility to reduce fee levels if required or to remove a fee that is imposed under the Imposition Bill. [Subsection 11(1), Imposition Bill]
12.27 Where the amount of a fee is specified as payable in certain circumstances, the regulations may prescribe an amount or method in relation to only some of those specified circumstances. [Subsection 11(2), Imposition Bill]
12.28 The Imposition Bill includes a number of definitions for the purposes of the Bill, including indexed amount, index number, base amount and quarter for the purposes of indexation. The Imposition Bill also ensures that definitions in the Bill or regulations prescribed under a regulation making power under the Bill have the same meaning. [Section 4, Imposition Bill]
Example 12.1 Indexation of fees
The fee payable for an exemption certificate for a new dwelling payable under section 57 of the Foreign Acquisitions Bill for the 2017-18 financial year is calculated as follows (assuming a lower fee amount has not been prescribed under regulations):
The fee for the 2015-16 financial year of $25,000 is multiplied by an indexation factor worked out by dividing the sum of the four index numbers for the quarters of the 12 month period ending on 31 March 2017 by the sum of the four index numbers for the quarters of the 12 month period ending on 31 March 2015. The indexation factor is rounded to three decimal places and the indexed fee amount calculated is the rounded down to the nearest multiple of $100.
General regulation making power
12.29 The Imposition Bill includes a general regulation making power to prescribe matters required or permitted by the Bill or necessary or convenient to give effect to the Bill. [Section 13, Imposition Bill]
12.30 The Imposition Bill extends to all Australian external territories. [Section 3, Imposition Bill]
Requirement for fees to be paid before Treasurer exercises powers
12.31 Where a fee is payable for making an application or giving a notice, a person is taken not to have given the notice or made the application until the fee has been paid or the fee has been waived. [Schedule 1, item 4, section 114, Foreign Acquisitions Bill]
Waiver and remissions of fees
12.32 The Treasurer may waive or remit the whole or a part of a fee that is payable if the Treasurer is satisfied that it is not contrary to the national interest to waive or remit the fee. [Schedule 1, item 4, section 115, Foreign Acquisitions Bill]
Application provisions
12.33 Fees apply from the later of:
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- the day after Royal Assent of the Imposition Bill; and
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- 1 December 2015.
[Table item 2 in Subsection 2(1), Imposition Bill]
12.34 However, if the Foreign Acquisitions Bill does not receive Royal Assent then fees do not apply. This ensures that all related legislation must be enacted before fees can apply.
[Subsection 2(1), table item 2, Imposition Bill]