Australia: Tax compliance, foreign investment applications

Foreign investments in Australia

Australia’s Treasurer on 22 February 2016 announced new tax compliance requirements are being imposed with respect to foreign investment applications.

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Foreign investment applications will now be subject to a set of standard conditions that must be met in order for an application to be considered as not being against the “national interest.” These conditions include one that investors “must comply with Australia’s taxation laws” in relation to the proposed investment and any transactions, operations or assets in connection with the assets or operations acquired, directly or indirectly, as a result of the investment. The tax compliance obligation on the investor is not limited to its own compliance, but also extends to investors. 

Other conditions require:

  • Complying with information requests from the Australian Taxation Office (ATO) in relation to proposed investments
  • Advising the ATO if investors enter into any transactions with non-residents to which transfer pricing or anti avoidance measures in respect of Australian tax law may potentially apply
  • Reporting to the Foreign Investment Review Board (FIRB) annually on compliance with these conditions 

Additional conditions may also be imposed on a case-by-case basis when a significant tax risk is identified. Such conditions could involve a requirement that the investor enter into advance pricing arrangements with the ATO or seek pre-transaction rulings. A failure to meet any of the conditions may result in prosecution, penalties and/or the Treasurer ultimately ordering a divestment of Australian assets. 



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