Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

The government is to be congratulated for its efforts to develop an accurate and effective foreign ownership register for agricultural land, as promised in the 2013 coalition election campaign. This is an issue which is important to the Forrest electorate and to the agricultural sector across Australia. Residents in Forrest—and I have heard it elsewhere around this nation—have raised this issue repeatedly over many years, and the coalition government has responded with this legislation. Sound processes, accurate information and good communication will provide confidence for both the Australian people and investors.

Of course, both domestic and foreign investment are vital to Australian agriculture. Much of the agricultural development in Western Australia has happened as a direct result of foreign investment. If we are to really take advantage of the potential growth that is available in Asia in the 21st century, foreign investment is essential. The government supports investment in our agricultural sector. There are many examples of foreign investment in agriculture that have resulted in positive outcomes for the foreign investors and also for local Australian businesses and communities, and the economy. An example in my own state of Western Australia would be the American investment in the Esperance region in the 1960s that contributed to the region developing into the prime cropping and grazing region it is today.

In being supportive of investment in agriculture, including foreign investment, we do, however, need an open and transparent foreign investment process. As a sovereign nation, it is essential to know how much foreign investment there actually is. We certainly do not oppose foreign investment; in fact, we encourage it. We just want to know where and when it is happening. Open, proper scrutiny is needed so that Australians have accurate information and a clear understanding and so that they can have trust not only in the process but in the accuracy of the information itself. It is clearly a simple way of managing misinformation as well, to help address the concerns and fears we often hear from our communities—and we do hear these concerns.

According to the Australian Bureau of Statistics and ABARES in their 2013 report, nearly 50 million hectares of Australian agricultural land had some level of foreign ownership. The area of agricultural land in Australia owned by businesses with a level of foreign ownership increased from 44.9 million hectares at 31 December 2010 to 49.6 million hectares at 30 June 2013, an increase of 4.7 million hectares. Of this 50-million hectare total, 28 million hectares were more than 50 per cent foreign owned—you can understand why people express concerns to us.

In my state of Western Australia, there are over six million hectares with some degree of foreign ownership. Over 3.5 million hectares of Western Australian agricultural land is over half foreign owned—that is, foreign controlled. If you wonder why people express concern to us, it equates to half of the area of mainland Tasmania, or equal to a country the size of Belgium. It is over twice the size of the Forrest electorate. It is more than all the land west of a line from Bunbury to Albany. We do not want to discourage foreign investment; we just simply want to identify it in an open and honest manner. Over seven million hectares of Western Australian agricultural land has some level of foreign ownership, which equates to all of mainland Tasmania. The purpose of the foreign ownership register for agricultural land is to increase transparency and provide accurate information to the community and policy makers.

This package of bills will make important changes to strengthen the integrity of Australia's foreign investment framework, ensuring Australia maintains a welcoming environment for investment that is not contrary to our national interest. I saw in an inquiry in 2012 that FIRB officials acknowledged that the current law requires overseas buyers to seek FIRB approval to buy a small city apartment but most other acquisitions, other than metro or urban properties, such as farmlands and farm businesses can be bought by anyone as long as it is less than the $244 million threshold. These changes implement the reforms announced by the government on 2 May 2015 to ensure that from 1 December 2015, Australia's foreign investment framework is more modern, simple and better targeted to changing demands and community expectations—those that I spoke about.

These changes will deliver a robust regulatory framework, increase community confidence and provide a predictable and welcoming environment for investors. They are about welcoming essential foreign investment that is not contrary to our national interest. What our communities do not want is foreign investment that simply hands over our assets without benefiting or local communities and broader economy, a reasonable request. Good foreign investment strengthens Australia's economy. It creates new jobs and it unlocks innovation. Being able to distinguish between the two is critical.

The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 represents the most significant overhaul of the Foreign Acquisitions and Takeovers Act 1975 since its introduction 40 years ago. No wonder the FIRB officials had some challenges in dealing with the world as it is now. It provides essential changes to simplify the system, strengthen the framework and ensure the rules are enforced. It introduces additional and stricter civil and criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules. At that parliamentary inquiry of 2012, FIRB officials acknowledged that there are anomalies in the existing laws, which is a part of the reason why these bills are important. They admitted that no fines could be imposed on companies that did not deliver assurances made to FIRB when securing investment approvals. These bills enable the transfer to the Australian Taxation Office of responsibility for regulating foreign investment in residential real estate, which will further enable stronger enforcement, audit and compliance of the existing rules. The bill also enables the lowering of screening thresholds for investments in Australian agriculture to ensure significant investments in this sector are actually scrutinised.

The Register of Foreign Ownership of Agricultural Land Bill 2015 complements these changes by establishing a register of foreign ownership operated by the Australian Taxation Office. Foreign investors are required to register essential information about their existing holdings and subsequent acquisitions of Australian agricultural land, providing greater transparency around foreign investment in agriculture.

The Australian government welcomes good foreign investment because, as I said earlier, it certainly plays an important and beneficial role in the Australian economy. Good foreign investment provides additional capital for economic growth, creates employment opportunities, improves consumer choice and promotes healthy competition while increasing Australia's competitiveness in global markets. We just simply need to be able to tell the difference. That is what these bills before the House do. I support the bills as presented.

Kelly O'Dwyer (Higgins, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

It gives me great satisfaction to rise today to speak on the government's legislative package that will strengthen Australia's foreign investment framework, enabling our current foreign investment rules to be properly enforced and providing greater transparency on the actual levels of foreign investment in land and residential real estate than ever before. Australia welcomes foreign capital and has always had a liberal regime that encourages investment unless contrary to the national interest. Foreign investment has played a vital role in the development of our modern and successful society and recognises that this will continue to be the case in the future. It is because we understand the benefits to our nation and to our region of open markets that this government is delivering the three North Asian free trade agreements, which independent analysis demonstrates will boost our economy by $2.4 billion every year for the next 20 years.

In 2013-14, there were 25,005 applications to the Foreign Investment Review Board, worth a total of $167 billion of investment into our country. When one excludes the residential real estate sector, only three applications were rejected in 2013-14. Against this context of welcomed investment, it has long been recognised that certain sectors were more sensitive and therefore subject to greater government scrutiny. Residential real estate is one such sector, and there is good reason for that. Homeownership—and the related issues of housing supply, investment and ultimately affordability—remains integral to the Australian dream. There is a sensible and reasonable rationale behind this personal aspiration. In truth, the availability of housing is fundamental to our wellbeing. It begins with the need to find stable, affordable shelter and follows a spectrum through to those that are in the market to purchase expensive accommodation. Whilst housing fulfils our basic need for shelter, it is ideally, and in reality for most Australians, so much more than that. It underscores our personal security and health; informs our sense of self through connection to family, friends, neighbourhood and community; and underscores our personal security. Housing underpins our financial security through access to services and work. For the majority of Australians who own their own home, it is their largest single asset and the physical and financial foundation from which they provide for their own families and those of the next generation. In Australia today the total estimated value of residential dwellings is around $5.4 trillion.

As the Parliamentary Secretary to the Treasurer I take special interest in housing affordability and believe that it underpins the wellbeing and capacity of every individual and family. These bills before the House will harness the benefits of foreign investment into residential real estate, ensuring that they continue to benefit Australians. In essence these bills seek to achieve the following four aims: to reinforce our longstanding focus on channelling foreign investment into increasing the overall supply of residential real estate through the construction of new dwellings for Australians to build, buy and rent; to improve the monitoring, compliance and ultimately enforcement of the rules surrounding foreign investment in real estate and to ensure that those who do flout these longstanding rules are dealt with commensurately and appropriately; to provide far greater scrutiny and clarity on the level of foreign ownership of land in Australia, both agriculture and residential, so that, as we move into this century, future Australian governments will be able to base their policies on holistic and accurate data rather than on piecemeal statistics or anecdote; and, finally, to provide a predictable and modern environment for investors.

My involvement in this policy area first began when, in March 2014, the Treasurer asked the House of Representatives Standing Committee on Economics, of which I was chair, to examine Australia's foreign investment policy as it applies to residential property, with its intended aim of increasing Australia's housing stock, and examine the economic benefits of the policy and its administration. The committee conducted six public hearings and received 92 submissions from organisations and individuals from across the country.

The committee's unanimous report made four key findings and 12 common-sense recommendations to government. The first finding was of the absence of timely and accurate data as to the true level of foreign investment in residential real estate. The Foreign Investment Review Board tracks applications to purchase but not actual transactions or compliance with the requirement to seek approval prior to purchase. The simple truth is that no-one actually knows the level of foreign ownership of residential or agricultural property in Australia.

The second finding was that, while all foreign persons are required to seek approval prior to purchasing property, monitoring, compliance and enforcement had been entirely insufficient to provide any level of confidence in overall adherence to the rules. The committee discovered that over the life of the previous government not one divestment order for illegally acquired property was issued nor one court action undertaken. It defies credibility that all foreign investors were compliant or indeed had cooperated with the foreign investment regime for this entire period. By comparison, 17 divestment orders were made between 2003 and 2007, at a time when foreign investment in Australia's residential real estate was at much lower levels.

I must say that compliance activity was further undermined by the previous government, who in 2008—under the then Assistant Treasurer, now shadow Treasurer, the member for McMahon—removed the requirement for temporary residents to notify FIRB of all residential purchases. This change caused damage—most likely to compliance with the legal conditions under which temporary residents are able to purchase a single home while in Australia, and certainly to the Foreign Investment Review Board's capacity to effectively monitor and enforce these conditions. It also sent a powerful message that the then government was not interested in ensuring that the rules were enforced. The member for McMahon's successor, Senator the Hon. Nick Sherry, recognised the ALP's error and reversed this policy change. In a media release he detailed a number of measures to improve monitoring and enforcement in the lead-up to the 2010 election. Regrettably, most of those announced measures remained just words and were not pursued by Senator Sherry's successor, the Hon. Bill Shorten, or by any of the subsequent assistant treasurers in the last Labor government.

If you are not prepared to enforce the rules then it is less likely that people will comply with the rules. This is especially true if the consequences of a breach are neither sufficiently adverse nor commensurate to the act. And, as a result, the committee's third key finding was that new, more flexible and ultimately stricter penalties were necessary for adequate enforcement. Finally, the committee found that the reliance on the Australian taxpayer to foot the bill had handicapped Australia's foreign investment regime by contributing to underinvestment in audit, compliance and enforcement activities.

I am delighted that the government accepted all of the committee's recommendations, and the legislation today acts upon their intent. From 1 December 2015, Australia's foreign investment framework will be simpler, more modern and far more effective. Our foreign investment rules have not been substantially revised since they were first introduced in 1975. The legislation today will ensure that the regime keeps pace with the development of international investment and capital and will place our nation in a strong position to monitor and enforce existing rules.

The government has already made strong progress on this issue. To encourage those in breach to self-report, the government has provided a moratorium on criminal sanctions for those who volunteer their illegal behaviour and they are given a longer period of time to divest their property—12 months rather than the usual three months. Concurrently, the Australian Taxation Office has begun using their sophisticated and extensive data-matching technology to crossmatch ATO data against data held by the Department of Immigration and Border Protection, the Australian Transaction Reports and Analysis Centre, AUSTRAC, amongst others. No-one who is breaking the rules should be under any illusion. If you do not come forward to the Australian government, the Australian government will come to you.

In addition to the five concessional divestments announced yesterday, the Treasurer has also required the divestment of six illegally held properties and has issued a formal divestment order to the owners of a Point Piper property earlier this year. This was the first divestment order issued in about 10 years. So since March of this year, under this government 12 divestment orders have been issued.

With the introduction of the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, changes will be made to simplify the system and strengthen the framework and ensure the rules are enforced. The bill introduces a range of new and stricter penalties that will enable breaches to be dealt with according to the severity of the breach. The existing criminal penalties will be increased from $90,000 to $135,000 for individuals and from $450,000 to $675,000 for companies. These will be supplemented by civil pecuniary penalties and infringement notices for less serious breaches of the residential real estate rules. For the very first time, third parties such as real estate agents, migration agents, conveyancers and lawyers who knowingly assist a foreign investor to breach the rules will also now be subject to both civil and criminal penalties.

Lastly, this legislation will close outrageous loopholes that have seen those people who have illegally purchased property, and required to divest, able to keep the capital gain. The foreign acquisitions bill delivers on the government's commitment to lower the screening thresholds for investments in Australian agriculture. Since 1 March 2015, the screening threshold for foreign purchases of agricultural land has been lowered from $252 million to $15 million based on the cumulative value of agricultural land owned by that investor. The government is also introducing a $55 million threshold for direct interests in agribusinesses from 1 December 2015. With this measure, Australians can be assured that investments into agriculture will be scrutinised to ensure that they are not contrary to our national interest.

As part of the first major review, this bill includes a package of long overdue amendments that will modernise the regime by reducing unnecessary red tape. In particular, this bill includes raising the substantial interest threshold from 15 to 20 per cent to align the foreign investment framework with the takeover rules in the Corporations Act 2001.

The Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 enables the adequate resourcing of monitoring and enforcement of the foreign investment regime. No longer will the Australian taxpayer fund the cost of administering the regime. The imposition bill introduces fees on all foreign investment applications from 1 December 2015. For example, fees for residential properties valued at $1 million or less will be $5,000 and $10,000 for property over $1 million, increasing in $10,000 increments for every million dollars thereafter.

Applications fees will also apply to commercial real estate, business and agriculture applications. These fees will ensure that the Australian taxpayer will no longer fund the administration of the system, whilst providing additional resourcing to Treasury and the ATO to undertake their activities.

The final bill is the Register of Foreign Ownership of Agricultural Land Bill 2015. This register will provide information such as the location and size of the property and size of the interest acquired, and will enable better transparency around foreign investment into Australia's agricultural sector. All existing holdings of agricultural land held in foreign ownership must be registered with the ATO by 31 December 2015, with new interests subsequently registered within 30 days.

The government is also actively working with the states and territories to use their land titles data to expand the register so that it includes all types of land, including residential real estate, in the future. For the first time, this will enable a clear picture of the levels of foreign investment in residential real estate by capturing real transaction data. This empirical data will separate fact from fiction and enable policy formation on empirical data rather than 'best guestimate.'

There is no doubt that overseas investment has contributed to our nation's standard of living and represents an enormous opportunity for investment in Australia's future. We welcome foreign investment. With these bills, Australia will continue to welcome this essential foreign capital and ensure we remain best placed to harness this opportunity, deriving the maximum benefit possible for all Australians for generations to come. I commend these bills to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.