Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)Chapter 4: 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 Bill 2024
Treasury Laws Amendment (Foreign Investment) Bill 2024
Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2024
Overview
4.1 The Fees Imposition 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.
4.2 The FATA provides that a foreign person must seek approval before taking a notifiable action (such as acquiring an interest in Australian residential land). The FATA also imposes obligations on a foreign person who acquires an interest in residential land (including requiring foreign persons with interests in residential dwellings to lodge vacancy fee returns each vacancy year). A range of fees are payable by a foreign person under the FATA, and these are prescribed in the Act.
4.3 The Act establishes a framework to impose, as taxes, fees payable under the FATA. The fees are subject to indexation under Part 5 of the Regulations.
4.4 The Regulations provide methods for working out the amount of fees imposed by the Act, regarding regulated actions of foreign persons under the FATA. This includes:
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- Part 2 – fees relating to actions such as an application for an exemption certificate and giving notice of a notifiable action (section 6 provides for fees covered under this Part); and
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- Part 3 – vacancy fees, which may arise when foreign persons do not utilise their residential property (section 42 provides for fees covered under this Part).
4.5 The Fees Imposition Bill contains two Schedules aimed at ensuring foreign investment in residential land is in the national interest:
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- Schedule 1 to the Fees Imposition Bill amends the Act to increase the fee cap amount, the maximum fee that can be imposed by the Regulations, to $7,000,000. The amendments revise the indexation provisions that apply to the increased fee cap to ensure a consistent and coherent indexation process for the fee cap and all fee amounts in Australia's foreign investment framework; and
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- Schedule 2 to the Fees Imposition Bill amends the Regulations to increase foreign investment application fees for the purchase of established dwellings and to double vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017.
Human rights implications
Right to equality and non-discrimination
4.6 The Fees Imposition Bill engages:
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- the right to no discrimination on the basis of race under Articles 1, 2 and 5 of the ICERD; and
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- the right to equality and non-discrimination under Articles 2, 16 and 26 of the ICCPR.
4.7 The right to no discrimination on the basis of race in Articles 1, 2 and 5 of the ICERD obliges Australia to refrain from discrimination on the basis of race, colour descent, or national or ethnic origin and to prohibit and eliminate such forms of discrimination.
4.8 The right to equality and non-discrimination in Articles 2, 16 and 26 of the ICCPR obliges Australia to refrain from discriminating or eroding equality, and protect and advance the fulfilment and enjoyment of the rights to equality and non-discrimination for all people.
4.9 Paragraph 1 of Article 1 of the ICERD 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'.
4.10 Article 2(1)(a) of the ICERD states that, 'Each 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'.
4.11 Under Article 5 of ICERD, States Parties undertake to prohibit and eliminate racial discrimination in the enjoyment of civil, political, economic, social and cultural rights, including the 'right to own property alone as well as in association with others'.
4.12 Article 2 of the ICCPR requires Australia 'to respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights recognized in the present Covenant, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status'.
4.13 Article 16 of the ICCPR further provides that 'everyone shall have the right to recognition everywhere as a person before the law'.
4.14 Article 26 of the ICCPR recognises that all persons are equal before the law and are entitled without discrimination to the equal protection of the law. Article 26 further provides that 'the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as...national or social origin, property, birth or other status'.
4.15 However, the UN Human Rights Committee has 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' [1] . Thus, where laws, policies or programs treat people differently, there must be criteria for the differential treatment that are reasonable and objective, and they must aim to achieve a purpose which is legitimate under the ICCPR.
4.16 Accordingly, differential treatment amongst individuals or groups may not constitute prohibited discrimination under the ICCPR and ICERD if the criteria for such differentiation are reasonable and objective and if the aim is to achieve a purpose which is legitimate.
4.17 Schedules 1 and 2 to the Fees Imposition Bill engages Articles 2 and 5 of ICERD and Article 2, 16 and 26 of the ICCPR because the fee cap applied by the Act and increased fees under the Regulations generally only apply to a 'foreign person'. While an Australian citizen who is not ordinarily a resident in Australia may be a 'foreign person' for the purposes of the FATA, it is anticipated that the majority of individuals who are directly affected by the amendments will not be Australian citizens.
4.18 The criteria by which Schedules 1 and 2 to the Fees Imposition Bill treat people differently are reasonable and objective. The purpose of Australia's foreign investment framework is to regulate certain kinds of foreign investment to ensure that the proposed investments are not contrary to Australia's national interest. All foreign persons are regulated in the same manner under Australia's foreign investment framework and the definition of foreign person is clearly set out in the FATA. The amendments rely on this established definition of foreign person in the FATA.
4.19 Schedule 1 to the Fees Imposition Bill updates the fee cap amount to enable the increase in fees in Schedule 2 to the Fees Imposition Bill and updates the indexation date and indexation factor. Schedule 2 to the Fees Imposition Bill increases fees (imposed as a tax) in relation to actions regulated by the FATA. Schedule 2 to the Fees Imposition Bill increases the amount of application fees for established dwellings, and vacancy fees for foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017.
4.20 The purpose of increasing the application fees for established dwellings is to encourage foreign investment in new housing stock. The aim is to create additional new housing stock, jobs in the construction industry and to support economic growth. The purpose of increasing vacancy fees is to increase the supply of foreign-owned dwellings on the rental market and improve rental affordability. These amendments aim to achieve a legitimate purpose and help ensure foreign investment in residential land is not contrary to Australia's national interest.
4.21 The increased fees are also reasonable, necessary and proportionate because the amount of fee imposed depends on the nature of the transaction, the value of the transaction, and the significance of the transaction to Australia's national interest.
4.22 While the Fees Imposition Bill primarily affects foreign persons, the differential treatment is reasonable, necessary and proportionate to the objectives. As such, the Fees Imposition Bill is consistent with the principles of the ICERD and the ICCPR.
Conclusion
4.23 The Fees Imposition Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate to the objective of ensuring foreign investment in residential property increases Australia's housing stock through increased foreign investment fees for the purchase of established dwellings and increased vacancy fees for all foreign-owned dwellings purchased on or after 7.30 pm on 9 May 2017.
Treasury Laws Amendment (Foreign Investment) Bill 2024
Overview
4.24 The Foreign Investment 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.
4.25 The Foreign Investment Bill amends the Agreements Act to clarify any uncertainty associated with the interaction between certain taxes, such as foreign investment fees and similar state and territory property taxes and double tax agreements implemented domestically by the Agreements Act. The amendment implements the Government's position as announced in the 2023-24 MYEFO, ensuring that such taxes take primacy in the event of any inconsistency with the Agreements Act.
Human rights implications
4.26 The Foreign Investment Bill does not engage any of the applicable rights or freedoms because it does not impact human rights. It clarifies the scope of taxes that will be subject to provisions of international agreements.
Conclusion
4.27 The Foreign Investment Bill is compatible with human rights as it does not engage any human rights issues.