Tax update: Australian Tax Conditions on Foreign Investors

The Australian Government outlines new tax conditions, which will affect foreign investors.

2016-12-20

The Australian government has released a publication outlining new far-reaching tax conditions which will apply to certain transactions involving foreign investors and Australian assets. The publication outlines circumstances in which the Treasurer will consider and apply tax-related conditions to approved acquisitions.

Broadly, tax conditions will be imposed where the Treasurer determines that there may be a risk to Australian tax revenues. These conditions include compliance with Australia’s tax laws, co-operation with the ATO by producing information in a timely and complete manner, and payment of outstanding tax debt, along with reporting on compliance with the conditions and the holding of the asset.

If a condition is breached an investor may be subject to prosecution or a civil penalty. For serious breaches the Treasurer may order the foreign investor to dispose of their asset(s).

Situations where tax conditions may be imposed to ensure an action is not contrary to the national interest would be to address risks associated with, but not limited to, the following: 

  • Capital gains tax

  • Dividend withholding tax

  • Transfer pricing

  • Low tax jurisdictions

  • Consolidations

  • Non-resident withholding tax

  • Debt and equity risks

  • Thin capitalisation

  • Tax avoidance

  • Tax liabilities on future disposals. 

Matters that will be taken into consideration include:

  • The complexity of the action

  • The size of the action

  • Previous interactions with Australia’s tax system. 

A list of conditions which may apply is contained on page 4 of Part A of Attachment A of the FIRB’s Guidance Note No 47.

Further, where an action is considered to have a significant or particular tax risk then one or both of the additional tax conditions shown on page 5 of Part B of Attachment A of the FIRB’s Guidance Note No 47 may also be imposed.

If additional tax conditions are imposed, the applicant will be given the opportunity to ask questions about the operation and effect of the condition and to provide comments to the decision maker.

Please note that the conditions do not have any impact on Australia’s tax laws, which continue to operate as per the legislation.

If you have any questions or would like further information in respect of the above, please do not hesitate to contact ShineWing Australia’s Tax Division on (03) 8635 1800. 

Stephen O'Flynn
Partner, Tax
ShineWing Australia
E
soflynn@shinewing.com.au