Australia – An Innovative Agenda?

Australia’s government tightens foreign investment laws for housing and land and introduces a National Innovation and Science Agenda to encourage innovation in business and schools.

The second half of 2015 saw significant changes to Australia’s foreign investment framework come into effect, along with the government making an innovation statement which committed $1 billion over the next four years to foster and develop new ideas and new businesses in Australia. To near universal approbation, the new prime minister’s Innovation Agenda has been embraced by all sides of the political spectrum which hopes to attract ideas, entrepreneurs and ultimately create more jobs.

Changes in foreign investment rules
In late November the government successfully negotiated passage through the senate for the legislation amending the foreign investment rules. These changes, which were passed with the help of the Australian Greens, are in part a response to significant community concern about elements of foreign investment and, specifically, foreign investment into residential housing and agricultural land. The proposed changes include:

• The transfer of all administration of foreign investment rules as they relate to residential real estate from the Foreign Investment Review Board (“FIRB”) to the Australian Taxation Office (“ATO”). This is in response to community, and government, concern that the FIRB is not adequately resourced and/or unable to enforce the current laws governing investment into residential property.
• Stricter penalties will be imposed, with criminal penalties increased and third parties who knowingly assist a foreign investor to breach rules now also being subject to penalties.
• Application fees will now be imposed on all foreign investment applications which start from $5,000 for a residential property valued at $1 million or less, with higher fees imposed for business, agriculture and commercial real estate applications.
• A comprehensive, public land register will be established along with lowering the screening threshold for investments in agribusiness to $55 million and lowering the screening threshold for agricultural land to $15 million or where an investor’s overall portfolio of land is worth $15 million or more. Again, this is in response to community concern over the lack of transparency of land ownership, although it is important to note that clauses of Australia’s free trade agreements with New Zealand, Chile, Singapore, Thailand and the United States provide for higher thresholds than this.
• The government will establish a public register of foreign owned land and of foreign owned water entitlements.

Prior to this legislation passing, the ATO has already taken over the FIRB responsibility for residential housing and, indeed, the Government has publicly said that over 195 homes are currently under investigation and over 60 investigators have been assigned to enhance the ATO’s capabilities to prosecute those who are not complying with the rules.

The Innovation Agenda
In early December the new Malcolm Turnbull lead Government unveiled a significant package of measures designed to encourage entrepreneurship and the establishment of new and innovative businesses.
The package is wide ranging with incentives being put in place in a significant number of areas and some key laws being amended to promote risk taking. Some of the key elements are:

• the establishment of a $200 million innovation fund to co-invest in businesses that develop technology from the CSIRO (Commonwealth Scientific and Industrial Research Organisation) and Australian universities
• the establishment of a $250 million Biomedical Translation Fund to co-invest with the private sector to commercialise medical research
• guaranteed funding of at least $150 million per year to the National Collaborative Research Infrastructure Scheme (“NCRIS”) which supports 1,700 scientists
• changes to university funding criteria to encourage greater collaboration with business to develop ideas along with an additional $127 million in research grants over the next four years
• the introduction of a new 20% income tax rebate for retail investors in start-ups, limited to $200,000 per investor per year
• amendments to insolvency and bankruptcy laws which will be relaxed for start-up enterprises and the default bankruptcy period being reduced from 3 years to 1 along with the banning of “ipso facto” contractual clauses which allow an agreement to be terminated solely due to insolvency
• the introduction of a new visa category to entice entrepreneurs and tech-skilled workers to Australia, and offers of permanent residency for high-quality foreign students who graduate in information technology and science, technology, engineering or maths

The Government is hoping these measures generate an ideas boom which will re-position the Australian economy and jump start growth now that the mining boom has come to an end. Given the background of Malcolm Turnbull it is clear to see this is an area he is passionate about and, with the Government recently also changing the rules around crowd funding platforms and other more innovative funding sources, we can expect more announcements from a more nimble and dynamic Government determined to modernise Australia.

These changes are in part a response to significant community concern about elements of foreign investment into residential housing and agricultural land.

Author
Scott Hogan-Smith
scott.hogan-smith@ecovis.com