Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FOREIGN ACQUISITIONS AND TAKEOVERS FEES IMPOSITION
AMENDMENT (FEE STREAMLINING AND OTHER MEASURES) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Scott Morrison MP)
Table of contents
Glossary ................................................................................................. 1
General outline and financial impact....................................................... 3
Chapter 1 Fee streamlining............................................................ 5
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Foreign Acquisitions Act Foreign Acquisitions and Takeovers
Act 1975
Foreign Acquisitions Foreign Acquisitions and Takeovers
Regulation Regulation 2015
Fees Act Foreign Acquisitions and Takeovers Fees
Imposition Act 2015
Fees Regulation Foreign Acquisitions and Takeovers Fees
Imposition Regulation 2015
1
General outline and financial impact
Fee Streamlining
Acknowledging the important role foreign investment plays in growing
the economy, fees for business investment will be streamlined from 1 July
2017.
The streamlining will simplify the fee framework, minimise the regulatory
burden on stakeholders, and allow Australia's foreign investment
framework to operate more efficiently. The fee rules will now be clearer
and provide a more transparent and consistent approach.
Date of effect: 1 July 2017
Proposal announced: Budget 2017-18
Financial impact: Streamlining business fees will have a revenue cost of
$400,000 over the forward estimates.
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 1,
paragraphs 1.59 to 1.63.
Compliance cost impact: Low. The amendments are intended to simplify
the fee framework, making it easier for stakeholders to determine what
fees are applicable.
3
Chapter 1
Fee streamlining
Outline of chapter
1.1 Acknowledging the important role foreign investment plays in
growing the economy, fees for business investment will be streamlined
from 1 July 2017.
1.2 These amendments will simplify the fee framework, minimise
the regulatory burden on stakeholders, and allow Australia's foreign
investment framework to operate more efficiently. The fee rules will now
be clearer and provide a more transparent and consistent approach.
1.3 The amendments also implement a 10 per cent increase to fees
for 'residential land' purchases $10 million or less, including when made
under an exemption certificate.
Context of amendments
1.4 A fee framework was introduced in 2015 with the fees set by the
Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (the
Fees Act) and the Foreign Acquisitions and Takeovers Fees Imposition
Regulations 2015 (the Fees Regulation).
1.5 The Fees Act and Fees Regulation work together with the
Foreign Acquisitions and Takeovers Act 1975 (the Foreign
Acquisitions Act) and the Foreign Acquisitions and Takeovers
Regulation 2015 (the Foreign Acquisitions Regulation) to form the
legislative framework for Australia's foreign investment framework,
which applies to certain foreign investment in Australia.
1.6 Fees are generally payable for all applications made and notices
given by 'foreign persons' under the Foreign Acquisitions Act.
Applications are not considered made and notices are not considered
given until the correct fee has been paid, or otherwise waived. Under
section 115 of the Foreign Acquisitions Act, the Treasurer may waive the
fee if satisfied that it is not contrary to the national interest to do so. Each
waiver requested by a foreign person is considered on its merits.
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
1.7 Differing fees for different transaction categories have created
complexities and caused delays in ascertaining the correct fee, which in
turn delays processing. For example, some acquisitions are subject to
multiple tiered fees (for example, 'agricultural land') and other
transactions are subject to flatter fee tiers (for example, business
acquisitions such as the acquisition of a mining or production tenements).
Further, a number of low value transactions are subject to fees
disproportionate to the value of the transaction.
1.8 The amendments are informed by a public consultation process
and stakeholder feedback, and implement the preferred option of a flatter
fee structure and legislated fee relief arrangements. The Fees Regulation
will also be amended to give effect to the changes to simplify the
commercial fees framework.
1.9 The amended fee framework will reduce complexity, achieve
more equitable fee outcomes and minimise the regulatory burden on
stakeholders. The changes are broadly revenue neutral, ensuring that
foreign investors continue to meet the costs of funding the system.
1.10 Amendments to streamline and simplify the commercial fee
framework will not apply to the fee framework for residential property.
The residential fee framework is less complex and does not typically
involve multiple actions in the one transaction. However, the amendments
also give effect to a 10 per cent increase in residential property fees to
fund the implementation of the Critical Infrastructure Centre. This
increase will be in lieu on the 2017-18 fee indexation.
1.11 Amendments to streamline and simplify the commercial fee
framework and implement a 10 per cent increase were announced through
the 2017-18 Budget.
Summary of new law
1.12 The new law will simplify the commercial fee framework and
effect fees payable for actions concerning: 'commercial land' and
agricultural land, actions relating to entities and business, exemption
certificates, mining and production, 'foreign government investors',
'internal reorganisations' and variations.
1.13 Key changes include implementing a three tier fee structure for
interests in land, securities and Australian businesses. This will have the
effect of better aligning fees across different categories of investment to
achieve a more equitable regime. This change will create a new low value
fee tier avoiding the need for fee waivers to be applied in many cases
6
Fee streamlining
where the fee is disproportionate to the size of the transaction. This will
mean some fees for some categories will increase (for example, fees for
'vacant' commercial land above $10 million) but some fees will be
reduced (for example, agricultural land transactions and commercial land
transactions below $10 million).
1.14 A range of other fees will be standardised into a flat fee
category, removing tiers based on the value of the consideration paid.
For example, applications to vary an existing no objection notification.
1.15 Indexation for commercial fees affected by these changes will be
paused for the 2017-18 financial year. Indexation will resume in 2018-19
with the 2017-18 fees as new base amounts.
1.16 Fees for residential property purchases will be increased by
10 per cent for acquisitions of $10 million or less. The 10 per cent
increase will also be applied to the fees payable by developers for 'new
dwellings' sold under a new dwelling exemption certificate granted under
section 57 of the Foreign Acquisitions Act. Indexation for these fees for
the 2017-18 financial year will also be paused.
1.17 Fees for properties where the consideration is more than
$10 million will not be subject to the 10 per cent increase but will be
subject to indexation for the 2017-18 period. Indexation will apply to all
these residential land fees from 2018-19 with the 2017-18 fees as the new
base amounts.
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
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Comparison of key features of new law and current law
New law Current law
The amendment sets a new fee The fee for applying for the
amount for an application for an exemption certificate for
exemption certificate for new new dwellings under section 57 of the
dwellings. The new fee payable under Foreign Acquisitions Act is set at
table item 1 of subsection 6(1) of the $25,000 in table item 1,
Fees Act is $25,700, which reflects subsection 6(1) of the Fees Act. Due
the 1 July 2017 indexation increase to to indexation on 1 July 2016 under
the current base amount of $25,000, the Fees Act, in practice the fee in
which was set when fees were 2016-17 is $25,300. This fee applies
introduced on 1 December 2015. The when the developer applies for the
10 per cent increase has not been certificate.
applied to this fee. An additional periodic fee applies on
However, the 10 per cent increase a 6 monthly basis for new dwellings
will apply to the 6 monthly fees for acquisitions made by foreign persons
developers where the consideration under the certificate during the
for each new dwelling is $10 million period. This fee is payable by the
or less. developer based and ensures that the
The methodology for achieving this same fee amount is collected per new
increase is set out at subsection 7(2) dwelling sold by the developer as
(item 3 of the Bill) and described would have been paid if purchasers
below at paragraphs 1.34 to 1.37. had sought individual approvals.
Fees for an exemption certificate The fee for applying for an exemption
under section 58 of the Foreign certificate where consideration for the
Acquisitions Act (Australian land) proposed purchases is less than
will be streamlined from a two tier $1 billion, under section 58 (foreign
fee to single fee for Table item 2 at persons) of the Foreign Acquisitions
subsection 6(1) of the Fees Act Act is set at $25,000, in table
regardless of the consideration paid. item 2(a), subsection 6(1) of the
The fee payable will be $35,000. Fees Act. Where consideration for the
proposed purchases is more than
$1 billion, table item 2(b) provides
that the fee payable is $100,000.
Due to indexation on 1 July 2016
under the Fees Act, in practice the
above fees in 2016-17 are $25,300
and $101,500.
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Fee streamlining
New law Current law
The table item 3 of subsection 6(1) of The fee for applying for an exemption
the Fees Act will be expanded to certificate under section 59
create a new category of fee. ('established dwellings') of the
Acquisitions with consideration of Foreign Acquisitions Act is $5,000
less than $1 million table item (a) will for properties valued at $1 million or
pay a fee of $5,500. less (at table item 3(a)). For
acquisitions over $1 million the fee
Acquisitions with consideration of payable is determined by applying the
between $1 million and $10 million formulae set out at subsection 6(2) (at
will pay a fee determined by table item 3(b)).
reference to subsection 6(2).
Under indexation on 1 July 2016, the
Acquisitions with consideration over above fee of $5,000 did not increase
$10 million will pay a fee determined and is the fee for 2016-17.
by reference to subsection 6(2A).
Table item 4 of subsection 6(1) of the The fee payable for an exemption
Fees Act will be amended, providing certificate given under the regulations
(a) if the exemption certificate is a made for the purposes of section 63
residential land (other than for of the Foreign Acquisitions Act is the
established dwellings) exemption amount not exceeding $25,000 that is
certificate prescribed in the prescribed by the regulations or
regulations made for the purpose of worked out using the method
this item, that fee amount prescribed prescribed in the regulations made for
by the regulations shall not exceed the purposes of this item.
the amount that would be payable if Due to indexation on 1 July 2016
the application were for an exemption under the Fees Act, in practice the
certificate under section 59 above fee in 2016-17 is $25,300.
(established dwellings) of the Foreign
Acquisitions Act and (b) that
otherwise, the amount not exceeding
$35,000 that is prescribed in the
regulations made for the purposes of
this item.
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
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New law Current law
Table item 5 will be amended to The fee payable for a variation of an
provide greater clarity of the fees exemption certificate under
payable, depending on the exemption section 62 of the Foreign
certificate sought. Acquisitions Act is $5,000.
Table item 5(a) will provide that if Under indexation on 1 July 2016, the
the application for a variation of an above fee of $5,000 did not increase
exemption certificate given under and is the fee for 2016-17.
sections 57 and 59 of the Foreign
Acquisitions Act is $5,100.
Under item 5(b)(i) if the application
is for a variation to an exemption
certificate given under regulations
made for the purposes of section 63
of the Foreign Acquisitions Act and
that exemption certificate relates to
residential land the fee payable will
be $5,100.
The above $5,100 fees reflect the
1 July 2017 indexation increase to the
current base amount of $5,000.
Table item 5(c) will provide that if
the application is for the variation of
any other exemption certificate under
the Foreign Acquisitions Act, the fee
payable is $10,100.
The formula relevant to fee For the purposes of paragraph (b) of
calculations for the purposes of item 3 of the table, the fee amount is
paragraph (b) of item 3 of the table in determined by reference to the
subsection 6(1) of the Fees Act will formula in subsection 6(2) of the
be simplified creating a two tiered Fees Act.
structure for determining the fee
payable, depending on the
consideration paid.
This calculation will apply where
consideration is between $1 million
and $10 million.
New subsection 6(2A) will be No equivalent in the current law.
inserted into the Fees Act providing a
method of calculating the fee payable
where consideration exceeds
$10 million.
10
Fee streamlining
New law Current law
Table item 1 of subsection 7(1) of the Table item 1 at subsection 7(1) of the
Fees Act will be amended to provide Fees Act provides that the fee for
for three tiers of fees, depending on giving notice of notifiable actions is
the consideration paid. $25,000 where the consideration for
Paragraph (a) of table item 1 will the acquisition is $1 billion or less, or
provide that if the consideration for otherwise $100,000, where that
the acquisition is $10 million or less, acquisition is (a) of a direct interest in
the fee payable is $2,000. an Australian entity or Australian
business that is an agribusiness, or (b)
Paragraph (b) of table item 1 will of a substantial interest in an
provide that where consideration is Australian entity.
more than $10 million and less than
$1 billion, the fee payable is $25,300. Due to indexation on 1 July 2016
under the Fees Act, in practice the
Paragraph (c) of table item 1 will above fees in 2016-17 are $25,300
provide that where consideration is and $101,500.
more than $1 billion, the fee payable
is $101,500.
Table item 2 of subsection 7(1) of the Table item 2(a) at subsection 7(1) of
Fees Act applies when acquiring an the Fees Act provides where
interest in agricultural land. It will be consideration for the acquisition is
amended to provide for three tiers of $1 million or less, the fee payable is
fees, depending on the consideration $5,000 where the notifiable action is
paid. the acquisition of an interest in
Paragraph (a) will provide that where residential land or agricultural land.
consideration is $2 million or less, the Where consideration is greater than
fee payable is $2,000. $1 million the fee payable under table
Paragraph (b) will provide that where item 2(b) is determined by reference
consideration is more than $2 million to subsections 7(2) and 7(3) of the
and less than $10 million the fee Fees Act.
payable is $25,300. Under indexation on 1 July 2016, the
Paragraph (c) will provide that where above fee of $5,000 did not increase
consideration is more than and is the fee for 2016-17. The fees
$10 million, the fee payable is where consideration is greater than
$101,500. $1 million did increase on 1 July
2016.
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
New law Current law
Table item 4 of subsection 7(1) of the Table item 3 at subsection 7(1) of the
Fees Act provides the fee payable for Fees Act provides the fee payable for
acquisitions of commercial land acquisitions of commercial land
(whether the land is vacant or not). It (other than commercial land that is
will be amended to provide three tiers vacant) is $25,000.
of fee, depending on the Due to indexation on 1 July 2016
consideration paid. under the Fees Act, in practice the
Paragraph (a) will provide that where above fee in 2016-17 is $25,300.
consideration is $1 million the fee
payable is $5,500.
Paragraph (b) will provide that where
consideration is more than $1 million
and $10 million and less the fee is the
amount worked out under
subsection 7(2).
Paragraph (c) will provide that where
consideration is more than
$10 million the fee payable is worked
out under subsection 7(3).
Table item 4 of subsection 7(1) of the Table item 4 at subsection 7(1) of the
Fees Act will be amended to provide Fees Act provides that the fee payable
three tiers of fee, depending on the for acquisition of an interest in
consideration paid. commercial land that is vacant is
Paragraph (a) will provide that where $10,000.
consideration is $10 million or less, Due to indexation on 1 July 2016
the fee payable is $2,000. under the Fees Act, in practice the
Paragraph (b) will provide that where above fee in 2016-17 is $10,100.
consideration is more than
$10 million and $1 billion or less than
the fee payable is $25,300.
Paragraph (c) will provide that where
consideration is more than $1 billion,
the fee payable is $101,500.
Table item 5 at subsection 7(1) of the Table item 5 at subsection 7(1) of the
Fees Act will be updated and the fee Fees Act provides that the fee payable
payable for an acquisition of an for acquisition of an interest in a
interest in a mining or production mining or production tenement is
tenement will be $25,300. $25,000.
Due to indexation on 1 July 2016
under the Fees Act, in practice the
above fee in 2016-17 is $25,300.
12
Fee streamlining
New law Current law
The formula relevant to fee For the purposes of paragraph (b) of
calculations for the purposes of item 3 of the table, the fee amount is
paragraph (b) of item 3 of the table in determined by reference to the
subsection 7(1) of the Fees Act will formula in subsection 7(2) of the
be simplified creating a two tiered Fees Act.
structure for determining the fee
payable, depending on the
consideration paid.
This calculation will apply where
consideration is between $1 million
and $10 million.
New subsection 7(2A) will be No equivalent in the current law.
inserted into the Fees Act providing a
method of calculating the fee payable
where consideration exceeds
$10 million.
The amount of the fee payable for Subsection 8 of the Fees Act outlines
these types of acquisitions as outlined the fees payable in respect of other
in table item 1 of subsection 8(1) of fees. The table at subsection 8(1)
the Fees Act will be updated, as outlines the acquisition types and fees
below. payable.
Paragraph (a) will provide that where Table item 1 provides that the fee
consideration is $10 million or less, payable is $25,000 where
the fee payable is $2,000. consideration for the issue or
Paragraph (b) will provide that where acquisition is $1 billion or less or
consideration is more than otherwise $100,000 where the action
$10 million and less than $1 billion is (a) to acquire an interest in
the fee payable is $25,300. securities in an entity that is not a
substantial interest in the entity; (b) to
Paragraph (c) will be inserted to issue securities in an entity; or (c) to
provide that where consideration is acquire interests in assets of an
more than $1 billion the fee payable Australian business.
is $101,500.
Due to indexation on 1 July 2016
under the Fees Act, in practice the
above fees in 2016-17 are $25,300
and $101,500.
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
New law Current law
The amount of the fee payable for Table item 2 at subsection 8(1) of the
these types of acquisitions as outlined Fees Act provides that the fee payable
in table item 2 of subsection 8(1) will is $25,000 where a foreign person (a)
be updated to $10,100. enters an agreement mentioned in
paragraph 40(2)(d) of the Foreign
Acquisitions Act; or (b) alters a
constituent document of an entity as
mentioned in paragraph 40(2)(e) of
the Foreign Acquisitions Act; or (c)
enters or terminate a significant
agreement with an Australian
business.
Due to indexation on 1 July 2016
under the Fees Act, in practice the
above fee in 2016-17 is $25,300.
Subsection 8(2) will be updated to Subsection 8(2) of the Fees Act sets
$5,100 to reflect indexation on 1 July the fees payable for a person who
2017 of the $5,000 fee and the applies under for a variation of a no
$10,100 will be updated so that objection notification if the action
indexation does not apply on 1 July specified in the notification is an
2017. Also, the types of actions acquisition of an interest in
specified in the no objection Australian land at $5,000, otherwise
notification to which the $5,100 fee $10,000.
will apply will be limited to Under indexation on 1 July 2016, the
acquisitions of interests in residential above $5,000 fee did not increase and
land. The $10,100 fee will apply to the $10,000 fee is $10,100 for
all other actions. 2016-17.
Section 10 will be updated so that the Under section 10, the fee payable for
fee payable for internal internal reorganisations is $10,000.
reorganisations in 2017-18 is Due to indexation on 1 July 2016
$10,100, the same fee as in 2016-17. under the Fees Act, in practice the
above fee in 2016-17 is $10,100.
Paragraph 12(9)(a) will be updated to Paragraph 12(9)(a) currently provides
reflect which amounts under that amounts referred to in
amendments made in this Bill are not subsections of the Fees Act are not
fees for the purposes of indexation fees for the purposes of indexation
under section 12. under section 12.
Detailed explanation of new law
1.18 These amendments simplify and streamline the existing fee
structures in the Fees Act and better align fees payable with consideration
paid for the relevant acquisition through a simplification of fee tiers and
the introduction of flat fees for various acquisition types.
14
Fee streamlining
1.19 The amendments will capture notifiable actions in the following
categories; commercial and agricultural land, actions relating to entities
and business, exemption certificates, mining and production, foreign
government investors, internal reorganisations and variations.
1.20 A separate amendment will be implemented to increase the fees
for notices for residential dwellings (established, new and vacant
residential land) by 10 per cent. The 10 per cent increase will apply to
notices by a foreign person for single residential purchases
(paragraph 47(2)(c) and section 43 of the Foreign Acquisitions Act) and
exemption certificates for established dwellings (section 59 of the Foreign
Acquisitions Act). The 10 per cent increase also applies to the six monthly
(reconciliation) fee under subsection 113(2) of the Foreign Acquisitions
Act. That is, the six monthly fees for developers given new dwelling
exemption certificates under section 57 of the Foreign Acquisitions Act.
1.21 The fees for applying for exemption certificates for developers
of new dwellings (section 57 of the Foreign Acquisitions Act) and for
foreign persons for acquiring land for commercial purposes (section 58 of
the Foreign Acquisitions Act) will not be subject to the 10 per cent
increase.
Exemption certificates
1.22 There is no substantive change for the fees applicable for
applications for exemption certificates for new dwellings under section 57
of the Foreign Acquisitions Act. This category of exemption certificate
picks up commercial property developers. However, due to the
replacement of the current fee table, the fee amount has been re-based to
incorporate indexation for the 2017-18 financial year. [Schedule 1, item 1,
subsection 6(1) table item 2 of the Fees Act]
1.23 The fee applicable to a foreign person applying for an exemption
certificate to acquire one or more interests in land (section 58 of the
Foreign Acquisitions Act) will be streamlined to align with the fee
payable for other exemption certificates that cover a program of
acquisitions for a commercial purpose. [Schedule 1, item 1, subsection 6(1) table
item 3 of the Fees Act]
1.24 The fee applicable to a foreign person applying for an exemption
certificate for established dwellings (section 59 of the Foreign
Acquisitions Act) will be subject to tiered fees depending on the
consideration paid. For acquisitions of $1 million or less the fee payable is
$5,500. For acquisitions of $10 million or less the fee payable is the
amount calculated applying the formula in subsection (2). For acquisitions
of above $10 million the fee payable is the amount calculated applying the
formula in subsection (2A). [Schedule 1, item 1, subsections 6(2) and 6(2A) of the
Fees Act]
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
Example 1.1
Mr Hans has recently arrived in Australia as a temporary resident.
Mr Hans is unsure of the particular established dwelling he would like
to purchase. He has decided that he wishes to spend no more than
$12 million on a property, which he can apply to have covered in an
exemption certificate for established dwellings under section 59 of the
Foreign Acquisitions Act.
If the exemption certificate is granted, he will be approved to purchase
one established dwelling for consideration up to, and including the
value of $12 million. The certificate will include other conditions that
Mr Hans must comply with if he is successful in purchasing a dwelling
under the certificate. For example, conditions could include that the
dwelling purchased is used as his principal place of residence in
Australia, and that he sell the property within three months from when
it either ceases to be his principal place of residence, or he ceases to be
a temporary resident, whichever occurs first.
The relevant fee payable for the exemption certificate will be
determined based on the Method Statement under subsection 6(2A),
which applies to applications for exemption certificates under
section 59 where the consideration is more than $10 million. The fee
will be automatically calculated through the foreign investment online
application portal.
Method statement
Step 1. Apply the following formula:
Amount of consideration specified in the application
1,000,000
Applied to a maximum purchase price of $12 million:
12,000,000
1,000,000
The resulting amount is 12, therefore it is not rounded down to the
nearest whole number.
Step 2. Multiply the step 1 amount by $10,000:
12 𝑋 $10,000 = $120,000
Step 3. Multiply the step 2 amount by 1.030:
$120,000 𝑋 1.030 = $123,600
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Fee streamlining
As the resulting amount is a multiple of $100, rounding down to the
nearest multiple of $100, is not necessary.
Step 4. The step 3 amount is the amount of the fee:
The step 3 amount of $123,600 is the amount of the fee that will be
applicable to Mr Hans' application for an established dwelling
exemption certificate.
1.25 The Treasurer may give an exemption certificate under
section 58 to foreign persons seeking to acquire one or more kinds of
interests in land. The Fees Act will be amended to provide that the fees
payable for applying for an exemption certificate under section 58 will be
simplified into a single standard fee of $35,000. This caps the fee payable
for this type of exemption certificate and represents an increase of $9,300
on the standard fee that would otherwise have been payable with
indexation on 1 July 2017. The change will remove the $103,000 fee that
would have been payable from 1 July 2017 for certificates where the
consideration for the acquisitions will be above $1 billion. [Schedule 1, item
1, subsection 6(1) table item 2 of the Fees Act]
Applications to vary Exemption certificates
1.26 Item 5 of the table sets out the fees applicable for applications to
vary an exemption certificate. The fees differ according to whether the
exemption certificate covers acquisitions of residential land or commercial
acquisitions (with the exception of the exemption certificates for
developers for new dwellings under section 57 of the Foreign
Acquisitions Act). The fees under items 5(a) (new dwelling and
established dwelling) and 5(b) (exemption certificate under section 63 of
the Foreign Acquisition Regulations concerning residential land) set new
base amounts by incorporating indexation for the 2017-18 financial year.
This means that the fee payable to apply to vary each of these exemption
certificates is $5,100. [Schedule 1, item 1, subsection 6(1) table item 5 of the Fees
Act]
1.27 The fee applicable to vary all other exemption certificates made
pursuant to section 63 of the Foreign Acquisition Act (that is, a program
of non-residential, commercial acquisitions) is a flat fee of $10,100. This
fee also incorporates indexation for the 2016-17 financial year but not the
2017-18 financial year. This amendment also has the effect of
implementing a streamlining approach to fees for commercial transactions
by implementing a flat fee of $10,100 for all variations for commercial
applications and notifications. [Schedule 1, item 1, subsection 6(1) table item 5 of
the Fees Act]
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
Fee calculation formulae for 10 per cent increase
1.28 As noted above in paragraph 124, subsections 6(2) and 6(2A) set
out the basis to calculate the fees payable for exemption certificates for
established residential dwellings under subsection 6(1), table items 3(b)
and 3(c).
1.29 Subsection 6(2) sets out the method for calculating the fee
payable for an exemption certificate for established dwellings valued at
$10 million or less. When calculating this fee the 2016-17 indexation
amount of 1.015 is applied before adding the 10 per cent increase to this
fee. This approach calculates the fee for the 2016-17 financial year and
calculates the 10 per cent increase based on the 2016-17 indexed fee
amount. [Schedule 1, item 1, subsection 6(2) of the Fees Act]
1.30 The formula in subsection 6(2A) is to be used when calculating
the fee for exemption certificates for established dwellings where the
consideration is more than $10 million. In this circumstance, the 10 per
cent increase is not applied, but indexation for 2017-18 is incorporated
using the 2017-18 indexation factor of 1.030. This sets a new base amount
of fee for the 2017-18 financial year and for future financial years.
[Schedule 1, item 1, subsection 6(2A) of the Fees Act]
Example 1.2
Ms Yamamoto has recently arrived in Australia as a temporary
resident. Ms Yamamoto is unsure of the particular established dwelling
she would like to purchase. She has decided that she wishes to spend
no more than $2 million on a property, which she can apply to have
covered in an exemption certificate for established dwellings under
section 59 of the Foreign Acquisitions Act.
If the exemption certificate is granted, she will be approved to
purchase one established dwelling for consideration up to, and
including the value of $2 million. The certificate will include other
conditions that Ms Yamamoto must comply with if she is successful in
purchasing a dwelling under the certificate. For example, conditions
could include that the dwelling purchased is used as her principal place
of residence in Australia, and she sell the property within three months
from when it either ceases to be her principal place of residence, or she
ceases to be a temporary resident, whichever occurs first.
The relevant fee payable for the exemption certificate will be
determined based on the Method Statement under subsection 6(2),
which applies when working out fees for applications for exemption
certificates where the consideration is more than $1 million and
$10 million or less. The fee will be automatically calculated through
the foreign investment online application portal.
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Fee streamlining
Method statement
Step 1. Apply the following formula:
Amount of consideration specified in the application
1,000,000
Applied to a maximum purchase price of $2 million:
2,000,000
1,000,000
The resulting amount is 2, therefore it is not rounded down to the
nearest whole number, as this is not necessary.
Step 2. Multiply the step 1 amount by $10,000:
2 X $10,000 = $20,000
Step 3. Multiply the step 2 amount by 1.015:
$20,000 X 1.015 = $20,300
The resulting amount is a multiple of $100, therefore it is not rounded
down to the nearest multiple of $100, as this is not necessary.
Step 4. Add to the step 3 amount the amount that is 10% of the step 3
amount:
$20,300 + (10% X $20,300)
= $20,300 + $2,030
= $22,330
The resulting amount is not a multiple of $100, therefore it is rounded
down to the nearest multiple of $100. This gives an amount of
$22,300.
Step 5. The step 4 amount is the amount of the fee:
The step 5 amount of $22,300 is the amount of the fee that will be
applicable to Ms Yamamoto's application for an established dwelling
exemption certificate.
Streamlining fees for notifiable actions and other actions
1.31 Fees payable for giving notice of notifiable actions under the
Foreign Acquisitions Act that are commercial in nature have been
amended to achieve the policy objective to streamline and simplify the
commercial fee framework. The changes seek to impose the same fee
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
structure across all types of commercial transactions to better align fee
categories, achieve more equitable fee outcomes across a range of
like-transactions (including by embedding fee waiver principles into a
low value fee tier). While some transaction categories are still subject to a
consideration-based fee framework, multiple tiers have been reduced to
three, and where possible, a single flat fee has been imposed.
1.32 Item 3 repeals the existing fee table under section 7 of the
Fees Act and replaces it with a new streamlined fee table for notifiable
actions. [Schedule 1, item 3, section 7 of the Fees Act]
1.33 Item 4 updates applicable fees in the fee table under section 8.
Under these amendments a new three tier fee structure will apply for the
following actions:
• acquiring a direct in an Australian entity or an Australian
business that is an agribusiness or acquiring a substantial
interest in an Australian entity;
• acquiring an interest in securities in an entity or issuing
securities, or acquiring interests in the assets of an Australian
business; and
• interest in agricultural land and commercial land.
[Schedule 1, item 4, subsection 8(1) table items 1 and 2 of the Fees Act]
1.34 Key changes are in the table below.
Table 1.1 Commercial fees from 1 July 2017 (key changes)
The below fees apply to all foreign persons.
Fee by category and value1,2
Category $10 million or $1 billion or less Above $1 billion
less and above
$10 million
Commercial land $2,000 $25,300 $101,500
(vacant and
developed)3
Actions relating $2,000 $25,300 $101,500
to entities and
businesses
Category $2 million or less $10 million or Above
less and above $10 million
$2 million
Agricultural land $2,000 $25,300 $101,500
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Fee streamlining
1. Lower fee rules: these replace the existing de minimis rule in section 9 of the
Fees Regulation. Other legislated lower fee rules will not be changed.
2. Entities carrying on a business acquiring multiple land titles under one agreement or
acquiring securities in an entity that primarily holds residential land have typically
been given a partial fee waiver on a discretionary basis. A lower fee rule for these
circumstances will be included in the Fees Regulation to apply a lower fee without
having to rely on the exercise of the discretionary fee waiver power.
3. A $2,000 fee will also apply for foreign government investors for developed
commercial land acquisitions under $55 million.
1.35 The fees applicable for a notifiable action concerning securities
and businesses, including land entities, and commercial land will be
aligned. Currently there is inconsistency in the fees payable for
commercial land depending on whether it is vacant or developed and for
interests in securities or Australian businesses. Fees will be better aligned
by creating three fee tiers based on the consideration of the interest or
asset.
1.36 The first fee tier will capture all interests in commercial land and
securities and businesses where the consideration is $10 million or less.
The fee payable will be $2,000. This fee category creates a new low value
fee tier for acquisitions $10 million or less, rather than lowering the fee on
a case by case basis through applying a discretionary fee waiver principle.
This will provide fee relief for a greater number of transactions by
capturing vacant commercial land which currently attracts a flat fee of
$10,000. However, it will result in a fee increase for vacant commercial
land where the consideration is more than $10 million. [Schedule 1, item 3,
subsection 7(1) table items 1 and 4 of the Fees Act]
1.37 The second fee tier will capture all interests in commercial land,
securities and businesses where the consideration is over $10 million but
$1 billion or less. The fee payable will be $25,300. This fee amount in the
new table will appear slightly higher than the current standard fee for
some categories of transactions of $1 billion. The fee incorporates
2016-17 indexation. Indexation for 2017-18 will be paused. This sets the
new fee base for this tier for 2017-18 financial year. [Schedule 1, item 3,
subsection 7(1) table items 1, 2 and 4 of the Fees Act]
1.38 The third fee tier for this category of transaction applies an
existing fee tier for transactions above $1 billion. This category of
transactions attracts a fee of $101,500, which appears slightly increased,
again due to accounting for 2016-17 indexation. However, as indexation
will not apply on 1 July 2017, in practice, the fee amount will not change
from 2016-17. [Schedule 1, item 3, subsection 7(1) table items 1 and 4 of the Fees
Act]
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
1.39 A similar tiered scheme has been inserted for acquisitions of
agricultural land. Currently, a sliding scale fee arrangement is in place
whereby the fee payable increases by approximately $10,000 for every
increase in consideration of $1 million once the consideration is above
$1 million. For example, agricultural land worth $1 million or less attracts
a fee of $5,000, which increases to $10,100 for land worth between
$1 million and less than $2 million, and increases to $20,300 for land
worth $2 million and less than $3 million etcetera. [Schedule 1, item 3,
subsection 7(1) table items 2(a), 2(b) and 2(c) of the Fees Act]
1.40 New subsection 7(1), table items 2(a) - (c) will implement a
much flatter fee structure and implement a standard fee amount which is
equivalent to the fees payable for commercial land and interests securities
and businesses. The key difference will be value of the transaction that
triggers each of the three fee tiers. As depicted in the summary table
above, a $2,000 fee will be payable for agricultural land transactions
where the consideration is $2 million or less (rather than the threshold of
$10 million which is applicable to commercial land and securities). This
reflects the difference in the consideration amounts between agricultural
land and commercial land and other commercial transactions.
1.41 The second fee tier applies for agricultural land where the
consideration is between $2 million and $10 million or less. The
applicable fee is $25,300. For acquisitions, where the consideration
exceeds $10 million, the fee will be $101,500. [Schedule 1, item 3,
subsection 7(1) table items 2(a), 2(b) and 2(c) of the Fees Act]
1.42 Fee streamlining measures have not been carried across to
notifications of interests in residential land. Amendments to these fees
align with the amendments to exemption certificates for established
dwellings and implement a 10 per cent increase to residential fees where
the consideration is $10 million or less. [Schedule 1, item 3, subsection 7(1) table
items 3(a), 3(b) and 3(c) of the Fees Act]
1.43 As described above in paragraph 1.24, where the consideration
for residential land is $1 million or less the fee will be $5,500. This
incorporates a 10 per cent increase on the fee in 2016-17.
1.44 Where the consideration is more than $1 million but $10 million
or less, the fee is calculated having regard to the formula at
subsection 7(2) which replicates the formula at subsection 6(2). In
summary, the fee payable is calculated by applying the indexation factor
for the 2016-17 financial year and then adding the 10 per cent increase on
top. Indexation for 2017-18 is paused for this fee but will resume again in
2018-19. The fee calculated under the formulae will be the base amount
when indexing the fees for each financial year from 2018-19. [Schedule 1,
item 3, subsection 7(2) of the Fees Act]
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Fee streamlining
1.45 The fee payable for interest in land more than $10 million is
calculated by applying the formula in subsection 7(3). The formula
replicates the formula set out at section 6(2A) for calculating the fee
associated with applying for an exemption certificate for established
dwellings. The formula does not include a 10 per cent increase but
indexation for 2017-18 is incorporated using the 2017-18 indexation
factor of 1.030. This sets a new base amount of fee for 2018-19 financial
year and for future financial years. [Schedule 1, item 3, subsection 7(2A) of the
Fees Act]
Example 1.3
Mr Xu is a non-resident and has been looking to purchase a
new dwelling. He has found the new dwelling that he wants to
purchase and has made his $11.5 million offer on the property
conditional on his finance approval and receiving a no objection
notification from the Treasurer.
Mr Xu has asked his solicitor to apply on his behalf to the Australian
Taxation Office. Prior to giving notice, the solicitor calculates the fee
under item 3 of the table in subsection 7(1) by applying the Method
Statement at subsection 7(3), which applies when working out fees for
acquisitions of interests in residential land where the consideration is
more than $10 million.
The relevant fee payable for the exemption certificate will be
determined under item 3 of the table in subsection 7(1) by applying the
Method Statement at subsection 7(3). This Method Statement applies
when working out fees for acquisitions of interests in residential land
where the consideration is more than $10 million. The fee will be
automatically calculated through the foreign investment online
application portal.
Method statement
Step 1. Apply the following formula:
Consideration for the acquisition
1,000,000
The formula is applied as follows:
11,500,000
1,000,000
The resulting amount is 11.5. Therefore, it is rounded down to the
nearest whole number, which is 11.
Step 2. Multiply the step 1 amount by $10,000:
23
Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
11 X $10,000 = $110,000
Step 3. Multiply the step 2 amount by 1.030:
$110,000 X 1.030 = $113,300
The resulting amount is a multiple of $100. Therefore, it is not rounded
down to the nearest multiple of $100, as this is not necessary.
Step 4. The step 3 amount is the amount of the fee:
The step 3 amount of $113,300 is the amount of the fee that will be
applicable to Mr Xu giving notice of the notifiable action to acquire the
new dwelling, which is an interest in residential land.
The solicitor gives notice and pays the fee on behalf of Mr Xu. After
receiving the no objection notification from the Treasurer and his
finance approval, the purchase completes.
1.46 Item 5 does not substantially alter the fee payable for
acquisitions of an interest in mining or production tenement. The fee will
increase from $25,000 to $25,300 to incorporate 2016-17 financial year
indexation. Indexation will not apply for 2017-18 and will resume from
2018-19 and the fee in the item will be the base amount of the fee for
2018-19 financial years onwards. [Schedule 1, item 3, subsection 7(1) table item 5
of the Fees Act]
1.47 This fee continues to be a flat fee as such tenements generally
are either low or high value. As foreign government investors do not have
a threshold when acquiring such tenements and also need to notify when
applying to governments for the grant or issue of such tenements, they
often notify nil or low value tenements. In such cases, the de minimis
lower fee may apply. Where acquired from an existing private holder,
they are commonly sold as part of a broader transaction. This would
benefit from the fee rules in section 9 of the Fees Act. Under this rule, if
there is more than one action covered by the one agreement (for example,
a purchase contract or inter-conditional purchase contracts), generally
only the highest fee of the actions will apply.
1.48 Likewise, the fee for actions prescribed by regulation under
section 48 of the Foreign Acquisitions Act (for example, acquiring an
interest of at least 5 per cent in an entity or business that carries on an
Australian media business and foreign government investors starting an
Australian business) has not been altered except to incorporate the
2016-17 financial year indexation amount. As a result of applying
indexation the fee will increase from $100,000 to $101,500. However,
indexation will not apply in 2017-18 and recommence from 2018-19.
[Schedule 1, item 3, subsection 7(1) table item 6 of the Fees Act]
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Fee streamlining
1.49 Streamlined fees also apply in respect of other actions.
Subsection 8(1) will be amended to apply the same three tier fee structure
to actions involving acquiring an interest in securities, to issue securities
or to acquire interests in the assets of an Australian business. As described
above at paragraphs 1.34-1.37, for consideration of $10 million or less, a
$2,000 fee will apply. Where the consideration exceeds $10 million but is
$1 billion or less, a fee of $25,300 will apply. For consideration exceeding
$1 billion, the fee is $101,500. [Schedule 1, item 4, subsection 8(1) table items 1
and 2 of the Fees Act]
1.50 As noted above, the $2,000 fee creates a new low value fee tier
which has the effect of legislating principles to lower fees in section 9 of
the Fees Regulation.
1.51 Amendments to subparagraphs 8(2)(a) and 8(2)(b)of the
Fees Act clarify that a single fee of $5,100 will apply for applications to
vary no objection notifications under subsection 76(6) for acquisitions of
residential land only. The fee includes an increase of $100 to take into
account indexation that would have applied on 1 July 2017 when setting
the 2017-18 fee. This has the effect of providing a standard fee for all
other applications to vary a no objection notification of $10,100. This fee
is the same as the 2016-17 fee and reflects that indexation will not apply
in 2017-18 and will recommence from 2018-19. [Schedule 1, items 5 and 6,
paragraphs 8(2)(a) and 8(2)(b) of the Fees Act]
Amendments to achieve consistency in the Fees Act
1.52 Section 10 has been amended to pick up consequential
amendments and incorporate the 2016-17 financial year indexation
amount into the fees for internal reorganisations. [Schedule 1, items 7 and 8,
section 10 of the Fees Act]
1.53 Further amendments have been made to ensure that changes to
table items are carried through. [Schedule 1, items 11 and 12, paragraph 12(9)(a)
and subparagraph 12(9)(b)(iii) of the Fees Act]
1.54 These amendments have the effect of imposing the relevant
indexation amounts to base fees within the Fees Act. [Schedule 1, items 6, 7,
8, and 9, section 10, subsection 8(1) table item 2, and paragraphs 8(2)(a), and 8(2)(b) of
the Fees Act]
Part 2 - Application and savings provisions
1.55 Item 12 clarifies when the amendments to the Fees Act take
effect. In summary, subsections 12(1) to 12(4) provide that the
amendments to sections 6, 7, 8 and 10 apply to:
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Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other
Measures) Bill 2017
• applications for exemption certificates made on or after
1 July 2017, including applications to vary an exemption
certificate;
• notices for notifiable actions (for example, acquisitions of
interests in land, securities and businesses), and or notices of
proposals to take an action that is not notifiable that are given
on or after 1 July 2017;
• an order made under Subdivision A of Division 2, Part 3 of
the Foreign Acquisitions Act on or after 1 July 2017 where
the person did not give the Treasurer a notice (for example,
where a fee is payable due to the Treasurer making an order
made at his or her own initiative for actions or proposed
actions considered contrary to the national interest, but no
notice has been given by the person);
• a person given a no objection notification who did not give a
notice to the Treasurer for the action taken (for example,
while the foreign person was taking a notifiable action they
failed to give a notice to the Treasurer and the Treasurer
subsequently gave a no objection notification imposing
conditions to the person to ensure the person has to comply
with conditions that ensure the purchase of an established
dwelling is not contrary to the national interest); and
• a fee payable on or after 1 July 2017 for one or more actions
constituting an internal reorganisation.
1.56 With respect to the six monthly fees for developers given
exemption certificates under section 57 of the Foreign Acquisitions Act,
paragraph 12(2)(b) clarifies that the amendments have effect for any
'new dwelling acquisition' under such a certificate on or after 1 July 2017.
1.57 Section 114 of the Foreign Acquisitions Act provides that
applications or notices have not be made or given until the relevant fee is
paid or waived. Subsection 12(5) has the effect of turning this rule off for
applications and notices submitted in the manner approved before 1 July
2017. For applications and notices submitted before 1 July 2017, the fee
payable will be the applicable fee payable prior to the amendments, unless
the fee is otherwise waived under section 115 of the Foreign
Acquisitions Act. [Schedule 1, item 12, Part 2 Application and savings]
1.58 Item 13 clarifies that the amendments carry over to fees payable
for exemption certificates granted under regulations pursuant to the
regulation making power in section 63 of the Foreign Acquisitions Act,
from the date of commencement of the regulations. [Schedule 1, item 13,
Part 2 Saving of regulations]
26
Fee streamlining
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee
Streamlining and Other Measures) Bill 2017
1.59 This 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
1.60 The Bill will amend the commercial fee framework, to
streamline and simplify fees for commercial transactions, minimising
regulatory burden for stakeholders, and allow Australia's foreign
investment framework to operate more efficiently. The fee rules will now
be clearer and provide a more transparent and consistent approach.
1.61 The Bill also implements a 10 per cent increase to fees for
residential land purchases $10 million or less.
Human rights implications
1.62 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.63 This Bill is compatible with human rights as it does not raise any
human rights issues.
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