Foreign investors risk Australian assets in Morrison crackdown as new tax rules apply

FOREIGN investors could be stripped of their Australian assets if found to have deliberately shifted profits offshore to avoid paying tax.

For the first time new tax rules will be imposed on large multinational companies buying into Australia, forcing them to either pay tax on their local earnings or pack up and leave.

The new requirements will give the Treasurer power to impose multimillion-dollar fines on companies that breach the rules, or even force divestment by stripping the company of Australian assets.

Foreign bidders for the NSW government’s electricity assets will now face the new rules. Foreign bids for large pastoral leases will also be captured, as will any other large-scale investment.

The rules will be triggered by the Foreign Investment Review Board assessing any foreign company — mostly large multinational corporations — that seeks to invest or take over existing Australian companies or assets. The companies would be forced to adhere to Australian Taxation Office rules as a condition of approval.

So far the federal government has forced the divestment of 27 properties with a total value of $76 million purchased illegally by foreign nationals.

The new rules seek to go further than just property investment and will target large multinational companies seeking to invest in Australia.

Although not designed primarily as a revenue-raising measure by the federal government, the new rules would be expected to bring in millions in annual tax revenue which would otherwise go offshore.

Labor has already promised to impose new tax avoidance rules on multinational companies. The opposition claims its policy would raise $7 billion over the next 10 years.

“The government is committed to ensuring companies operating in Australia pay tax on their Australian earnings,” Treasurer Scott Morrison said.

“Where companies fail to do so I will have powers to take action, including ordering divestment of Australian assets.

“A breach of these conditions could result in prosecution, fines and potentially divestment of the asset.’’

The new ATO requirements follow recent changes to the FIRB that requires it to now also risk-assess national security and defence implications, after US anger over the Darwin Port sale to a Chinese firm.

“Foreign investment applications will have to comply with tax law (and) ATO directions to provide information in relation to the investment, and advise the ATO if investors enter into any transactions with non-residents to which transfer pricing or anti-avoidance measures of tax law may potentially apply,” Mr Morrison said.