Foreign owners of Australian assets need to be aware of their recently extended registration requirements in order to avoid significant penalties for non-compliance.
Since 1 July 2023, foreign persons – as defined under the Foreign Acquisitions and Takeovers Act 1975 (Cth) – have been subject to extended obligations to register certain acquisitions, divestments and changes in interests in relation to their Australian investments with the Registrar for the Register of Foreign Ownership of Australian Assets.
The matters that require notification to the Registrar are broader than those that require notification to, or approval from, Australia’s Foreign Investment Review Board (FIRB). For example, all interests in Australian land must be registered regardless of the value of the transaction. Those who fail to comply with notification requirements can be fined up to AU$78,250, so it is important that foreign persons are aware of, and comply with, their notification requirements.
Below are some scenarios which may trigger an obligation to notify the Registrar.
You have recently signed a lease for Australian land
All foreign persons must notify the Registrar within 30 days of acquiring certain interests in Australian land regardless of value. This includes entering into a lease which gives rights to occupy Australian land, and where the term of the lease is reasonably likely to exceed five years at the time that the lease is entered into, including options to extend.
For example, if an Australian corporation with a foreign holding company were to enter into a lease for new office premises, with the term of the lease being four years and with an option to extend for two years, the Australian corporation would be regarded as a foreign person and be required to give notice to the Registrar of its interest within 30 days of signing the lease.
You have recently acquired an Australian company which has become a foreign person
Australian entities that have been acquired by foreign corporations that hold interests in Australian land, regardless of value, must notify the Registrar within 30 days of becoming a foreign person.
This notification requirement is separate from any requirement that the acquiring foreign company may have to notify and seek prior approval from FIRB or notify the Registrar.
For example, where an Australian-owned company is acquired by a foreign company and, at the time of the acquisition, the Australian company’s wholly owned subsidiary owns freehold commercial land and leases three additional properties - each with lease terms exceeding five years - the Australian company’s wholly owned subsidiary must notify the Registrar of its interest in the freehold land and the leases within 30 days of it becoming a foreign person.
Australian entities that become foreign persons due to an acquisition - including through upstream acquisitions, such as in the example above - must also notify the Registrar within 30 days of becoming a foreign person of certain interests in businesses or assets, if those interests would have been ‘notifiable actions’ had they been acquired by that Australian entity on the date that it became a foreign person.
For example, if an Australian-owned company owns 25% of the shares in an electricity generation company and the Australian-owned company is acquired by a foreign buyer, even though the foreign buyer would have received FIRB approval and has complied with its notification requirements, the Australian company may also have to notify the Registrar of its interest in the electricity generation company. If the electricity generation company is considered a ‘national security business’, then notification to the Register of the Australian company’s 25% interest in the generation company is also required.
Your registered circumstances have changed or ceased
A foreign person may have a further obligation to notify the Registrar of changes to interests previously notified. Notification obligations may arise where there has been a subsequent purchase or divestment of interests in Australian entities or businesses and the change in interest is 5% or more, or in the case of an interest in land recorded on the Register, there is a change in the type of that land – for example, if the type of land changes from residential to commercial.
For example, where an Australian company with 100% foreign ownership has acquired a 25% interest in a domestic retail corporation with a purchase price over the relevant FIRB monetary threshold, the foreign-owned Australian company would be considered a foreign person and - due to the value of its 25% interest in the retail corporation – it would have had to obtain FIRB approval for the acquisition and notify the Registrar. Two years later, if the Australian company were to sell some of its shares in the domestic retail corporation, after which it would hold 15%, it must notify the Registrar of this change in its interest.
Given the complexities of the notification rules and the significant penalties for non-compliance, we recommend seeking legal advice if you are unsure of your registration obligations.
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