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Legal

Foreign investment law makeover

FOREIGN investment in Australia is operating under new restrictions from December 2015.

Analysis of the changes have identified how the Federal Government has moved to close loopholes and impose more realistic costs for international applicants, Mullins Lawyers director Tony Hogarth said.

“From December 1, 2015, the Foreign Investment Review Board (FIRB) has implemented new rules aimed at strengthening the regulation of foreign investment in Australia,” Mr Hogarth said.  

A significant change in the compliance regime has been the appointment of  the Australian Taxation Office (ATO) to regulate foreign investment in residential real estate, to improve compliance and strengthen the enforcement of the FIRB rules.

“The ATO now has the capacity to match its own taxpayer data with those from the states and territories relating to land titles, immigration, FIRB and AUSTRAC,” Mr Hobart said. AUSTRAC follows the movement of funds in and out of Australia.

Foreign nationals wanting to invest in Australia are also now required to pay an administrative fee before their investment application is processed. The fees apply for each application lodged from December 1, 2015.

Residential properties valued at $1 million or less now attract a $5,000 fee. Residential properties valued over $1 million have a fee of $10,000 then $10,000 incremental fee increases per additional $1 million in property value.

For commercial real estate there is now a $25,000 fee, while vacant commercial land attracts a $10,000 fee.

For proposed foreign investments in agribusiness, there are fees of $25,000, but that raises to $100,000 where the investment is greater than $1 billion. The agribusiness investment threshold is at $55 million to be indexed annually, but exceptions apply for some Free Trade Agreement (FTA) countries.

Agricultural land attracts fees of $5,000 to $100,000 and the threshold is at $15 million (cumulative) with exceptions for some FTA countries.

In addition, an administrative fee is now payable by developers when applying for advance off-the-plan approval. For developments of 50 or more residences, property developers can now apply for a new dwelling exemption certificate to enable them to sell new residential dwellings to foreign investors without the need to apply for FIRB approval.

The general ‘substantial interest’ threshold for acquisitions requiring notification has been increased from 15 percent to 20 percent, consistent with the Corporations Act 2001 takeovers threshold, Mr Hogarth said.

He said the ATO plans to establish a register relating to foreign ownership of residential real estate from July 1, 2016. The FIRB has already established a register relating to foreign ownership of agricultural land from July 1, 2015.

Significant changes have been made to the penalties, introducing civil penalties for the first time while previous criminal penalties have been expanded.

“Generally, the maximum ‘criminal’ penalty for individuals and companies has been increased to $135,000, or three years imprisonment, and $675,000, respectively,” Mr Hogarth said. 

He said ‘civil’ penalties cater for situations where a foreign person makes an acquisition without approval; a foreign person fails to comply with a condition of approval; a non resident acquires established residential property; a temporary resident acquires more than one established residential property; a temporary resident fails to sell an established residential property when it ceases to be their principal place of residence; and a temporary resident rents out an established residential property.

“By way of example, in the case of residential real estate, the maximum ‘civil’ penalty is the greater of 25 percent of the purchase price in addition to the relevant application fee, or 25 percent of the market value of the property in addition to the relevant application fee,” Mr Hogarth said.

“The civil and criminal penalties are now extended to third parties, who knowingly assist a foreign person to breach the FIRB rules. This raises the level of responsibility for real estate agents, lawyers and others involved in the sale of property to foreign buyers, to take care and provide proper advice in relation to the FIRB rules and requirements.

“Foreign investors and advisors need to be aware of their obligations and to abide by the FIRB rules to avoid incurring the significant penalties which may now be imposed,” Mr Hogarth said.

www.mullinslaw.com.au

 

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New film classification portal helps festivals, gamers

A NEW online classifications registration portal is proving to be popular with film festival organisers and computer game expos. The Classification Board  has seen almost 200 events registered through the online system in its first four months.

The portal gives festival and event organisers a streamlined, accessible way to register the unclassified films and computer games in their program. 

This is a major change from the old system where event organisers had to apply to the Director of the Classification Board for an exemption from the usual classification requirements for each film or computer game being used at their event.

The portal was launched to coincide with the commencement of new laws for events wishing to exhibit unclassified content.

The registration record can be instantly sent to venues, such as cinemas, to confirm event details and if there are last minute changes, such as a late program entry or a change of venue, this can be updated online by event organisers. It is fast, simple and, in combination with the relevant legislative changes, represents a significant reduction in workload for both government and industry.

The online tool is especially important for events organised by community groups and non-profit organisations running on a shoestring budget, often relying on volunteers working long hours in the final push to opening night and enables the art sector to more easily provide the community with access to a broad range of diverse content.

As well as being part of the Federal Government’s deregulation agenda, the registration portal is an important step in the Classification Department’s digital transformation journey and provides a technological solution to make it easier to comply with classification requirements and to interact with government online.

In the four months since the launch, industry use indicates the portal is already a success.

The portal services the needs of an estimated client base of 500 event organisers and an estimated 1,000 events a year.

For more information, go to the Registered Events page on the classification website.

www.classification.gov.au

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Government brings in the Telecommunications (Interception And Access) Amendment (Data Retention) Act 2015, but some ISPs floundering

THE Australian Attorney-General, George Brandis, has welcomed the commencement of the Telecommunications (Interception and Access) Amendment (Data Retention) Act 2015 on October 13 and announced grants to assist compliance.

As many smaller internet service providers (ISPs) are struggling to meet their obligations under the Act, extensions for compliance out to April 2017 have been built in, along with a grants program, according to the Attorney-General. 

"Metadata is the basic building block in nearly every counter-terrorism, counter-espionage and organised and major crime investigation," Senator Brandis said.

"It is also essential for the investigation of child abuse and child pornography offences, that are frequently carried out online, and other forms of organised crime.

"With the expiry of the initial six month implementation period, telecommunications companies can apply for an extension of up to 18 months (April 2017) to comply with the legislation," Senator Brandis said.

"The government continues to work constructively with the industry to achieve full compliance by April 2017.

"Over $131 million has been committed by the Government to contribute to the upfront capital costs of the scheme.

"Telecommunications companies have always retained metadata and law enforcement agencies have been permitted access to these records for decades, however industry practices have varied. The new scheme implements a uniform standard.

"The Data Retention Act standardises the timeframe and type of data held giving law enforcement and national security agencies consistent information of the kind they need to keep the community safe," Senator Brandis said.

The Act also introduced new and strengthened safeguard arrangements, in particular by significantly reducing the number of agencies that can access metadata.

The Attorney-General's Department is finalising details of a grants program and it is expected that payments will be made early next year, well before April 2017, Senator Brandis said.

"The government will continue to work closely with industry; the focus will be on implementation rather than enforcement," he said.

www.attorneygeneral.gov.au

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ASIC releases second licensing activity report, plans licensing liaison meetings

  • Legal

THE Australian Securities and Investments Commission (ASIC) has published its second report on its approach to licence applications and it has also released a meetings schedule to assist businesses in the financial services sector.

ASIC's Report 448, Overview of licensing and professional registration applications: January to June 2015 (REP 448), sets out recent regulatory outcomes achieved by ASIC in relation to Australian financial services (AFS) applications, Australian credit licence applications, liquidator registration applications, company auditor and approved SMSF auditor registration applications. 

ASIC deputy chairman Peter Kell said the report was part of ASIC’s ongoing commitment to providing greater public information about itsregulatory activities. ASIC’s first licensing activity report was published in May 2015.

"As we did in our first report, today’s report highlights ASIC’s continuing focus on retail OTC derivatives and marketplace lending, and also discusses the additional areas of digital (robo) advice, limited licensing, consumer leases and Centrepay, and ASIC’s recently announced Innovation Hub," Mr Kell said.

He gave a detailed breakdown of recent activities from January 1 to June 30, 2015:

  • ASIC assessed approximately 2050 applications, with 35% relating to a new licence application and the remaining 47% relating to variations to existing licence; 18% related to professional registration (liquidators and auditors).
  • Of the total number of applications assessed, 47% of these related to an Australian financial services (AFS) licence and 35% related to an Australian credit licence.
  • 48% of all applications assessed during this period were approved.
  • 57% of those approved were in a form other than as requested by the applicant (with 71% of these relating to an AFS licence and 46% related to a credit licence).
  • Nine AFS licences were suspended, 98 AFS licences were cancelled and 192 credit licences were cancelled.
  • ASIC assessed 369 applications for professional registration as liquidators and auditors.

LICENSING LIAISON MEETINGS

ASIC is organising meetings in Sydney on Monday, October 26, 2015 and Melbourne on Tuesday, October 27, 2015.

Licensing will also become a topic for discussion at ASIC’s regional liaison meetings in Adelaide, Brisbane, Hobart and Perth.

"We will be publishing an agenda for these meetings on our website and invitations will be sent out to our targeted audience of advisers and service providers shortly," Mr Kell said.

"We encourage people to attend as the meetings will provide insights into ASIC’s regulatory approach to its licensing and professional registration responsibilities.

"They will cover current topics relevant to the application for a licence and professional registration process.

"Senior staff will be available to present information and respond to questions," he said.

For details on the meetings and to RSVP to attend click here.

Download REP 448.

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Unfair contract legislation to finally help SMEs fight predatory financial institutions

THE Federal Government’s introduction of legislation to extend unfair contract terms (UCT) protections for consumers to small business is a step in the right direction, according to the Institute of Public Accountants (IPA).

Many small business failures over recent years have been triggered by actions from banks, finance companies and suppliers that would have been considered ‘unconscionable conduct’ if they had taken place in a pure consumer environment. Appeal channels such as financial ombudsman services have not extended to small businesses and companies. 

For thousands of small business people caught in these contracts, it has driven them to major personal financial loss and often destroyed their businesses.

“The IPA has long advocated for a fairer deal for small business when it comes to contracts and has voiced its concerns through the extensive consultation period with Treasury,” IPA chief executive officer, Andrew Conway said.

Under the new protections, a court will be able to strike out a term of a small business contract that it considers unfair.  Under these protections, a contract will be a small business contract if at least one party has fewer than 20 employees and its value is below the prescribed threshold of $100,000 (or $250,000 for a multi-year contract).

“While we would have preferred a higher ‘upfront price’, we believe the new protections will help small business in dealing with unconscionable conduct,” Mr Conway said.

“The IPA is of the opinion that the $100,000 threshold is insufficient as it significantly restricts the availability of the UCT provisions to small business and may lead to unjustifiable distinctions being drawn between consumer and business contracts. 

“The ‘take it or leave it’ rationale for reform can apply just as much to contracts over $100,000 as to those for less than this amount.

“The monetary limit is of particular concern to small businesses that make only a few large contracts each year rather than numerous smaller ones. For example, an agricultural producer selling an annual crop may have a series of contracts each with a value over $100,000.

“The existence of the monetary limit will also make it possible for a dominant firm to avoid the UCT provisions by aggregating the contracts it makes with a particular small business so they exceed that limit.

“However, there is no doubt that the government has taken a positive step forward in support of small businesses across Australia,” he said.

“The IPA applauds the legislation and looks forward to its passage and implementation.

“We will work with our members and small business to raise awareness of the benefits of this important legislation,” Mr Conway said.

www.publicaccountants.org.au

 

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Investor visa program could boost venture capital

EXTRA >>

TRADE and Investment Minister Andrew Robb has released a draft investment framework for an enhanced Significant Investor Visa Scheme (SIV) and design options for a new Premium Investor Visa (PIV) in an effort to boost investment into more dynamic sectors of the economy.

Mr Robb said as part of the government’s broader competitiveness agenda, these visa reforms aimed to drive investment into needy areas such as venture capital and small emerging companies. 

“The framework and design options were developed by Austrade following initial rounds of stakeholder consultation which attracted 68 written submissions,” Mr Robb said. 

“Under the existing SIV scheme, investment is directed largely into passive investments like government bonds.

“Applicants are required to make an investment of at least $5 million in complying investments for a minimum of four years. Under the proposed changes government bonds would no longer be a complying investment class.”

Mr Robb said the proposed complying investment framework for the SIV scheme included specifying that at least 20 percent ($1m) of the applicant’s $5m investment must flow into early stage, growth capital investments, through approved venture capital funds.

It would also specify that at least 30 percent ($1.5m) of the applicant’s investment must flow into emerging listed companies, through managed funds investing in small Australian stock exchange listed companies.

The changes would also reinforce existing rules banning direct investment into residential real estate, and introducing new measures to clamp down on indirect investment into residential real estate. A portion of funds will continue to be permitted to flow into commercial real estate, via managed funds.

Mr Robb said there were “enhanced measures” to improve protection for investors.

The Premium Visa scheme, he said, would require a minimum investment of $15 million and offer an accelerated 12-month pathway to citizenship.

This scheme will be more flexible in terms of investment class and will be aimed at attracting exceptional business people to Australia, including high-calibre entrepreneurs.

Mr Robb said investor visas offered a valuable prize which the government believed warranted investment in more dynamic and productive areas of the economy which experience capital constraints.

“These changes will attract more investment into high-growth companies and will support the commercialisation of great Australian research,” Mr Robb said.

“Our key objective is to see more investment into areas which support innovation and which provide new sources of growth capital, particularly in areas with thin capital flows.”

www.trademinister.gov.au

 

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CGW warns business over on privacy reform, one year on

BUSINESSES with annual turnover of more than $3 million, and those who offer payment terms of seven days or more, may be in the firing line if they are not compliant with new privacy laws.

That is the warning from lawyers Cooper Grace Ward, who have found that businesses non compliant with the Australian Privacy Principles could now face major penalties.

March 12 marked the first anniversary of the most significant changes to Australia’s privacy laws in over 25 years through amendments to the Privacy Act 1988 (Cth) – which  included the introduction of a new set of Australian Privacy Principles (APPs) and credit information obligations that now regulate the handling of personal information and credit information by most businesses and government agencies.

The amendments also introduced significant penalties of up to $340,000 (for individuals) or $1.7 million (for corporations) for breaches of certain provisions of the APPs and the Privacy Act.

Cooper Grace Ward partner Charles Sweeney said the Australian Privacy Principles applied to businesses with an annual turnover of more than $3 million, while some key obligations for affected businesses include having an up-to-date privacy policy “that is easily accessible and contains information about a number of mandatory matters”.

Mr Sweeney said if a business’s current privacy policy refers to the ‘National Privacy Principles’ it is likely its has not been updated and is not APP compliant.

The policy should also ensure that the business notifies individuals of certain privacy and information handling matters before collecting their personal information; and only collects personal information for permitted reasons. Once collected, the business must deal with the personal information in accordance with the APPs.

The policy must ensure the business does not use personal information for direct marketing purposes, unless an exception is satisfied; and takes steps before disclosing information to overseas recipients to ensure they do not breach the APPs – and this includes outsourcing operations and cloud computing.

The 2014 amendments to the Privacy Act also imposed new obligations on most businesses that defer payment for goods or services on terms of seven days or more regardless of annual turnover.

“Some key obligations for affected businesses include ensuring that your business has an up-to-date policy on your handling of credit information and that the policy is easily accessible and contains information about a number of mandatory matters,” Mr Sweeney said. “And notifying individuals of certain credit information handling matters before collecting their credit information.”

Mr Sweeney said until last year, privacy compliance was seen by many businesses as a toothless tiger.

“However, given the significant penalties that are now on the cards for non-compliance, businesses should ensure that they are aware of their obligations under the Privacy Act and make positive steps towards complying with their obligations or face hefty penalties.”

www.cgw.com.au

 

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