Treasurer to beef up ATO’s foreign investment tax reviews
Ahead of the national budget release in mid-May, Treasurer Jim Chalmers has announced a stronger foreign investment framework underpinned by enhanced regulatory portfolios.
Treasurer Jim Chalmers said the ATO would be better able to ensure foreign investors are paying their fair share of tax under a proposed foreign investment overhaul.
Announced on Wednesday morning, the Albanese government will reform the nation’s foreign investment framework to make it more attractive for foreign investors and safer for Australia’s national security.
As part of the shakeup, the government will release updated guidance on tax arrangements that will attract “greater scrutiny – such as those that are overly complex.”
Chalmers also said the government would enhance the ATO’s capacity to “assess and ensure foreign investors pay their fair share of tax.”
The reform package, crowned by a stronger and more efficient risk-based approach to case assessment, will complement budgetary efforts to tackle inflation and ongoing cost-of-living challenges.
While cutting inefficiencies, Treasury will lift the hood on its approvals process and clarify its tax integrity expectations in the next few months.
“We processed around 1,500 commercial investment applications in the last year alone and our levels of foreign direct investment have sat above the OECD average since 2006 – boosting innovation, skills development, and helping to drive our prosperity,” wrote Chalmers in an opinion piece published in The Australian Financial Review.
“But increasing uncertainty and the quickening pace of change in the global economy calls for a rethink of foreign investment and reform of our framework.”
The reforms will streamline investment pathways towards the government’s proposed Future Made in Australia manufacturing revamp by fast-tracking approvals for investors with a proven track record.
The Future Made in Australia Act will be underpinned by two investment streams: a “national interest stream” where sovereign capabilities will prioritised, and a “net-zero transformation stream” which will direct funding towards decarbonising industries.
“Foreign investment has a key role to play in our economy but only if it’s in our national interest,” wrote Chalmers, adding that the risks to Australia’s national interests have increased alongside a growing global race for capital.
The challenge set by the proposal will be making investment pathways more efficient yet more robust and compliant.
The risk-based approach, he said, will strengthen national security by beefing up Treasury’s foreign investment compliance team, including a new ability to undertake on-site visits to complement the Treasurer’s review powers.
Paperwork for repeat investors will be reduced where ownership information has not been updated since their prior investment applications while consultation timeframes will be shortened.
Treasury will aim to process 50 per cent of investment application cases within 30 days from 1 January 2025 while application fees will be refunded for unsuccessful bidders.
Hours after announcing the foreign investment reforms, Chalmers took the defensive position against claims the Future Made in Australia plans risked making industries dependent on the government’s subsidies absent a clear exit strategy.
Productivity Commission chair Danielle Wood and former Prime Minister John Howard have been among the loudest voices pleading the opposition case.
Howard said the industrial policy was a kind of “new protectionism” that failed to do the heavy lifting of reducing business red tape and modernising industrial relations while inappropriately fuelling government spending.
“The Prime Minister and his Treasurer have claimed that their new policy is all about building foundations. If they were serious about stronger foundations, they would reform and not further tighten our industrial relations system,” wrote Howard for The Australian.
“They would lighten, not increase, the regulatory burden on risk takers.”
While the foreign investment shakeup is designed to go some way in cutting red tape, stronger compliance measures and directed investment pathways continue to turn heads.
Chalmers said on Wednesday that the government would get “value for money,” adding the plan is “not about manufacturing the past, it’s about powering the future, it’s about making ourselves an indispensable part of the global net zero transformation.”
“By providing more clarity around sensitive sectors and assets, our reforms will give businesses and investors greater certainty, while safeguarding our national security,” he wrote.
“Australia welcomes foreign investment, and it is a big part of Australia’s economic success, but only when it’s in our broader national interest.”
