Second Reading Speech
Mr Hockey (The Treasurer)I move:
That this bill be now read a second time.
Today I am introducing legislation to strengthen Australia's foreign investment framework.
This legislative package shall ensure Australia maintains a welcoming environment for investment-but one that ensures that the investment is not contrary to our national interest.
These reforms shall ensure that from 1 December 2015, Australia's foreign investment framework is more modern, simple and effective.
Importantly, it will add integrity to the system, so that everybody plays by the rules. With integrity comes compliance.
By granting new compliance powers to the Australian Taxation Office (ATO), and additional powers to the Foreign Investment Review Board (FIRB), the government is ensuring that Australians can have confidence that our foreign investment framework will be effectively enforced.
Australians expect our foreign investment rules to be strong, effective and enforceable.
Our foreign investment rules have not been significantly revised since introduction in 1975, 40 years ago, and they have not kept pace with the changes in global investment.
The government recognises the changing landscape and has already taken active steps to enforce the existing rules and act decisively on foreign investment breaches.
One such step is to encourage those who are in breach to come forward and self-report. In so doing, we have announced a reduced penalty period for foreign investors who come forward and self-report noncompliance before 30 November 2015.
Already, I have issued the first divestment order in about 10 years. Since then, I have ordered the divestment of a further six illegally held properties under the reduced penalty period.
While the government has increased enforcement activities, further strengthening of the framework is still required to ensure foreign investment in Australia can be appropriately monitored and the rules enforced for the benefit of all Australians.
With this package of bills, the government is implementing its commitment to increase scrutiny and transparency around foreign investment in agriculture. The government is also responding to concerns raised by the House Economics Committee, which was at the time led by my parliamentary secretary. That committee looked at the issue of a lack of compliance and enforcement of residential real estate rules and determined that that lack of enforcement was undermining the overall integrity of the foreign investment framework.
The package delivers a robust and enforceable regulatory framework and provides a predictable and welcoming environment for investors.
The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 makes essential changes to simplify the system, strengthen the framework and ensure the rules are enforced.
Consistent with the recommendations of the House Economics Committee, the bill introduces a range of new and stricter penalties that are commensurate with the severity of the breach and ensure that those who break the rules do not profit by their actions.
Criminal penalties will be increased from $90,000 to $135,000 for individuals and will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches of the residential real estate rules.
Third parties such as real estate agents, migration agents, conveyancers and lawyers who knowingly assist a foreign investor to breach the rules will also now be subject to both civil and criminal penalties.
The government has provided $47.5 million over four years to the Australian Taxation Office to improve compliance and enforcement of the rules. The ATO has the capacity to cover more than 600 million transactions annually through its sophisticated data matching programs.
The bill also implements the government's commitment to lower the screening thresholds for investments in Australian agriculture.
Since 1 March 2015, the screening threshold for foreign purchases of agricultural land has been lowered from $252 million to $15 million based on the cumulative value of agricultural land owned by that investor. The government is also introducing a $55 million threshold for direct interests in agribusinesses from 1 December 2015.
Australians can have confidence that investments in agriculture will be scrutinised to ensure that they are not contrary to the national interest.
The government is committed to deregulation and ensuring that we create an investment environment that is open for business.
The bill includes a package of long overdue amendments that will reduce red tape by removing routine cases and better aligning the foreign investment framework with other corporate legislation. For example, the substantial interest threshold will be raised from 15 per cent to 20 per cent to better align the foreign investment rules with the takeover rules in the Corporations Act 2001, which I introduced into this place. This means investors acquiring a stake of less than 20 per cent will no longer need foreign investment approval.
The bill will also provide greater certainty for investors and the Australian community by bringing foreign government investors within the legislative framework. I commend the bill to the House.