Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Wong. Virgin Australia recently announced a corporate restructuring that separates its domestic operation from its international operation. The apparent intention is to allow greater foreign investment without testing the limits of 49 per cent foreign ownership limit for Australian designated international airlines. I note that Qantas has lodged an objection to the Virgin Australia proposal with the International Air Services Commission. Minister, is it possible to avoid foreign ownership limitations of Australian designated international airlines by the creation of elaborate corporate structures? Also, is the foreign ownership test applied to the total investment in all of the associated entities—that is, the consolidated business group—or is it applied to each entity separately?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank Senator Xenophon for the question. I will give him a response and, if there are further issues which I am not able to address in the time frame, I am happy to arrange for a more detailed briefing. First, as a general proposition, he would be aware that foreign investments that are subject to the Foreign Acquisitions and Takeovers Act or the government's foreign investment policy are examined against the national interest. The concept of national interest embodies a number of elements including considerations of issues such as national security, community interests and economic, development, competition and environmental issues.

In terms of the FIRB approval process, the government does not publicly comment or speculate on issues involving any particular foreign investment proposal, not even to comment on whether a specific proposal has been received. This is a longstanding practice of ministers. However, as I understand, the question in part relates to the 49 per cent foreign ownership limit for Australian designated international airlines, which is a specific issue with its own specific rules. I am advised that Virgin's international airlines will be restricted to 49 per cent foreign ownership and the constitution of the new company will contain provisions that require the selldown of foreign interests should they breach the 49 per cent limit.

I am also advised that all Australian companies subject to foreign ownership restrictions are required to comply with ASX rules including to notify the ASX if they come within five per cent of the relevant restriction. If unacceptable ownership of Virgin's international business arises, the government would obviously consider exercising its powers to prevent it. Provisions relating to ownership and control of Virgin are also enforced through the regulatory process such as the system of international airline licences.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Mr President, I have supplementary question. In relation to the government's understanding of the rules that apply to Australian designated international airlines, does the government consider the beneficial ownership of a holding company and does it flow down under the control provisions to its associated entities including subsidiaries? Wouldn't such a corporate restructure by Virgin Australia act to increase the overall level of foreign investment in the various parts of its consolidated business group?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I suspect at least some of that is asking me for a legal opinion and I am not in a position to give that—partly because of the standing orders and also because I do not know the answer, to be frank. But I would say this—

Concetta Fierravanti-Wells (NSW, Liberal Party, Shadow Minister for Ageing) Share this | Link to this | Hansard source

That's the best answer you've given in a long time!

Opposition senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

Order! Senator Wong, ignore the interjections.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I referenced in the previous answer international airline licences. I am advised the Department of Infrastructure and Transport monitors ongoing compliance with those requirements. I am also advised that as long as Virgin Australia's international airline continues to comply with the provisions of the act—here I am talking about the Air Navigation Act—it is free to structure its domestic operations as it sees fit. Virgin, I understand, has said there will be no job losses as a result of its decision and it will not affect the day-to-day running of its international and domestic airlines. As I said, I have invited Senator Xenophon to a briefing if he has more detailed questions on some of those issues. I would be happy to arrange for such a briefing.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Mr President, I have a second supplementary question. I would not dare ask the minister for legal advice, but I would like some policy positions from the government. For instance, if an Australian airline—for example, Tiger Airways Australia—invests in another company that is subject to foreign ownership restrictions, is that investment treated as an Australian investment because it is owned by an Australian company, or is it treated as foreign because all of the shares in that company are foreign owned?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

In answering this I am going to be very clear to distinguish between commenting on specific circumstances and commenting on the general. Specifically, it is the case that Tiger Airways is owned by foreign interests and any investment would therefore be treated as foreign investment. As a matter of principle, foreign investments that are subject to the Foreign Acquisitions and Takeovers Act, or the government's foreign investment policy, are examined against the national interest, to which I referred in my primary answer. Again, I say to the senator that we obviously do not comment or publicly speculate on any such specific proposal. To the extent that the question relates to the 49 per cent foreign ownership limit, as opposed to more general rules around foreign ownership, those questions should be properly addressed to the Minister representing the Minister for Infrastructure and Transport.