House of Representatives

Explanatory Memorandum

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

Chapter 7 - Miscellaneous

Outline of chapter

7.1 New Part 8 of the Bill:

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invests the Federal Court of Australia (Federal Court), the Federal Circuit Court of Australia (Federal Circuit Court) and the Supreme Court of a State or Territory with the power to enforce certain orders made by the Treasurer;

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permits the Treasurer to require a person to give information or produce documents relating to matters relevant to the exercise of the Treasurer's powers under this Act;

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clarifies that a failure to comply with the Act or regulations does not invalidate an action;

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enables the Secretary to specify the method that must be used by a person making an application or giving a notice;

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permits the Treasurer and the Secretary to delegate their functions and powers under this Act to certain officers, including the Commissioner of Taxation (Commissioner);

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enables the Commissioner to exercise certain information gathering and other investigatory powers when exercising delegated powers or performing functions under this Act or at the request of the Treasurer; and

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confers a general regulation making power.

Summary of new law

7.2 New Part 8 builds on Part III of the existing Act.

Comparison of key features of new law and current law

Detailed explanation of new law

Powers of courts to enforce Treasurer's orders

7.3 If a person (the offender) fails to comply with an order made by the Treasurer under new Part 3 of the Act or a condition of a no objection notification imposing conditions, the Treasurer may apply to the Federal Court, Federal Circuit Court or the Supreme Court of any State or Territory to make such order or orders as the court thinks fit for the purpose of giving effect to the order or condition imposed by the Treasurer. [Schedule 1, item 4, subsection 132(1)]

7.4 The Bill includes a non-exhaustive list of the kinds of orders that might be made by a court [Schedule 1, item 4, subsection 132(3)]. A court may also make an order directing any person to do or refrain from doing a specified act for the purposes of securing compliance with any other order made under new section 132 as well as an order containing such ancillary or consequential provisions as the court thinks fit. [Schedule 1, item 4, subsection 132(4)]

7.5 A court may rescind, vary or discharge an order it has made under new section 132. A court may suspend the operation of an order made by it under new section 132. [Schedule 1, item 4, subsection 132(6)]

7.6 For the avoidance of doubt, the Bill clarifies that a court may make such an order regardless of whether the offender has been convicted of an offence or a civil penalty order has been made in relation to the contravention; the contravention is continuing or other proceedings relating to the contravention have been or are to be instituted. [Schedule 1, item 4, subsection 132(2)]

7.7 These provisions provide additional enforcement options to achieve the objects of the Act. For example, where a civil penalty order is sought, the Treasurer may also seek an order restraining any dealings in property connected to the alleged breach so that the property is available to satisfy payment of a civil penalty order.

7.8 The Bill clarifies that the powers conferred on a court under new section 132 of the Bill are in addition to, and not instead of, any other powers of the court conferred by the Act or otherwise. [Schedule 1, item 4, subsection 132(7)]

Treasurer may require information

7.9 The Treasurer may require a person to give information or to produce documents if the Treasurer has reason to believe that the person is capable of giving information or producing documents relating to matters that are relevant to the exercise of the Treasurer's powers under the Act and regulations. The notice given by the Treasurer must specify a period (of at least 14 days) within which the information must be given or documents produced and manner in which the person must give the information or produce the documents. The Treasurer may extend, or further extend, the period within which the information must be given or the documents produced if the Treasurer is satisfied that it is reasonable to do so.

7.10 It is an offence not to comply with such a notice, and the maximum penalty that can be imposed under the provision is a fine equivalent to 30 penalty units (currently $5,400), imprisonment for six months, or both.

7.11 A person does not commit an offence if the person complies with the notice to the extent to which the person is capable of doing so. It is appropriate to include this matter in a defence (rather than specifying it as an element of the offence) because it is a matter that is peculiarly within the defendant's knowledge and it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter.

7.12 The effect of sections 137.1 and 137.2 of the Criminal Code is that a person might commit an offence if they provide information or documents that are false or misleading.

7.13 A person is required to comply with the notice even if giving the information or producing the document might tend to incriminate him or her. Whilst the privilege against self-incrimination is abrogated in relation to this provision, the Bill provides individuals with the protection that self-incriminatory disclosures cannot be used against the person who makes the disclosure, either directly in any criminal proceedings on in proceedings for the recovery of a civil penalty (other than proceedings under this Act or sections 137.1 or 137.2 of the Criminal Code) or indirectly to gather other evidence against the person. These exceptions are commonly referred to as a 'use and derivative use' immunity. However, the information could be used against a third party.

7.14 The removal of the privilege, subject to a use or derivative use immunity, assists the Treasurer and the Commissioner to monitor and enforce compliance with this Act and thereby assist in the effective administration of this Act. That is in circumstances where information may be held offshore and information necessary to administer the Act may not otherwise be available. The effective administration of this Act is vital to ensuring that the Australian public continues to have confidence in the way foreign investment is regulated in Australia.

7.15 The Bill does not abrogate the right of a person to claim legal professional privilege. This means that a person has the right to refuse to give information or produce a document on the ground that the information or document could be subject to legal professional privilege. [Schedule 1, item 4, section 133]

Validity of acts done in contravention of Act

7.16 An act is not invalidated simply because it constitutes an offence against or contravention of a civil liability provision in the Act or regulations. [Schedule 1, item 4, section 134]

Method of notification and application

7.17 A notice given, or an application made, under the Act or regulations made has no legal effect unless it is given using the method approved by the Secretary of the Department. For example, the Secretary might require applications to be made and notices given using an online portal. [Schedule 1, item 4, section 135]

Withdrawal of applications and notices

7.18 An application or notice that is withdrawn has no effect [Schedule 1, item 4, section 136]. This makes clear that if a person does not wish to proceed with an application, or significant action, the Treasurer does not need to make a decision to avoid the consequences which would otherwise flow from an application having been made (for example, under section 82).

Delegation of powers or functions

7.19 The Treasurer may generally delegate any of his or her powers or functions under this Act to the Secretary of the Treasury (Department), the Commissioner, or a person who is engaged under the Public Service Act 1999 who is employed in the Department or the ATO.

7.20 The Secretary may delegate any of his or her powers or functions under this Act to the Commissioner or a public servant employed in the Department or the ATO. If a power or function is delegated to the Commissioner, the Commissioner may subdelegate the power or function to a person engaged under the Public Service Act who is employed in the ATO. [Schedule 1, item 4, section 137]

7.21 It is anticipated that the Treasurer will delegate his powers and functions relating to residential land under this Act to the Commissioner.

7.22 The delegations powers included in the Bill are broad. This is appropriate because the decisions to be made under this Act range from those that involve only a limited exercise of discretion and which may give rise to a high volume of decisions. Other decisions under the Act involve weighing competing considerations including Australia's national security and Australia's relationship with other countries, which would generally be made by the Treasurer personally.

Extension of the Commissioner's powers

7.23 The Commissioner is already permitted to access premises and gather documents and other information, whether held domestically or in foreign jurisdictions. The Commissioner can exercise these powers in relation to any 'taxation law'. To enable the Commissioner to exercise most of his or her powers in relation to any taxation law with respect to any power or function under a provision in this Act that is delegated to the Commissioner, the Bill provides that the Commissioner has the general administration of this Act to the extent of administering the provision. [Schedule 1, item 4, subsections 138(1) and (2)]

7.24 Enabling the Commissioner to apply the Commissioner's existing access and information gathering powers, including those in sections 353-10 and 353-15 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953), helps to minimise costs for both regulated persons and the ATO. This is because in many situations where information is required to administer this Act that same information is also be required to administer taxation laws. For example, if a foreign investor has acquired an interest in a property, in addition to questions about whether the person has complied with this Act, there may also be questions as to whether that property has been used for income producing purposes and, if so, how that income has been treated for taxation purposes.

7.25 The Commissioner can also exercise his or her powers under section 353-10 or 353-15 in Schedule 1 to the TAA 1953 with respect to a certain matter if requested in writing to do so by the Treasurer. This means, for example, that the Commissioner can investigate an alleged contravention of this Act if requested to do so by the Treasurer. If the Commissioner does receive such a request from the Treasurer, the Commissioner (or an individual authorised by the Commissioner) may exercise his or her powers under sections 353-10 or 353-15 as if a reference in those sections to a taxation law included a reference to this Act to the extent that it relates to the matter. [Schedule 1, item 4, subsections 138(3) and (4)]

Regulations

7.26 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 the purposes of carrying out or giving effect to the Act. This includes providing a method for indexing a value or an amount prescribed for the purposes of this Act. [Schedule 1, item 4, subsections 139(1) and (2)]

7.27 The regulations may provide in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in any other instrument or other writing as in force or existing from time to time. This provision overrides subsection 14(2) of the Legislative Instruments Act 2003 which provides that a legislative instrument may not make provisions in relation to any matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time unless the contrary intention appears. [Schedule 1, item 4, subsection 139(3)]

7.28 It is anticipated that this power will be used to define the meaning of the term 'agribusiness' to be a business that is carried on, wholly or partly, in any of certain classes of the Australian and New Zealand Standard Industrial Classification Codes as in force from time to time, published by the Australian Bureau of Statistics (ABS), and which is published on the ABS website and available free of charge.

7.29 It is also anticipated that a regulation will be made that defines the term 'US national' to mean a national of the United States of America, as defined in Title III of the Immigration and Nationality Act of the United States of America. Defining the meaning of the term US national in this way ensures consistency with the terms of the Australia-United States Free Trade Agreement. A number of websites provide access to this statute free of charge, including the Legal Information Institute. ^[10]

7.30 The Government will continue to assist people to comply with their obligations under this Act, including by taking steps to draw the attention of stakeholders to any relevant changes to any document which is incorporated by reference in the regulations, including by publishing information on the internet. However, it is not anticipated that a regulation would incorporate by reference any document which is frequently amended.