House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Chapter 14 - Register of Foreign Ownership of Agricultural Land Bill 2015

Outline of chapter

14.1 The Register of Foreign Ownership of Agricultural Land Bill 2015 (Register Bill) establishes a Register of Foreign Ownership of Agricultural Land (Register) to be administered by the Commissioner of Taxation (Commissioner). The Register Bill provides for the collection of information, and publication of statistics, about foreign interests in agricultural land in Australia. It allows increased scrutiny of foreign investment in agricultural land and increased transparency on the levels of foreign ownership of agricultural land in Australia.

Context of amendments

14.2 This measure was announced by the Prime Minister, the Treasurer and the Minister for Agriculture in the joint Media Release titled Government tightens rules on foreign purchases of agricultural land of 11 February 2015. The Government further announced on 2 May 2015 that it would strengthen Australia's foreign investment framework through a range of measures. The announcement followed public consultation on the Options Paper titled Strengthening Australia's Foreign Investment Framework of February 2015.

14.3 The announced changes will primarily be enacted through the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 and the Register Bill.

•

The Foreign Acquisitions and Takeovers Legislation Bill 2015, if enacted, would substantially rewrite and modernise the Foreign Acquisitions and Takeovers Act 1975 (Act).

14.4 The Register Bill establishes a Register from 1 July 2015 to allow increased scrutiny of foreign investment in agricultural land and increased transparency on the levels of foreign ownership in Australian agricultural land. The Register will contain a record of foreign persons with interests in Australian agricultural land. It will also contain statistics about foreign interests in agricultural land which will be published on a website. The Commissioner will provide to the Minister for presentation to Parliament statistics derived from the Register as soon as practicable after the end of each financial year.

14.5 Outside of Queensland, there is currently no comprehensive collection of foreign ownership of land information at any level of government. All the States and Territories collect a significant amount of relevant data as part of the land title transfer process. However, there is a lack of consistency on the type of data that States and Territories collect on land title transfers. The Register Bill provides a timely and effective solution for implementing a foreign ownership register for agricultural land in Australia.

Summary of new law

14.6 The Register Bill establishes the Register, which will be maintained by the Australian Taxation Office (ATO). The Register will include information about interests in Australian agricultural land held by foreign persons on or after 1 July 2015. While foreign persons are only required to report such interests in agricultural land to the ATO on or after 1 December 2015, if a person notifies the ATO of their interest before this, it is anticipated that the ATO would treat them as having complied with the requirement to give notice under the Register Bill. The Register Bill sets out what interests in agricultural land must be reported to the ATO, by whom and by when.

14.7 The Register will have two separate parts, a basic part (the full record) and the statistical part. The latter will be published by the Commissioner on a website. In addition, the Commissioner will derive statistics from the basic part of the Register on at least an annual basis to report to the Minister (in this case, the Treasurer). An annual report on the operation of the Act, including the statistics derived from the Register, will be presented to the Parliament by the Minister.

Comparison of key features of new law and current law

Detailed explanation of new law

14.8 The Register Bill:

•

establishes the Register (including the Commissioner's obligation to publish on a website statistics derived from the information contained in the Register);

•

sets out what interests in agricultural land must be reported to the ATO, by whom and by when;

•

sets out other circumstances that must be reported to the ATO, by whom and by when, such as a registered landholder ceasing to be a foreign person, or registered agricultural land ceasing to be agricultural land;

•

provides for the general administration of the Register; and

•

provides other provisions.

Establishment of the Register

14.9 The Register Bill requires the Commissioner to keep the Register. The Register must be kept in two parts: a basic part, and a statistical part. [Sections 12 and 13, and subsection 14(1)]

14.10 The basic part must contain all information notified to the Commissioner by persons with foreign holdings of agricultural land held on or after 1 July 2015. The Commissioner can add information to the basic part of the Register which he or she otherwise obtains about holdings, or changes to holdings, of agricultural land by foreign persons. The Commissioner can add such information to the Register even if it was obtained by the Commissioner before the commencement of the Register Bill. The Commissioner may also correct or update information in the basic part of the Register. For example, the Commissioner may become aware of updated contact details for a person whose details are on the Register (because the person has updated those details, for example through the lodgement of their income tax return) and the Commissioner will also be able to update those contact details for the Register. [Section 12, subsection 14(2), and sections 15 and 16]

14.11 The statistical part of the Register must contain statistics derived from information in the basic part of the Register. The Commissioner may correct or update information in the statistical part of the Register. The Commissioner must periodically publish the statistical part of the Register on a website. In addition, the Commissioner must annually report to the Minister on the operation of the Act including statistics derived from the basic part of the Register. Rules may require the Commissioner to report to the Minister more than once a year. As announced by the Prime Minister, and the Treasurer in the joint Media Release titled Government strengthens the foreign investment framework of 2 May 2015, the Government expects that the Commissioner will publish in the first half of 2016 aggregate data from the initial stocktake in 2015. [Section 12, subsection 14(3), and sections 16, 17, 31 and 34]

Reporting of interests in agricultural land

What interests must be reported

14.12 Foreign persons with certain interests in agricultural land held on or after 1 July 2015 must report those interests to the ATO. [Sections 18, 19 and 20]

Example 14.1

Phil is an individual who is not ordinarily resident in Australia. He owns 20 per cent of the shares in the Australian incorporated Raoul Cheeses Co, which means that he holds a substantial interest in Raoul Cheeses Co. So although Raoul Cheeses Co is Australian incorporated, Raoul Cheeses Co is a foreign person.

Meaning of agricultural land

14.13 Agricultural land is land in Australia that is used, or that could reasonably be used, for a primary production business. This includes land which is partially used for a primary production business, or land where only part of the land could reasonably be used for a primary production business. An example of the latter is where part of the land is subject to an environmental protection zone that does not allow primary production activities within the zone. [Section 4]

14.14 Agricultural land also includes land which may, from time to time, be covered by water. However, agricultural land does not include a right to occupy areas of waterways, estuaries and bays, for purposes such as fish farming or oyster beds.

Example 14.2

Following on from Example 14.1, Raoul Cheeses Co has a freehold interest in land in Australia which it uses for a primary production business. This business is maintaining dairy cows. The dairy cows are used to produce milk which is then used to produce cheese. Not all of the land is, or could reasonably be, used for a primary production business because a portion of the land is partially submerged by a large swamp and is therefore fenced off to prevent injuries to the dairy cows. Despite the fact that part of the land could not reasonably be used for a primary production business, it is still agricultural land because it is partially used for a primary production business.

14.15 Whether land could reasonably be used for a primary production business depends on the facts and circumstances of the land. Factors that may provide a reasonable indicator that the land could (or could not) reasonably be used, either alone or together with other factors, could include:

•

The primary uses allowed on the land under its zoning: These are likely to provide a reasonable indicator of if the land could reasonably be used for a primary production business. For example, if zoning allowed for primary production activities to be undertaken without the further approval of the local regulatory body, this would likely indicate that the land could reasonably be used for a primary production business. However, land within a rural residential zone, where zoning requirements either explicitly do not allow for primary production activities, or would only be approved in special circumstances, is unlikely to be land that could reasonably be used for a primary production business.

•

Land use history: If the land has been used in a primary production business in recent years, this is likely to indicate that the land again could reasonably be used for a primary production business, unless there has been one or more significant changes in the land in the meantime (for example, significant permanent environmental degradation, water depletion or pollution, or removal or loss of the earlier primary production business infrastructure). However, even though the land has not been used in a primary production business in recent years does not necessarily mean that it could not reasonably be used for a primary production business in the future. Examples of this could include if the land is not being used in a primary production business due to:

-

an extended extreme climatic event, such as a long term drought;

-

a recent natural disaster, such as bushfire or floods; or

-

other activities, such as mineral exploration and development on the land after which expected, or legally required, land remediation works would mean that the land in whole or part again could reasonably be used for a primary production business.

•

Land characteristics (for example, climate, crop yield, land size, remoteness, soil quality, stock holding capacity, topography, vegetation and water availability): While relevant to if the land could reasonably be used for a primary production business, a single characteristic such as land size, in isolation may be insufficient to make a reasonable assessment. It is also not necessary that the land be of sufficient size to allow for the operation of a stand-alone primary production business in some or all cases within the site. Remoteness of the land from goods transport and other infrastructure, as well as key agricultural service providers, is likely to mean that land could not reasonably be used for a primary production business, until such infrastructure and/or services became available to the locality.

•

Lease or licence conditions or limitations: Where there is a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) is reasonably likely to exceed five years, there may be land use conditions or restrictions attaching to the lease or licence:

-

Where these explicitly allow for primary production activities to be undertaken, the land could reasonably be used for a primary production business, irrespective of the lessee or licence holder's intention during the lease or licence term.

-

Where these do not permit use for a primary production business by the lessee or licence holder, this in isolation should not be taken as meaning the land could not reasonably be used for a primary production business. Other factors, such as those outlined above and the rationale for such a restriction on the lease or licence would be relevant to an assessment. For example, if a lessor has retained adjacent land on which they are operating a primary production business and has restricted the uses of the lessee so that they can incorporate the land back into their operations should they decide to so at the end of the lease term (after the land has been left fallow to raise productivity), then the land could reasonably be used for a primary production business.

14.16 Land includes a building or a part of a building. However, a building or a part of buildings that do not have any direct connection with land that is used or that could reasonably be used for a primary production business are not included within the meaning of agricultural land. For example, an administrative office for a primary production business that is on a strata title in an office block in a city centre is not included within the definition of agricultural land. It is also not generally expected that dwellings within city limits would be considered to be on land that could reasonably be used for a primary production business, although it may be feasible or legal for small scale intensive primary production activities, or administrative activities related to a primary production business to occur on such land in some cases. However, such land is agricultural land if non-ancillary activities of a primary production business are carried out on the land. For example, market gardens or propagating plants as part of a plant nursery. [Section 4]

14.17 Australia, when used in a geographical sense, includes the external territories. The Act applies both within and outside Australia. [Sections 4, 7 and 8]

14.18 Primary production business has the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 995-1(1) of the ITAA 1997 defines a primary production as a business of:

•

cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment;

•

maintaining animals for the purpose of selling them or their bodily produce (including natural increase);

•

manufacturing dairy produce from raw material that you produced;

•

conducting operations relating directly to taking or catching fish, turtles, dugong, bêche de mer, crustaceans or aquatic molluscs;

•

conducting operations relating directly to taking or culturing pearls or pearl shell;

•

planting or tending trees in a plantation or forest that are intended to be felled;

•

felling trees in a plantation or forest; or

•

transporting trees, or parts of trees, that you felled in a plantation or forest to the place where they are first to be milled or processed or from which they are to be transported to the place where they are first to be milled or processed.

[Section 4]

14.19 Despite land falling within the definition of agricultural land, rules made by the Minister may specify that land is not agricultural land. Such rules must be made via a legislative instrument and would be subject to Parliamentary disallowance. As this allows the rules to reduce (but not broaden) the scope of the term 'agricultural land', such rules would generally decrease the regulatory burden. Generally, rules may be made by the Minister where necessary or convenient to carry out or give effect to the Register Bill. [Sections 4, 5, 31 and 35]

Meaning of foreign person

14.20 Foreign person has the same meaning as in the Foreign Acquisitions and Takeovers Act 1975 as amended by the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 (FATA (as amended)). Section 4 of the FATA (as amended) defines a foreign person as:

•

an individual not ordinarily resident in Australia;

•

a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•

a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•

the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;

•

the trustee of a trust in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest;

•

a foreign government; or

•

any other person, or any other person that meets the conditions, prescribed by the regulations to the FATA.

[Section 4]

14.21 Where the Register Bill uses the term 'person' it is intended that 'person' be read in light of the definition of 'foreign person'. 'Person' would therefore include an individual, a corporation, the trustee of a trust, a foreign government and any other person, or any other person that meets the conditions, prescribed by the regulations.

14.22 Section 5 of the FATA (as amended) defines when an individual who is not an Australian citizen is ordinarily resident in Australia. Under Section 4 of the FATA (as amended), a person holds a substantial interest in an entity (which is defined in section 4 of the FATA (as amended) as a corporation or a unit trust) or trust if the person holds:

•

for an entity - holds an interest of at least 20 per cent in the entity, alone or together with one or more associates of the person; or

•

for a trust (including a unit trust) - holds a beneficial interest, together with any one or more associates, in at least 20 per cent of the income or property of the trust.

14.23 Aggregate substantial interest requires that two or more persons hold an aggregate interest of at least 40 per cent in the entity or beneficial interests in at least 40 per cent of the income or property of the trust. Section 17 of the FATA (as amended) provides the meaning of interest and aggregate interest, including that interests of associates of the person are taken into account when calculating the person's interest. Section 18 sets out rules relating to determining interests in such entities. Therefore, the foreign person definition would take into account indirect interests that make a corporation or trustee a foreign person.

Example 14.3

Menfem Co has a freehold interest in land in Australia. It uses the land for a primary production business of tending and felling trees in a plantation. The land is therefore agricultural land.

Because of its ownership structure, Menfem Co is a foreign person as two or more persons (for example, individuals not ordinarily resident in Australia or foreign corporations) hold an aggregate substantial interest in Menfem Co (that is, because of its ownership structure paragraph (c) of the definition of foreign person in section 4 of the FATA (as amended) is relevant in working out if Menfem Co is a foreign person). Two or more persons hold an aggregate substantial interest in Menfem Co as they, together with any associates of any of them, are in a position to control at least 40 per cent of the voting power in Menfem Co (see section 4 and subsection 17(2) of the FATA (as amended)).

Essam and Casey each are in a position to control 10 per cent of the voting power in Menfem Co. They are not associates of one another and are both not ordinarily resident in Australia.

Cedwick Co is a foreign corporation which also has an interest in Menfem Co. Cedwick Co is in a position to control 10 per cent of the voting power. In addition, Michelle and Rebecca, who are both not ordinarily resident in Australia and are not associates, also are each in a position to control 10 per cent of the voting power in Menfem Co.

Essam, Casey, Cedwick Co, Michelle and Rebecca together control 50 per cent of the voting power in Menfem Co. Menfem Co is therefore a foreign person.

What types of interests in agricultural land must be reported

14.24 There are two types of interests, or changes to interests, in agricultural land that a foreign person must report:

•

freehold interests, and

•

rights to occupy agricultural land under a lease (including a sublease) or licence where the term of the lease or licence (including any extension or renewal) is reasonably likely to exceed five years.

[Subsection 19(1) and sections 21, 22, 23, 24, 25 and 26]

14.25 A freehold interest in land means a legal interest in an estate in fee simple that the person holds alone, as a tenant in common or as a joint tenant. The term 'hold' takes its ordinary meaning and encompasses direct legal interests in freehold interests in land or rights to occupy land. Where the agricultural land that a foreign person takes a freehold interest in, or holds rights to occupy over, is on more than one legal title, as can be the case with a farm and other primary production businesses, the freehold or leasehold interest in each title that is agricultural land is its own reporting event. [Section 4]

Example 14.4

This means that, having regard to the facts in Example 14.3, even though Menfem Co is a corporation, under the Register Bill it is a foreign person and has any relevant reporting obligations for the Register in relation to the land on which the primary production business is being conducted because it is the legal owner of the land.

14.26 A person starts to hold a freehold interest in land or a right to occupy land even if they:

•

start to hold it with one or more persons, or

•

they already hold or have previously held such an interest or right in other land.

[Section 4 and subsection 6(1)]

14.27 A person ceases to hold a freehold interest in, or right occupy, agricultural land even if they continue to hold another freehold interest in or right to occupy other land. [Section 4 and subsection 6(2)]

14.28 It should be noted that, while the Register Bill provides these clarifications about instances of where interests are starting or ceasing to be held, these instances are not limiting. Therefore there can be other circumstances in which a person may start or cease to hold an interest in land. [Subsection 6(3)]

What events which must be reported?

14.29 The Register Bill creates two distinct reporting obligations.

•

First, Register Bill requires foreign persons who held interests in agricultural land on 1 July 2015 to notify the Commissioner, in the approved form, following commencement of the Register Bill.

•

Second, the Register Bill requires foreign persons (and persons who have since ceased to be foreign persons) to notify the Commissioner of certain events involving agricultural land that occur on or after 1 July 2015.

[Sections 18, 19 and 20]

14.30 The events that must be notified if they occur on or after 1 July 2015 are:

•

a foreign person starts to hold:

-

a freehold interest in land that is agricultural land, or

-

right to occupy land that is agricultural land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years after the person starts to hold the right an example of a lease that is reasonably likely to exceed five years could be a lease with a term of three years with a three year renewal option that is likely to be exercised;

[Sections 4 and 21]

•

a foreign person ceases to hold a:

-

freehold interest in land that is agricultural land, or

-

right to occupy land that is agricultural land under a lease or licence whose term (including extensions and renewals) was reasonably likely to exceed five years after the latest of when the person started to hold it, when the person became a foreign person, when the land became agricultural land, and the start of 1 July 2015;

[Sections 4 and 22]

•

a person becomes a foreign person while holding a:

-

freehold interest in agricultural land, or

-

right to occupy agricultural land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years after the person became a foreign person;

[Section 23]

•

a person ceases to be a foreign person while holding a:

-

freehold interest in agricultural land, or

-

right to occupy land under a lease or licence whose term (including extensions and renewals) was reasonably likely to exceed five years after the latest of when the person started to hold the right, when the person became a foreign person, when the land became agricultural land and the start of 1 July 2015;

[Sections 4 and 24]

•

land becomes agricultural land while a foreign person holds a:

-

freehold interest in the land, or

-

right to occupy the land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years from the time the land becomes agricultural land; and

[Section 25]

•

land ceases to be agricultural land while held by a foreign person as a:

-

freehold interest in the land, or

-

right to occupy the land under a lease or licence whose term (including extensions and renewals) is reasonably likely to exceed five years from the latest of when the person started to hold the right, when they became a foreign person, when the land became agricultural land, and the start of 1 July 2015.

[Sections 4 and 26]

Who must report or may report

14.31 Generally, the person with the direct legal interest is required to notify the ATO of their interest in agricultural land. That is, the person who holds the freehold interest (alone, as a tenant in common or a joint tenant) or the right to occupy land under a lease (including a sublease) or licence. Where there are multiple foreign persons with a legal interest in agricultural land, each foreign person has an obligation to report their interest. However, an agent may give notice on their behalf. [Sections 4, 19, 20 and 29]

14.32 If a natural person is required to give notice but dies before doing so, the executor or administrator of their estate must give the notice, even if the person dies before 1 December 2015. [Sections 18 and 27]

14.33 If a corporation is required to give notice but is wound up before it gives notice, then the liquidator of the corporation must give the notice, even if the corporation is wound up before 1 December 2015. In the case where a corporation is under administration, but still in existence, the corporation continues to have a reporting obligation. This could be discharged by the administrator (or another person) as an agent. [Sections 18, 28 and 29]

14.34 Rules made by the Minister may provide that all persons, or some persons, are not required to give the Commissioner information about foreign holdings of agricultural land. These rules may not impose additional reporting obligations. They must be made via legislative instrument and would be subject to Parliamentary disallowance. These rules could reduce the regulatory burden by exempting certain persons from notifying of changes to foreign holdings of agricultural land. [Sections 18, 30, 31 and 35]

When interests in agricultural land must be reported

Interests held on 1 July 2015

14.35 Foreign persons with interests in agricultural land held on 1 July 2015 must give notice of those interests to the ATO in the approved form by 30 December 2015, or within a deferred time approved by the Commissioner (see section 388-55 of Schedule 1 to the TAA 1953). The Commissioner can determine the content of an approved form and the manner in which it is given to the Commissioner, including by electronic means (see section 388-50 of Schedule 1 to the TAA 1953). [Sections 19 and 32]

14.36 If a foreign person notifies the ATO of their interests in agricultural land before the Register Bill commences, it is anticipated that the ATO would treat them as having complied with the requirement to give notice under the Register Bill. The Commissioner would be able to make additions to the Register to take into account the matters reported prior to the commencement of the Register Bill, because the Commissioner's ability to make additions to the Register is not restricted to matters that are required to be reported under Part 3. [Section 15]

Changes to interests after 1 July 2015

14.37 A person who is required to notify of a change to a holding of an interest in agricultural land after the start of 1 July 2015 must give notice to the ATO in the approved form by the later of 30 December 2015, or within 30 days of the event occurring for which notice must be given. The Commissioner may provide further time to notify (see section 388-55 of Schedule 1 to the TAA 1953). As noted in paragraph 13.36, the Commissioner can determine the content of an approved form and the manner in which it is given to the Commissioner, including by electronic means (see section 388-50 of Schedule 1 to the TAA 1953). [Sections 20 and 32]

General administration

14.38 The Commissioner has the general administration of the Act. This means the Act is a taxation law for the purposes of the TAA 1953. The TAA 1953 defines a taxation law by reference to the ITAA 1997. The ITAA 1997 defines a taxation law in subsection 995-1(1) to include an Act of which the Commissioner has the general administration and legislative instruments made under such an Act. [Sections 31 and 32]

14.39 The effect of the Act being a taxation law is that existing provisions in the TAA 1953 apply for the purposes of the Act. This includes the:

•

approved form provisions in Subdivision 388B of Schedule 1;

•

powers to obtain information and evidence in Division 353 of Schedule 1;

•

confidentiality of taxpayer information provisions in Division 355 of Schedule 1 (which imposes strict obligations on the handling of confidential taxpayer information and specifies the circumstances in which the ATO may disclose information to certain recipients, for example, the Secretary of the Treasury and certain Ministers); and

•

administrative penalties such as:

-

the administrative penalties for statements in Division 284 of Schedule 1;

-

penalties for failing to lodge documents on time in Division 286 of Schedule 1; and

-

the miscellaneous administrative penalties in Division 288 of Schedule 1; and

•

offence provisions such as:

-

the offence in section 8C for failing to comply with requirements under a taxation law; and

-

the offences in section 8D for refusing or failing to answer questions, produce a document, or take an oath or make an affirmation when attending before the Commissioner.

[Section 32]

Other provisions

Simplified outline of the Act

14.40 The simplified outline of the Act provides an overview of the Act and the simplified outlines of Parts 2 to 4 provide an overview of the respective Parts. While simplified outlines are included to assist readers to understand the substantive provisions, they are not intended to be comprehensive. It is intended that readers should rely on the substantive provisions. [Sections 3, 12, 18 and 31]

Binding on the Crown

14.41 The Commonwealth, State and Territory Governments are bound by the Act. In line with normal practice, the Crown is not liable to a pecuniary penalty or to be prosecuted for an offence. [Section 9]

Access powers and information gathering

14.42 As noted at paragraph 13.39, because the Act is a taxation law, the Commissioner could use the access and information gathering powers in sections 353-10 and 353-15 of Schedule 1 to the TAA 1953 for the purpose of administering the Register. Those provisions apply to a broad range of persons, including government entities and those who may be, or may have been, required to register interests in agricultural land. Section 353-10 allows the Commissioner to require the production of information or documents or attendance to give evidence. Section 353-15 allows the Commissioner (or a person authorised by the Commissioner) to access land, premises or places in Australia for the purpose of a taxation law. [Section 32]

14.43 Section 264A of the Income Tax Assessment Act 1936 (ITAA 1936) is being modified so that it applies for the purposes of the Register Bill. This allows the Commissioner to require a person to provide information or documents which the Commissioner has reason to believe is held offshore, for the purposes of determining whether that person has, or had, an obligation to notify the Commissioner of an interest (or change to an interest) in agricultural land, and/or whether a person has complied with such an obligation. [Sections 31 and 33]

14.44 Where a notice for offshore information issued by the Commissioner is not complied with, the information or documents requested may not be admissible as evidence in proceedings before a court or the Administrative Appeals Tribunal in which the person disputes an obligation to notify the Commissioner of an interest in agricultural land, or a change to an interest in agricultural land. [Sections 31 and 33]

Example 14.5

Matt Co has a freehold interest in agricultural land in Australia of which it has not notified the ATO. It has shareholders overseas. The ATO has reason to believe it is a foreign person because of its overseas shareholding and that information or documents about that shareholding are held offshore. The ATO issues Matt Co with an offshore information notice, requiring it to produce information and documents about its foreign shareholding so that the ATO can determine whether it has an obligation to notify the ATO of its interest in agricultural land.

Constitutional provisions

14.45 For the purposes of section 109 of the Constitution, the Register Bill is not intended to limit the operation of a law of a State or Territory which is capable of operating concurrently with the Register Bill. [Section 10]

14.46 The Register Bill is enacted on the basis that it is supported by the Commonwealth's statistics power in paragraph 51(xi) of the Constitution. Nevertheless, the Register Bill provides for the continued operation of the Act (or provisions of the Act) in the event of a successful constitutional challenge. It sets out the various constitutional heads of power upon which the Act can draw if its operation is expressly confined to persons under those constitutional powers. This gives the Register Bill the widest possible operation consistent with Commonwealth constitutional legislative power. [Sections 11 and 17, and paragraph 34(1)(b)]

14.47 In relation to the places power, the Register Bill also has the effect it would have if each reference to land was expressly confined to land within a Territory. [Subsection 11(6)]

Application and transitional provisions

14.48 The Register Bill commences on 1 December 2015 but applies to interests in agricultural land in Australia held by foreign persons on or after 1 July 2015. [Sections 2, 18, 19 and 20]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

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

Register of Foreign Ownership of Agricultural Land Bill 2015

14.49 The Register Bill 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

14.50 The Register Bill establishes a Register to be administered by the Commissioner. The Register will include information about the interests held by foreign persons in agricultural land in Australia, thereby allowing increased scrutiny of foreign investment in agricultural land and increased transparency of the levels of foreign ownership of agricultural land in Australia. 'Agricultural land' is defined by section 4 to refer to land in Australia that is used, or that could reasonably be used, for a primary production business within the meaning of the ITAA 1997.

14.51 Section 14 provides that the Register will have two parts - a basic part, which comprises the full record, and the statistical part. The statistical part must not identify, or be reasonably capable of being used to identify, a person.

14.52 The Commissioner is required by section 17 to publish the statistical part of the Register on the internet.

14.53 Under section 34, the Commissioner is required, on an at least annual basis, to give the Minister a report for presentation to the Parliament, on the operation of this Act which includes statistics from the basic part of the Register.

14.54 The Commissioner has the general administration of the Act. This means the Act will be a taxation law for the purposes of the TAA 1953. The effect of the Act being a taxation law is that existing provisions in the TAA 1953 will apply for the purposes of the Act. Most relevantly, this includes the provisions which regulate the confidentiality of taxpayer information in Division 355 of Schedule 1 to the TAA 1953.

Human rights implications

14.55 The Register Bill engages the following human rights and freedoms:

•

the right to protection from unlawful or arbitrary interferences with an individual's privacy;

•

the right to freedom of expression; and

•

the right to be free from discrimination.

Right to privacy

14.56 Article 17 of the International Covenant on Civil and Political Rights (ICCPR) prohibits unlawful or arbitrary interferences with a person's privacy, family, home or correspondence. It also provides that everyone has the right to the protection of the law against such interference or attacks. The Human Rights Committee has interpreted the term 'unlawful' to mean that no interference can take place except in cases envisaged by law, which itself must comply with the provisions, aims and objectives of the ICCPR. The Human Rights Committee has also indicated that an interference will not be considered to be 'arbitrary' if it is provided for by law and is in accordance with the provisions, aims and objectives of the ICCPR and is reasonable in the particular circumstances. ^[17]

14.57 Privacy is a concept which is broad in scope and includes a right to information privacy. The Register Bill directly engages the right to privacy under Article 17 of the ICCPR because it requires the provision of information by and authorises the use and disclosure of certain information about individuals for inclusion in the Register. Specifically, the Bill provides that the following persons must give notice in the approved form to the Commissioner if:

•

on 1 July 2015 a foreign person held a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose remaining term (including any extension or renewal) was (on 1 July 2015) reasonably likely to exceed five years (section 19);

•

on or after 1 July 2015 a foreign person starts to hold a freehold interest in agricultural land or a right to occupy agricultural land under a lease or a licence whose term (including any extension or renewal) after the person starts to hold the right is reasonably likely to exceed five years (sections 20 and 21);

•

a foreign person ceases to hold a freehold interest in agricultural land under a lease or licence whose term (including any extension or renewal) after the person starts to hold the right is reasonably likely to exceed five years (sections 20 and 22);

•

a person becomes a foreign person while holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) after the registration trigger time ^[18] was reasonably likely to exceed five years (sections 20 and 23);

•

a person ceases to be a foreign person while holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence whose term (including any extension or renewal) after the registration trigger time was reasonably likely to exceed five years(sections 20 and 24);

•

land becomes agricultural land while the person holds an interest in the land or a right to occupy the land under a lease or licence whose term (including any extension or renewal) after the time the land becomes agricultural land is (at that time) reasonably likely to exceed five years (sections 20 and 25); and

•

land ceases to be agricultural land while a foreign person holds a freehold interest in the land or right to occupy the land under a lease or licence whose term (including any extension or renewal) after the registration trigger time was (at that time) reasonably likely to exceed five years (sections 20 and 26).

14.58 It is anticipated that the approved form will require an individual who is or was a foreign person to provide the Commissioner with their name, contact details, information about the land (including the location of the land, land title details and its market value) and the purposes for which the land is currently used or intended to be used. If a person who is required to give notice to the Commissioner dies before giving the notice, section 27 requires that the executor of that person's estate must instead give the required notice.

14.59 The Commissioner may also collect information about an individual by serving an offshore information notice on an individual. The effect of section 33 is that the Commissioner may give an offshore notice to a person if the Commissioner has reason to believe that information or documents that may be relevant to determining whether a person has or had an obligation to notify the Commissioner of an interest (or change in interest) in agricultural land.

14.60 If a person fails to comply with obligations under the Act the person may be liable to an administrative penalty under subsection 286-75(1) of Schedule 1 to the TAA 1953. The amount of that penalty would be worked out in accordance with subsection 286-80, but would not be more than five penalty units in any circumstance.

14.61 The information collected under this statute may only be used or disclosed for the purposes authorised by this Act or under a taxation law. Taxation officers must comply with Division 355 of Schedule 1 to the TAA 1953. In general terms, Division 355 makes it an offence for information about the tax affairs of a particular entity to be disclosed except in circumstances specified in detail by that Division. The maximum penalty for this offence is imprisonment for two years. In addition, information about individuals must also be handled in accordance with the obligations imposed by the Privacy Act 1988. This minimises the risk of information about identified or identifiable individuals being used or disclosed for an unauthorised purpose.

14.62 The circumstances in which information may be collected and used are clearly defined by the Bill and are therefore a lawful interference with the right to privacy. Moreover, as it would not be possible to achieve the objectives of the statute without collecting some information about identifiable individuals, these limitations on the right to privacy are reasonable in the circumstances and do not interfere with the right to privacy of those individuals more than is necessary to achieve the legitimate objective of allowing the Government to scrutinise over time the levels of foreign ownership of agricultural land in Australia.

Right to freedom of expression

14.63 Paragraph 2 of Article 19 of the ICCPR requires States parties to guarantee the right of everyone to freedom of expression, including the 'freedom to seek, receive and impart information and ideas of all kinds'. The right to freedom of expression includes the right not to impart information.

14.64 Divisions 2 and 3 of Part 3 of the Register Bill engage paragraph 2 of Article 19 of the ICCPR because they require individuals to provide information in the approved form. There is no less restrictive means of achieving the legitimate purpose the limitation seeks to achieve. Moreover, to the extent the Register Bill interferes with the right to freedom of expression the interference is relatively minor and has a clear legal basis. These limitations and therefore reasonable, necessary and proportionate.

Right to be free from discrimination

14.65 The Register Bill generally engages Article 26 of the ICCPR, which recognises that all persons are equal before the law and are entitled without discrimination to the equal protection of the law. While the ICCPR does not define the term 'discrimination' nor indicate what constitutes discrimination, the Human Rights Committee believes that in the context of the ICCPR it:

should be understood to imply any distinction, exclusion, restriction, or preferences which is based on race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status, and which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise by all persons, on an equal footing, of all rights and freedoms. ^[19]

14.66 The Human Rights Committee has observed that '[n]on-discrimination, together with equality before the law and equal promotion of the law without any discrimination, constitute a basic and general principle relating to the protection of human rights'. ^[20] However, the Human Rights Committee has also recognised that 'not every differentiation of treatment will constitute discrimination, if the criteria for such differentiation are reasonable and objective and if the aim is to achieve a purpose which is legitimate under the Covenant'. ^[21]

14.67 The Register Bill also generally engages the rights protected by the International Convention on the Elimination of All Forms of Racial Discrimination. Paragraph 1 of Article 1 of the International Convention on the Elimination of All Forms of Racial Discrimination defines the term 'racial discrimination' to mean 'any distinction, exclusion, restriction or preference based on race, colour descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural, or any other field of public life'. Under Article 2(1)(a) of the International Convention on the Elimination of All Forms of Racial Discrimination, [E]ach State Party undertakes to engage in no act or practice of racial discrimination against persons, groups of persons or institutions and to ensure that all public authorities and public institutions, national and local shall act in conformity with this obligation'. Under Article 5 of the International Convention on the Elimination of All Forms of Racial Discrimination States Parties 'undertake to prohibit and eliminate racial discrimination in all its forms and to guarantee the right of everyone, without distinction as to ...national ...origin, to equality before the law' in the enjoyment of civil, political, economic, social and cultural rights.

14.68 The Register Bill limits Article 26 of the ICCPR and Articles 2 and 5 of the International Convention on the Elimination of All Forms of Racial Discrimination because the core obligations imposed by the Register Bill only apply to a 'foreign person'. If the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 is enacted, the term 'foreign person' will include an individual not ordinarily resident in Australia. While an Australian citizen who is not ordinarily resident in Australia may be a 'foreign person' for the purposes of this Bill, it is anticipated that the majority of individuals who are directly affected by this Bill will not be Australian citizens.

14.69 While the Bill, if enacted, will primarily affect individuals who are citizens of countries other than Australia, there is no less restrictive way of achieving the objectives of the Bill. Given that the Bill only requires individuals who are foreign persons to provide certain information, and the Register Bill does not interfere with the rights of citizens from countries other than Australia more than to the extent possible to achieve the objective of the Register Bill, these limitations are considered reasonable and proportionate.

Conclusion

14.70 The Register Bill is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.