Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)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 Regulation | Foreign Acquisitions and Takeovers Regulation 2015 |
| Fees Act | Foreign Acquisitions and Takeovers Fees Imposition Act 2015 |
| Fees Regulation | Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015 |
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.
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.
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 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.
Comparison of key features of new law and current law
| New law | Current law |
| The amendment sets a new fee amount for an application for an exemption certificate for new dwellings. The new fee payable under table item 1 of subsection 6(1) of the Fees Act is $25,700, which reflects the 1 July 2017 indexation increase to the current base amount of $25,000, which was set when fees were introduced on 1 December 2015. The 10 per cent increase has not been applied to this fee.
However, the 10 per cent increase will apply to the 6 monthly fees for developers where the consideration for each new dwelling is $10 million or less. The methodology for achieving this increase is set out at subsection 7(2) (item 3 of the Bill) and described below at paragraphs 1.34 to 1.37. |
The fee for applying for the exemption certificate for new dwellings under section 57 of the Foreign Acquisitions Act is set at $25,000 in table item 1, subsection 6(1) of the Fees Act. Due to indexation on 1 July 2016 under the Fees Act, in practice the fee in 2016-17 is $25,300. This fee applies when the developer applies for the certificate.
An additional periodic fee applies on a 6 monthly basis for new dwellings acquisitions made by foreign persons under the certificate during the period. This fee is payable by the developer based and ensures that the same fee amount is collected per new dwelling sold by the developer as would have been paid if purchasers had sought individual approvals. |
| Fees for an exemption certificate under section 58 of the Foreign Acquisitions Act (Australian land) will be streamlined from a two tier fee to single fee for Table item 2 at subsection 6(1) of the Fees Act regardless of the consideration paid. The fee payable will be $35,000. | The fee for applying for an exemption certificate where consideration for the proposed purchases is less than $1 billion, under section 58 (foreign persons) of the Foreign Acquisitions Act is set at $25,000, in table item 2(a), subsection 6(1) of the 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. |
| The table item 3 of subsection 6(1) of the Fees Act will be expanded to create a new category of fee.
Acquisitions with consideration of less than $1 million table item (a) will pay a fee of $5,500. Acquisitions with consideration of between $1 million and $10 million will pay a fee determined by reference to subsection 6(2). Acquisitions with consideration over $10 million will pay a fee determined by reference to subsection 6(2A). |
The fee for applying for an exemption certificate under section 59 ('established dwellings') of the Foreign Acquisitions Act is $5,000 for properties valued at $1 million or less (at table item 3(a)). For acquisitions over $1 million the fee payable is determined by applying the formulae set out at subsection 6(2) (at table item 3(b)).
Under indexation on 1 July 2016, the above fee of $5,000 did not increase and is the fee for 2016-17. |
| Table item 4 of subsection 6(1) of the Fees Act will be amended, providing (a) if the exemption certificate is a residential land (other than for established dwellings) exemption certificate prescribed in the regulations made for the purpose of this item, that fee amount prescribed by the regulations shall not exceed the amount that would be payable if the application were for an exemption certificate under section 59 (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. | The fee payable for an exemption certificate given under the regulations made for the purposes of section 63 of the Foreign Acquisitions Act is the amount not exceeding $25,000 that is prescribed by the regulations or worked out using the method prescribed in the regulations made for the purposes of this item.
Due to indexation on 1 July 2016 under the Fees Act, in practice the above fee in 2016-17 is $25,300. |
| Table item 5 will be amended to provide greater clarity of the fees payable, depending on the exemption certificate sought.
Table item 5(a) will provide that if the application for a variation of an exemption certificate given under 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 fee payable for a variation of an exemption certificate under section 62 of the Foreign Acquisitions Act is $5,000.
Under indexation on 1 July 2016, the above fee of $5,000 did not increase and is the fee for 2016-17. |
| The formula relevant to fee calculations for the purposes of paragraph (b) of item 3 of the table in subsection 6(1) of the Fees Act will be simplified creating a two tiered structure for determining the fee payable, depending on the consideration paid.
This calculation will apply where consideration is between $1 million and $10 million. |
For the purposes of paragraph (b) of item 3 of the table, the fee amount is determined by reference to the formula in subsection 6(2) of the Fees Act. |
| New subsection 6(2A) will be inserted into the Fees Act providing a method of calculating the fee payable where consideration exceeds $10 million. | No equivalent in the current law. |
| Table item 1 of subsection 7(1) of the Fees Act will be amended to provide for three tiers of fees, depending on the consideration paid.
Paragraph (a) of table item 1 will provide that if the consideration for the acquisition is $10 million or less, the fee payable is $2,000. Paragraph (b) of table item 1 will provide that where consideration is more than $10 million and less than $1 billion, the fee payable is $25,300. Paragraph (c) of table item 1 will provide that where consideration is more than $1 billion, the fee payable is $101,500. |
Table item 1 at subsection 7(1) of the Fees Act provides that the fee for giving notice of notifiable actions is $25,000 where the consideration for the acquisition is $1 billion or less, or otherwise $100,000, where that acquisition is (a) of a direct interest in an Australian entity or Australian business that is an agribusiness, or (b) of a substantial interest in an Australian entity.
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. |
| Table item 2 of subsection 7(1) of the Fees Act applies when acquiring an interest in agricultural land. It will be amended to provide for three tiers of fees, depending on the consideration paid.
Paragraph (a) will provide that where consideration is $2 million or less, the fee payable is $2,000. Paragraph (b) will provide that where consideration is more than $2 million and less than $10 million the fee payable is $25,300. Paragraph (c) will provide that where consideration is more than $10 million, the fee payable is $101,500. |
Table item 2(a) at subsection 7(1) of the Fees Act provides where consideration for the acquisition is $1 million or less, the fee payable is $5,000 where the notifiable action is the acquisition of an interest in residential land or agricultural land.
Where consideration is greater than $1 million the fee payable under table item 2(b) is determined by reference to subsections 7(2) and 7(3) of the Fees Act. Under indexation on 1 July 2016, the above fee of $5,000 did not increase and is the fee for 2016-17. The fees where consideration is greater than $1 million did increase on 1 July 2016. |
| Table item 4 of subsection 7(1) of the Fees Act provides the fee payable for acquisitions of commercial land (whether the land is vacant or not). It will be amended to provide three tiers of fee, depending on the consideration paid.
Paragraph (a) will provide that where 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 3 at subsection 7(1) of the Fees Act provides the fee payable for acquisitions of commercial land (other than commercial land that is vacant) is $25,000.
Due to indexation on 1 July 2016 under the Fees Act, in practice the above fee in 2016-17 is $25,300. |
| Table item 4 of subsection 7(1) of the Fees Act will be amended to provide three tiers of fee, depending on the consideration paid.
Paragraph (a) will provide that where consideration is $10 million or less, the fee payable is $2,000. Paragraph (b) will provide that where 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 4 at subsection 7(1) of the Fees Act provides that the fee payable for acquisition of an interest in commercial land that is vacant is $10,000.
Due to indexation on 1 July 2016 under the Fees Act, in practice the above fee in 2016-17 is $10,100. |
| Table item 5 at subsection 7(1) of the Fees Act will be updated and the fee payable for an acquisition of an interest in a mining or production tenement will be $25,300. | Table item 5 at subsection 7(1) of the Fees Act provides that the fee payable for acquisition of an interest in a mining or production tenement is $25,000.
Due to indexation on 1 July 2016 under the Fees Act, in practice the above fee in 2016-17 is $25,300. |
| The formula relevant to fee calculations for the purposes of paragraph (b) of item 3 of the table in subsection 7(1) of the Fees Act will be simplified creating a two tiered structure for determining the fee payable, depending on the consideration paid.
This calculation will apply where consideration is between $1 million and $10 million. |
For the purposes of paragraph (b) of item 3 of the table, the fee amount is determined by reference to the formula in subsection 7(2) of the Fees Act. |
| New subsection 7(2A) will be inserted into the Fees Act providing a method of calculating the fee payable where consideration exceeds $10 million. | No equivalent in the current law. |
| The amount of the fee payable for these types of acquisitions as outlined in table item 1 of subsection 8(1) of the Fees Act will be updated, as below.
Paragraph (a) will provide that where consideration is $10 million or less, the fee payable is $2,000. Paragraph (b) will provide that where consideration is more than $10 million and less than $1 billion the fee payable is $25,300. Paragraph (c) will be inserted to provide that where consideration is more than $1 billion the fee payable is $101,500. |
Subsection 8 of the Fees Act outlines the fees payable in respect of other fees. The table at subsection 8(1) outlines the acquisition types and fees payable.
Table item 1 provides that the fee payable is $25,000 where consideration for the issue or acquisition is $1 billion or less or otherwise $100,000 where the action is (a) to acquire an interest in securities in an entity that is not a substantial interest in the entity; (b) to issue securities in an entity; or (c) to acquire interests in assets of an Australian business. 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. |
| The amount of the fee payable for these types of acquisitions as outlined in table item 2 of subsection 8(1) will be updated to $10,100. | Table item 2 at subsection 8(1) of the Fees Act provides that the fee payable is $25,000 where a foreign person (a) 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 $5,100 to reflect indexation on 1 July 2017 of the $5,000 fee and the $10,100 will be updated so that indexation does not apply on 1 July 2017. Also, the types of actions specified in the no objection notification to which the $5,100 fee will apply will be limited to acquisitions of interests in residential land. The $10,100 fee will apply to all other actions. | Subsection 8(2) of the Fees Act sets the fees payable for a person who applies under for a variation of a no objection notification if the action specified in the notification is an acquisition of an interest in Australian land at $5,000, otherwise $10,000.
Under indexation on 1 July 2016, the above $5,000 fee did not increase and the $10,000 fee is $10,100 for 2016-17. |
| Section 10 will be updated so that the fee payable for internal reorganisations in 2017-18 is $10,100, the same fee as in 2016-17. | Under section 10, the fee payable for internal reorganisations is $10,000.
Due to indexation on 1 July 2016 under the Fees Act, in practice the above fee in 2016-17 is $10,100. |
| Paragraph 12(9)(a) will be updated to reflect which amounts under amendments made in this Bill are not fees for the purposes of indexation under section 12. | Paragraph 12(9)(a) currently provides that amounts referred to in subsections of the Fees Act are not fees for the purposes of indexation 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.
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]
Example 1.1
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 * $10,000 = $120,000
Step 3. Multiply the step 2 amount by 1.030:
$120,000 * 1.030 = $123,600
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] [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]
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.
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 * $10,000 = $20,000
Step 3. Multiply the step 2 amount by 1.015:
$20,000 * 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% * $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 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.
Commercial fees from 1 July 2017 (key changes)
The below fees apply to all foreign persons.
| Fee by category and value 1,2 | |||
| Category | $10 million or less | $1 billion or less and above $10 million | Above $1 billion |
| Commercial land (vacant and developed)3 | $2,000 | $25,300 | $101,500 |
| Actions relating to entities and businesses | $2,000 | $25,300 | $101,500 |
| Category | $2 million or less | $10 million or less and above $2 million | Above $10 million |
| Agricultural land | $2,000 | $25,300 | $101,500 |
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]
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]
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:
11 * $10,000 = $110,000
Step 3. Multiply the step 2 amount by 1.030:
$110,000 * 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]
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: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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- applications for exemption certificates made on or after 1 July 2017, including applications to vary an exemption certificate;
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- 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]
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.