On 22 February 2016, the Treasurer issued a press release announcing tax compliance obligations would be a condition of applications of foreigners to make investments in Australia.

The Turnbull Government will apply new requirements on foreign investment applications to ensure multinational companies investing in Australia pay tax here on what they earn, Treasurer the Hon. Scott Morrison announced today.

“The Government is committed to ensuring companies operating in Australia pay tax on their Australian earnings. Where companies fail to do so I will have powers to take action, including ordering divestment of Australian assets,” Mr Morrison said.

“Foreign investment applications will have to comply with Australian taxation law, Australian Taxation Office (ATO) directions to provide information in relation to the investment and advise the ATO if investors enter into any transactions with non residents to which transfer pricing or anti avoidance measures of Australian tax law may potentially apply.

“Additional conditions may also be applied where a significant tax risk is identified in a particular case. These may include requiring the investor to enter into advance pricing arrangements with or seek rulings from the ATO, or comply with other directions from the ATO that are specific to their circumstances.

“A breach of these conditions could result in prosecution, fines and potentially divestment of the asset.

“The Turnbull Government is absolutely committed to ensuring that investors in Australia pay the required amount of tax.

“Australians expect all entities operating in Australia to maintain the highest standards of corporate behaviour, irrespective of whether those entities are Australian or foreign owned.

“Persons involved in operating these entities are expected to understand Australia’s regulatory environment and abide by all the relevant requirements.

“The Australian Government expects foreign enterprises operating in Australia to meet all obligations imposed under the tax laws and to cooperate with the ATO in a timely and complete manner.

“These changes add to the already strengthened framework the Government has enacted, including:

  • Greater compliance powers for the Australian Taxation Office and strict new penalties for those caught breaking the rules;
  • A new agricultural land foreign ownership register and reduction of the screening threshold for proposed foreign purchases of agricultural land by private investors to $15 million;
  • FIRB screening of direct interests in agribusinesses valued at $55 million or more;
  • The appointment of Mr David Irvine (a former Director General of both the Australian Security Intelligence Organisation and the Australian Secret Intelligence Service) to the FIRB, bolstering the Board’s ability to advise on national security issues;
  • Forced divestment of 27 properties, worth more than $76 million, illegally acquired by foreign nationals.

“The additional requirements on foreign investors add to the existing national interest test which also considers a range of factors, such as national security, the impact on competition, the character of the investor, and the impact on the economy and the community,” Mr Morrison said.

The standard conditions to be imposed on foreign investment applications prospectively are attached.

[Treasurer’s press release] [Related TT article – standard conditions] [LTN 34, 22/2/16]