By Colin Packman
A Chinese investment firm has won approval to buy Australia’s oldest dairy farm, making it the first overseas company to be subject to new rules aimed at ensuring foreign companies pay tax on their Australian earnings.
The Australian government on Monday introduced new regulations under which foreign investors would have to comply with Australian tax laws and tax office directions to provide information or face sanctions.
Australian Treasurer Scott Morrison on Tuesday approved the $280 million purchase of Tasmania-based Van Diemen’s Land Co by China’s Moon Lake Investment.
“It will ensure increased employment and investment in an important industry sector in Tasmania, while the safeguards we have put in place will ensure they pay their tax,” Morrison said in a statement.
Moon Lake will be required to advise the tax office if it enters into any transactions with non-residents to which the transfer pricing or anti-avoidance measures of Australian tax law applies.
Failure to do so could result in prosecution, fines and potentially divestment of the asset, Morrison said.
The rule changes follow pressure to ensure multinational companies are not able to shift profits to low-tax havens to avoid paying more tax in Australia.
Foreign acquisitions of Australian agriculture are also politically sensitive, and to help alleviate concerns Moon Lake said it will honour current supply agreements.
The sale of the Australia’s largest cattle ranch to Chinese firms was blocked in November by Mr Morrison, who said the assets including area the size of South Korea should remain in Australian hands.