University Assignment: Foreign Investment and Australian Taxation Law

This report delves into the complexities of Australian taxation law as it pertains to foreign investment, particularly within the agricultural sector. It begins by defining 'foreigners' under the Income Tax Assessment Act 1936 (Cth) and the Foreign Acquisition and Takeover Act 1975, outlining the requirements for foreign entities investing in agricultural land and water entitlements, including the need for FIRB approval and registration with the Australian Taxation Office. The report then examines the tax treatments applied to foreign investors, contrasting them with those of Australian residents, and discusses the implications of these treatments, including transfer pricing regimes and potential tax avoidance strategies. It also explores the concerns surrounding the competitive advantages of foreign enterprises and the minimization schemes employed by international companies. The report concludes by offering recommendations for addressing these issues, such as eradicating differences in tax policies and promoting uniformity within tax regimes, to ensure fair competition and appropriate tax revenue collection. The analysis is supported by a review of relevant literature and legislation, providing a comprehensive overview of the topic.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

1TAXATION LAW
Introduction
The investment in Australian agricultural sector has gained a considerable amount of
debates. Several concerns have been brought about regarding the approval with respect to the
foreign investment in the agricultural sector of Australia. The concerned mostly lies within
the area of accountability as well as transparency of the parties related. This issue has
invoked certain public concerns as well regarding the viability of such approval in
agricultural sector. However, from the perspective of the prosperity of Australia, the foreign
investments are having utmost importance1. This is because it assists the economy of
Australia and enhance the wellbeing of the population of Australia by providing support to
the financial growth of the country. For the purpose of making an investment in the
residential estate, the agricultural land as well as the water entitlements, a person being a
foreign person need to make an application to the Foreign Investment Review Board (FIRB)
for the purpose of registering the Investments with the Australian taxation office2. This
research paper would strive to analyse the tax treatments as well as the implications of the
same towards the foreigners who have been investing in the Australian agricultural
businesses. In doing the same, this paper would address the definition of foreigners as per the
taxation law prevailing in Australia. It will identify the tax treatment that are different for
foreigners and will present comparison between the same to that of the residents of Australia.
This paper would also suggest the treatments to was the foreigners that can be identified as an
implication. It will strive to provide certain recommendations with respect to the prevailing
law reforms relevant to this topic.
1 Kingwell, Ross, and Peter White. "Implications for Australia." (2018).
2 Ruth Sippel, Sarah. "Financialising farming as a moral imperative? Renegotiating the legitimacy of land
investments in Australia." (2018) Environment and Planning A: Economy and Space 50.3: 549-568.

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Discussion
For the purpose of determining the tax treatments as well as implications with respect to
the foreigners investing in Australia towards the agricultural sector, the meaning of the term
foreigners is required to be assessed in the sense it is used in the Australian taxation law. Any
individual who cannot be treated as a resident in Australia as per the provisions contained in s
6-1 of the Income Tax Assessment Act 1936 (Cth)3, would be treated as a foreigner in
Australia for the purpose of taxation4. Any person who is foreigner for the purpose of
taxation in Australia would not be subject to taxation in Australia until and unless it has been
made evident that he has been earning from a source within the territory of Australia. Any
source of income located within Australia would result in the income being subject to
taxation in Australia only irrespective of the residency of the person earning the same. This
requires all the investments made by the foreigners within the precincts of Australia to be
subjected to taxation in Australia5. This would also be applicable towards the non-residents of
Australia. For the purpose of making an investment in the residential estate, the agricultural
land as well as the water entitlements, a person being a foreign person need to make an
application to the Foreign Investment Review Board (FIRB) for the purpose of registering the
Investments with the Australian taxation office6.
Definition of Foreigners
In case any foreign individual is having the desire to make an investment in the
agricultural land located within Australia, he needs to apply for an approval from the FIRB
prior investing. Moreover, a registration in relation to land and water needs to be completed
3 The Income Tax Assessment Act 1936 (Cth), s 6.1
4 Dixon, Janine, and Jason Nassios. "A Dynamic Economy-wide Analysis of Company Tax Cuts in Australia."
(2018).
5 Sippel, Sarah Ruth, Nicolette Larder, and Geoffrey Lawrence. "Grounding the financialization of farmland:
perspectives on financial actors as new land owners in rural Australia." (2017) Agriculture and Human Values
34.2: 251-265.
6 Magnan, André. "The financialization of agri-food in Canada and Australia: Corporate farmland and farm
ownership in the grains and oilseed sector." (2015) Journal of Rural Studies 41: 1-12.

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immediately after the investment has been made. As per the provisions contained in s 4 of the
Foreign Acquisition and Takeover Act 19757, certain elements need to be satisfied for the
purpose of rendering a person to be a foreign person in the territory of Australia for the
purpose of foreign investment8. A foreigner needs to be an individual who is not an ordinary
resident in the territory of Australia. In case of a corporation, if a person who is not an
ordinary resident in Australia or a corporation of foreign nature or any foreign government
has interest of substantial nature over that Corporation would render the whole Corporation to
be a foreign individual for the purpose of investment. A foreign government making
investments within the territory of Australia would be treated as a foreigner for the purpose of
taxation with respect to any income accrued through such an investment9.
Tax Treatments
The foreign companies registered within the territory of Australia and owning the
Australian Business Number are required to be considered as companies, which are resident
in Australia. From the perspective of treasury, any company having a turnover exceeding 250
million dollars in a particular year would be treated as a large company. In the present times,
only a handful of the companies having a large scale operations has been operating within the
agricultural sector in Australia. As per the assessment of the treasury, in the year 2010/11, 83
non-resident entities have been operating in the agricultural sector in the country. Around 65
of these companies have been found to be private companies10. Among these companies four
of them were public companies and the other 14 for joint ventures. On the other hand, the
Australian companies involved with the agricultural sectors are more than sixteen thousand in
7 The Foreign Acquisition and Takeover Act 1975
8 Sippel, Sarah Ruth. "Food security or commercial business? Gulf State investments in Australian agriculture."
(2015) The Journal of Peasant Studies 42.5: 981-1001.
9 Xiao, Lin. "Investment and Supervision Systems in SFTZ." (2016) National Test. Springer, Singapore,. 99-
132.
10 Fan, Di, et al. "Localized learning by emerging multinational enterprises in developed host countries: A fuzzy-
set analysis of Chinese foreign direct investment in Australia." (2016) International Business Review 25.1: 187-
203.

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number. This depicts a negligible percentage of the non-residents to be involved in the
agricultural sector in Australia as compared to the total number of Companies. There has
been no uniformity with respect to the taxation of the incomes, which includes royalties,
interests and dividends pertaining to foreign enterprises which also covers foreign SEOs. The
reason behind such a lack of uniformity is going to the stipulation of bilateral free trade
agreements and agreements of double taxation in Australia. The sole factor governing the
taxation of the profits accrued from business is the existence of a permanent establishment or
a branch. The agreement specifies that any business profit of a foreign country will only be
subjected to taxation in Australia if the enterprise has perform the business affairs building
profit through the establishment of permanent nature located within the territory of Australia
and the profits are directly attributable to that permanent establishment11.
There is an extent of apprehension with respect to community that the enterprises of
foreign origin have respect to the competitive benefits over the enterprises of domestic nature
for the purpose of operating business. There has been a controversy that has been presented
by recent media articles in Australia with respect to the concern of minimization of schemes
that has been pursued by the international companies, which includes foreign SOEs. It has
been discovered from the interim report upon the national interest test of the FIRB by the
Senate Rural and Regional Affairs and Transport References Committee that the foreign
investors can utilise several mechanism for curbing their tax liability within Australia. Such a
measure would include creation of substitution of a death for the purpose of extracting the
additional income out of the territory of Australia to be located in a low tax jurisdiction.
Additionally, foreign entities used in arrangement where assets belonging to a company
operating overseas has been purchased via Australia true and entity of foreign nature utilising
the subsidiary de control in Australia. The conclusive evidence that has been made available
11 Rogers, Dallas, Chyi Lin Lee, and Ding Yan. "The politics of foreign investment in Australian housing:
Chinese investors, translocal sales agents and local resistance." (2015) Housing Studies 30.5: 730-748.

5TAXATION LAW
to the committee has suggested towards the entities owned by the foreign government that
has been making Investments within Australia as well as conducting exports with respect to
non-commercial purposes could avail the benefit of non-payment of taxes within Australia.
The committee has expressed its disregard its comments regarding structure possibility. This
is because and ambiguous possibility needs to be supported by the explanation as to the
reason behind search your leakage of tax revenue from the foreign Investments12.
Implications of the Identified Treatments to Foreigners
The Income Tax Assessment Act 1997 (Cth) controls the regimes transfer pricing. The
main intention underlying such a legislation was to make the foreign companies to abstain
from shifting their profit arbitrary to overseas. The concern of treating non-commercial
agricultural production by Foreign SOEs within Australia in a different manner would assist
in the process of tax avoidance. The agricultural sector in Australia is well equipped for the
purpose of satisfying the challenges that has been composed by the growth in the food
requirement in the world13. The global companies as well as financial intermediaries
connected with them have been increasingly acquiring stakes within this sector with the
expansion in the market opportunities. This has post a constant within the regulator of
Australia to deal with the question of handling such companies in the best man of the purpose
of ensuring the appropriate volume of tax payment being made on their income within
Australia14.
12 www.aph.gov.au, "Foreign Investment In Australian Agriculture – Parliament Of Australia", Aph.Gov.Au
(Webpage, 2019) <https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/rp/rp1314/ForeignInvest#_Toc379968403>.
13 Plunkett, Bradley. "PrimeAg Australia 2007-13: A Suitable Structure for Long Term Investment in
Agriculture?." Plunkett, B (2015): 2007-13.
14 www.ato.gov.au, "Investing Overseas", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/individuals/international-tax-for-individuals/investing-overseas/#targetText=As%20an
%20Australian%20resident%20you,income%20tax%20offset%20in%20Australia.>.

6TAXATION LAW
Recommendations
There has been a controversy that has been presented by recent media articles in Australia
with respect to the concern of minimization of schemes that has been pursued by the
international companies, which includes foreign SOEs. It has been discovered from the
interim report upon the national interest test of the FIRB by the Senate Rural and Regional
Affairs and Transport References Committee that the foreign investors can utilise several
mechanism for curbing their tax liability within Australia. It has been discovered from the
interim report upon the national interest test of the FIRB by the Senate Rural and Regional
Affairs and Transport References Committee that the foreign investors can utilise several
mechanism for curbing their tax liability within Australia. Such a measure would include
creation of substitution of a death for the purpose of extracting the additional income out of
the territory of Australia to be located in a low tax jurisdiction. This needs to be stopped by
the eradication of the differences in the tax policies that has been assisting such tax fiascos.
Moreover, there has been a uniformity within the tax regimes applicable to the entities who
have been involved with the agricultural businesses irrespective of the origin of that entity.
This would promote a healthy competition and remove the excessive burden upon the entities
of domestic origin.

7TAXATION LAW
Bibliography
Dixon, Janine, and Jason Nassios. "A Dynamic Economy-wide Analysis of Company Tax
Cuts in Australia." (2018).
Kingwell, Ross, and Peter White. "Implications for Australia." (2018).
Magnan, André. "The financialization of agri-food in Canada and Australia: Corporate
farmland and farm ownership in the grains and oilseed sector." (2015) Journal of Rural
Studies 41: 1-12.
Plunkett, Bradley. "PrimeAg Australia 2007-13: A Suitable Structure for Long Term
Investment in Agriculture?." Plunkett, B (2015): 2007-13.
Rogers, Dallas, Chyi Lin Lee, and Ding Yan. "The politics of foreign investment in
Australian housing: Chinese investors, translocal sales agents and local resistance." (2015)
Housing Studies 30.5: 730-748.
Ruth Sippel, Sarah. "Financialising farming as a moral imperative? Renegotiating the
legitimacy of land investments in Australia." (2018) Environment and Planning A: Economy
and Space 50.3: 549-568.
Sippel, Sarah Ruth, Nicolette Larder, and Geoffrey Lawrence. "Grounding the
financialization of farmland: perspectives on financial actors as new land owners in rural
Australia." (2017) Agriculture and Human Values 34.2: 251-265.
Sippel, Sarah Ruth. "Food security or commercial business? Gulf State investments in
Australian agriculture." (2015) The Journal of Peasant Studies 42.5: 981-1001.
The Foreign Acquisition and Takeover Act 1975

8TAXATION LAW
The Income Tax Assessment Act 1936 (Cth)
www.aph.gov.au, "Foreign Investment In Australian Agriculture – Parliament Of Australia",
Aph.Gov.Au (Webpage, 2019)
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/rp/rp1314/ForeignInvest#_Toc379968403
www.ato.gov.au, "Investing Overseas", Ato.Gov.Au (Webpage, 2019)
https://www.ato.gov.au/individuals/international-tax-for-individuals/investing-overseas/
#targetText=As%20an%20Australian%20resident%20you,income%20tax%20offset%20in
%20Australia.
Xiao, Lin. "Investment and Supervision Systems in SFTZ." (2016) National Test. Springer,
Singapore,. 99-132.