Overview

We would like to provide an explanation here regarding several recent changes to Australia’s Foreign Investment Law:

• The China-Australia Free Trade Agreement has been signed;

• Announce the imposition of a 3% additional stamp duty on foreign purchases of real estate in Victoria.

• The Australian Taxation Office has begun exercising its regulatory and enforcement powers over real estate.

• The Minister of Agriculture made remarks supporting a ban on foreign government investors acquiring agricultural land.

• Changes to the compliance funding requirements for the Significant Investor Visa program; and

• Establish a high-end investor visa program.

Detailed content

Sign the China-Australia Free Trade Agreement

The China-Australia Free Trade Agreement (ChAFTA) was signed at a ceremony held in Canberra on June 17, 2015. China and Australia are currently undergoing the approval process for the agreement, and it is expected to take effect by the end of this year.

This China-Australia Free Trade Agreement will bring significant advantages to Chinese investors in Australia. Overall:

• The threshold for reviewing investments by Chinese private investors in non-sensitive sectors will be raised from the current 252 million to 1.094 billion, aligning China’s treatment of investors with that of other major trading partners such as the United States, Japan, and New Zealand.

• Tariffs on resources, energy, and manufactured goods will be immediately eliminated. For certain sensitive industries—such as automobiles, steel, aluminum, plastics, canned fruits, carpets, apparel, and footwear—tariffs will be gradually phased out over a period of two to four years. And—

• We will adopt a more relaxed policy toward visa and immigration requirements for Chinese investors.

Additional tax for foreign investors purchasing real estate in Victoria.

In its 2015-2016 fiscal budget, the Victorian government announced that, starting July 1, 2015, foreign investors purchasing real estate in the State of Victoria will be subject to an additional tax of 3% on top of the standard stamp duty. Additionally, beginning in 2016, a land surcharge of 0.5% will be imposed on absentee property owners.

The Australian Taxation Office has begun exercising formal regulatory and enforcement powers over real estate.

The Australian Taxation Office (ATO) will be responsible for the auditing, compliance, and enforcement of external investment regulations related to the acquisition of real estate. The ATO has begun leveraging its data-matching capabilities to review foreign investment applications submitted between July 1, 2010, and June 30, 2016, in order to identify potential violations of the Foreign Investment Act.

The regulatory responsibilities for foreign investment in residential real estate—including the collection of application fees, pre-screening procedures, compliance activities, and enforcement—will be assumed by the Australian Taxation Office starting December 1, 2015.

The Minister of Agriculture supports banning foreign governments from acquiring agricultural land.

Agriculture Minister Barnaby Joyce explicitly stated that he personally supports a complete ban on foreign government investors purchasing Australian farmland. Currently, all letters of intent from foreign government investors to purchase Australian farmland must be reviewed by the Foreign Investment Review Board (FIRB) and can be approved as long as they do not conflict with Australia’s national interests. Whether Australia will adopt these views remains to be seen.

New Compliance Investment Framework for the Significant Investor Visa Program

To divert investment away from the real estate sector and promote passive investments geared toward innovation and industry development, the Australian government has announced changes to the compliance investment framework for the Significant Investor Visa program.

The investment framework will take effect on July 1, 2015, and will require visa applicants to invest at least 5 million yuan in the following investment projects within a four-year period: