I begin with looking at the general trend we are now experiencing in Australia:
- The Australian currency has dropped significantly compared to its peak in 2012/2013. This makes the Australian assets significantly “cheaper” to acquire for foreign investors.
- Recently, there is a trend of investors chasing investment with good returns as deposits around the world are not attracting good interest. In Australia, our cash rate is at record low of 1.5%.
- There have been significant increases in interests in Australia agricultural land as the world’s demand for food increases.
Combining these factors, it is no surprise that Australia assets are particularly attractive, especially agricultural land.
Adding to these factors, the State Government of Western Australia and Queensland have made loosen their nomination requirements. It is now much easier for potential business migrant to obtain State support from Western Australia
There may be many reasons why you should invest in Australia, BUT what do you need to know before you invest in Australia?
Australia Consumer Law
You would have looked around trying to find sound and safe investment. You may have been given a lot of information by the seller or broker. The seller will tell you that the business is profitable. They may even promise you that you will fetch very high return on investment. The seller may even be prepared to give you a “guarantee”. But if the business or the assets are performing so well, then you need to ask the question, why are they selling it to you? Is it true that the business is very profitable? Can the investment generate such high return? Is the “guarantee” worth anything? You must take steps to verify this information. The seller is prohibited from giving false information under the Australian Consumer Law. Failure to disclose material information can constitute misleading conduct under the Australian Consumer Law. As a buyer or an investor, you need to ask the relevant factual questions, do your checking and due diligence, and if information given to you is an opinion (as opposed to a fact), it needs to be qualified.
Foreign Investment Review Board
If you are a foreigner looking to acquire assets in Australia, you may be required to first obtain FIRB approval. There are serious consequences for failing to comply with the FIRB requirements. Penalties will be imposed and you may be required to dispose of the asset.
Your sale and purchase contract must state that it is subject to FIRB approval, failing which your contract is actually unlawful and unenforceable. As a foreign investor, you are also required to enter your interest in the land register. Please beware, these requirements are mandatory!
Sale and Purchase Contract
In Western Australia, the sale and purchase contract for land is standardised and it is commonly known as “Contract for Sale and Purchase of Property by Offer and Acceptance”.
The practice is that as buyer, you make a written offer. But did you know that once your written offer is accepted by the seller, a formal contract is immediately formed and your “written offer” becomes a formal binding contract! The written offer is not merely a document to express your purchase price. Be aware, it is in fact a legal document!
Moreover, in Western Australia, there is no “cooling off” period. Once a contract is formed, you are under contractual obligations to perform.
The best way to protect your investment is to have control over it. You may have invested millions of dollars into a company and you own the assets, but how much control do you have over your investment if you do not have the management rights? As a shareholder of a company, you actually have very limited control over the affairs of the company as it is managed by board of directors (not shareholders)?
Before you invest, you need to consider how to structure the investment transaction so as to preserve your control over your capital.
The tax system in Australia is very comprehensive and highly complex. Before you invest, you should obtain tax advice from accountants to avoid adverse implications. Plan your tax ahead!
The Spirit of Contracts
In Australia, we respect contracts. It is not just a piece of paper. It is the parties’ legal rights and obligations. Litigation in Australia is very common when a party breaches the contract.
Do not simply sign on legal documents or make promises. Once you make a contractual promise, you will need to deliver your promise. It would be wise to get legal advice before you lock yourself into a contract to invest.
Australia legal system is comprehensive, mature and highly complex. Be aware and respect the law!
ABOUT THE WRITER
Kelvin has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing service on Commercial Law, Dispute Resolution & Litigation, Family Law, Wills & Estate Planning and Settlements.