The FIRB guidelines as to the matters which it will take into consideration include the impact of a foreign investment proposal on Australian tax revenues.
Prior to the G20 summit, the Treasurer Joe Hockey issued a clear warning to foreign investors seeking to manage their Australian tax liabilities and what such actions may mean for decisions made in the national interest.
FIRB has issued seven investor obligations, two of which include:
- observation and understanding of the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises
- the meeting of all obligations imposed under Australian taxation law and co-operation with the Australian Taxation Office (ATO) including reporting requirements in a timely and complete manner. Thin capitalisation and transfer pricing are identified as particular areas of relevance.
Recently, FIRB has requested the following documents from foreign investors investing into Australia:
- summary of the tax outcome post-acquisition, including the consolidation steps
- a comparison of the financial outcome prior to and after the acquisitions
- in the context of a singular acquisition, the tax advice solicited by the foreign investor.
Consequences for foreign investors contemplating an acquisition, divestment or restructure may include:
- a referral to the ATO for consideration
- a condition of FIRB approval that a ruling is obtained on a particular issue
- a request that advice obtained from advisers is submitted to FIRB, irrespective of any claims of legal professional privilege.
The ATO has historically worked with FIRB to assess tax implications of material foreign investments and whilst Mr Hockey’s comments do not indicate a change of policy, it and recent requests from FIRB, signal increased scrutiny.