English - Mallesons

`
Guide to doing
Business in Australia
2014

AUSTRALIA WELCOMES AND ENCOURAGES
FOREIGN INVESTMENT
“Australia’s long period
of uninterrupted
economic growth
makes it the Iron Man
among the OECD
countries”
Angel Gurria
OECD Secretary-General
OECD Economic Survey of Australia,
14 December 2012
King & Wood Mallesons
and SJ Berwin joined
forces on 1 November
2013 in a world first
combination, confirming
our position as a leading
global law firm.
(see www.kwm.com.)
Australia offers significant
benefits for foreign investors
and has a favourable
investment environment. It has
a resilient and diverse economy
with low inflation; a transparent
and liberal process for approval
of foreign investment; low
barriers to trade and investment
with business-oriented
corporate regulation; a
competitive company tax rate;
and a sizeable domestic market
of 23 million people.
Australia also has a highly
educated, skilled, multi-lingual
and computer-literate labour
force; an emphasis on reform to
maintain the best conditions for
growth and investment; a
business migration program;
and a strategic location in the
Asia-Pacific region together
with an integration with global
markets.
Change of Federal
government
Following the federal election
on 7 September 2013, the
Coalition (of the Liberal and
National parties) will form a
new government. Some of
their policies differ from the
outgoing Labor government
(see www.liberal.org.au),
however, the extent to which
they will be implemented, and
when, is to be determined.
This guide provides a
general, high level outline of
the legal and tax issues
relevant to doing business
in Australia and is current as
at May 2013 (with some
updates). Intending
investors should obtain
specific and detailed
professional advice about
any proposed business
activity in Australia. King &
Wood Mallesons would be
pleased to assist you and
provide further information
on any of the topics in this
guide. See the back cover
of this guide and
www.kwm.com.
The following websites
provide more information
about Australia and doing
business here:
The Australian Government
www.australia.gov.au
AusTrade
www.austrade.gov.au
The Department of Foreign
Affairs and Trade
www.dfat.gov.au
Tourism Australia
www.tourism.australia.com
See also the websites of the
various Chambers of
Commerce and Business
Councils which promote
business between Australia
and the relevant other
country.

CONTENTS
AUSTRALIA WELCOMES AND ENCOURAGES FOREIGN INVESTMENT 1
AUSTRALIA’S SYSTEM OF GOVERNMENT 2
CHOOSING A BUSINESS STRUCTURE 3
FOREIGN COMPANY REGISTRATION 7
MARKETS, REGULATION & GOVERNANCE 10
FOREIGN INVESTMENT REGULATION 18
COMPETITION LAWS 25
BANKING SYSTEM 31
FINANCIAL SERVICES LICENSING REGIME 33
E-BANKING AND PAYMENT SYSTEMS 35
ANTI-MONEY LAUNDERING 37
PERSONAL PROPERTY SECURITIES 38
TAX - OVERVIEW 40
TAX - COMPANIES 41
TAX - TRUSTS 53
TAX - INDIVIDUALS 56
OTHER TAXES - FBT, GST, DUTY AND OTHER TAXES 57
SUSTAINABILITY IN BUSINESS 61
ENERGY AND RESOURCES 66
INTELLECTUAL PROPERTY 69
THE DIGITAL ECONOMY AND COMMUNICATIONS 72
PRIVACY / DATA PROCESSING AND SPAM 75
CONSUMER PROTECTION, CONSUMER CREDIT AND PRODUCT LIABILITY 77
LABOUR LAWS 80
INTERNATIONAL TRADE 83
IMPORT / EXPORT REGULATION 84
ENVIRONMENTAL REGULATION 87
NATIVE TITLE AND INDIGENOUS HERITAGE 90
GLOSSARY 94
ABOUT KING & WOOD MALLESONS 96
KING & WOOD MALLESONS’ OFFICES & CONTACTS 97
© King & Wood Mallesons i

AUSTRALIA’S SYSTEM
OF GOVERNMENT
The Commonwealth of Australia is a federation with the following political divisions:
DIVISION
Commonwealth / Federal
State & Territory
Local government
RESPONSIBILITY
Under the Constitution, the Commonwealth Parliament has power to legislate in
relation to a range of subjects including corporations, interstate and
international trade and commerce, taxation, communications, banking,
insurance and industrial disputes.
Subject to Commonwealth laws, the States (New South Wales (NSW), Victoria,
Queensland, South Australia, Western Australia and Tasmania) and the main
Territories (the Australian Capital Territory (ACT) and the Northern Territory)
make laws applying to their own jurisdiction.
Local Councils plan and deliver a range of services to communities. They
provide corporate governance for communities including environmental aspects,
zoning and building approval.
Australia is a democracy and adheres to the principles of responsible government. Australia has federal
constitutional guarantees to protect freedom of interstate commerce and prevent certain government acquisitions
on other than just terms. The ACT and Victoria are the only jurisdictions to have a statutory bill of rights (being the
ACT Human Rights Act and the Victorian Charter of Rights and Responsibilities).
When doing business in Australia, you must consider relevant Commonwealth, State and Territory and local
government laws and regulations. It may also be necessary to take into account the general law developed by the
courts, known as common law.
Change of Federal government
Following the federal election on 7 September 2013, the Coalition (of the
Liberal and National parties) will form a new government. Some of their
policies differ from the outgoing Labor government (see www.liberal.org.au),
however, the extent to which they will be implemented, and when, is yet to
be determined. See also www.kwm.au for legal updates.
© King & Wood Mallesons 2

CHOOSING A BUSINESS
STRUCTURE
Business structures available in Australia include companies, trusts, joint ventures, partnerships and sole traders.
Companies
Businesses may be conducted through a company, which usually confers limited liability on its members. The
legislation governing corporations is the Corporations Act 2001 (Cth) (Corporations Act), an Act of the
Commonwealth Parliament applying in each State and Territory. The operation of this law is overseen by the
Australian Securities & Investments Commission (ASIC). A company limited by shares is the most common form
of business entity in Australia. There are two principal types:
CORPORATIONS
PROPRIETARY (Pty Ltd)
PUBLIC (Limited)
- must have at least one shareholder but no
more than 50 non-employee shareholders
- must have at least one director who is
ordinarily resident in Australia
- can, but need not, have a secretary
- cannot engage in any activity that would
require the lodgement of a prospectus
(except for an offer of shares to existing
shareholder or employees)
- a large proprietary company must appoint
an auditor
- must have a public officer for tax purposes
- must have a registered office in Australia
- must have at least one shareholder
- must have at least three directors (two of
whom are ordinarily residents in Australia)
- must have at least one secretary who is
ordinarily resident in Australia
- subject to securities and other applicable
laws, may issue a prospectus for the offer
of shares, debentures or other securities
- must appoint an auditor
- must have a public officer for tax purposes
- must have a registered office in Australia
- may, but need not, be listed on ASX
Insolvent trading
Ordinarily, companies trade with limited liability. However, a company’s directors and any holding company may
be liable for debts incurred at a time when the company is insolvent and there are reasonable grounds for
Guide to doing business in Australia / kwm.com 3

suspecting it is insolvent or would become insolvent. Further, in certain circumstances, a company director may
also be liable for any outstanding tax related liabilities of the company.
Trusts
A business may also be carried on through a trust. A trustee owns the assets of the business and carries on the
trading activities on behalf of the beneficiaries of the trust. The trustee may be an individual or a corporation.
The type of interest which the beneficiaries have in the profits and assets of the business may vary. Traditionally,
trusts have been divided into fixed trusts, unit trusts and discretionary trusts. Most larger trusts provide for the
beneficiaries to hold units in them, with the entitlements being similar to those attaching to shares in a company
(although there are important differences). Trusts may be private or public. Public trusts can be listed on the
Australian Securities Exchange (ASX).
Managed investment schemes (MIS)
A managed investment scheme is a common trust
structure which allows people to pool funds for a common
purpose in order to make a profit. The contributors to the
fund have no day-to-day control of the scheme. The
trustee for the scheme, called the responsible entity, is
required to hold an Australian financial services licence
(AFSL). If the scheme has more than 20 members, or is
promoted by a person or their associate who is in the
business of promoting managed investment schemes, the
scheme must be registered with ASIC. There are additional compliance and disclosure obligations for a registered
scheme, as well as increased liability for the responsible entity and its officers.
Managed investment trusts (MITs)
A managed investment trust is one structure increasingly being used to facilitate collective investment. The
advantages for foreign investors in using an MIT structure include a reduced rate of withholding tax and the
removal of uncertainty surrounding the tax treatment of certain investments. To be an eligible MIT, the trust must
satisfy a number of conditions.
For further information see Managed Investment Trusts (MITs) in the Tax – Trusts section.
Mutual recognition of managed investment schemes
“Due in large part to its compulsory superannuation
system, Australia boasts the largest pool of funds
under management in the Asia-Pacific region, and
the 4th largest in the world.” 1
King & Wood Mallesons’ Funds teams have advised
on many of the region’s most innovative funds deals.
Australia has entered into mutual recognition arrangements for managed investment schemes with New Zealand,
the United States, Hong Kong and Singapore. The terms of the arrangements vary but the Australian Government
has indicated that it proposes to maximise mutual recognition and develop a framework to promote investment
between jurisdictions, subject to the integrity of the markets and protection of investors.
Foreign schemes regulated by certain authorities 2 may be able to take advantage of ASIC “passport relief” from
AFSL requirements regarding providing financial services to wholesale clients in Australia.
1
2
www.asxgroup.com.au/the-australian-market
Namely the UK Financial Conduct Authority, the US Securities and Exchange Commission, the Federal Reserve and
Office of Comptroller of the Currency, Commodity Futures Trading Commission, the Monetary Authority of
Singapore, the HK Securities and Futures Commission and the German BaFin (Bundesanstalt für
Finanzdienstleistungsaufsicht).
© King & Wood Mallesons 4

ASIC has also made changes to enable interests in certain foreign schemes to be offered to retail clients in
Australia without the need to be registered in Australia. These changes apply to foreign schemes that are
authorised in a foreign jurisdiction recognised by ASIC and which satisfy the applicable conditions.
Joint venture
A venture or project can be carried on by individuals or companies as a joint venture. A joint venture creates a
common enterprise for parties to assist each other with a common goal. Joint ventures can be incorporated
(where the joint venturers are shareholders in a special purpose company) or unincorporated. Unincorporated
joint ventures are not separate legal entities.
Unincorporated joint ventures are governed by the terms of the formal agreement between the joint venturers and
by common law. Such a joint venture is likely to be appropriate where the members associate for a particular
project such as a mining or exploration venture.
The individual or corporate participants in certain unincorporated joint ventures are entitled to lodge separate tax
returns in respect of their portions of the joint venture project and may therefore adopt differing tax treatments for
the income and expenses of the venture or project. For this reason, and to minimise the risk of joint liability, care
must be taken to ensure the joint venture is not a partnership at law or for taxation purposes.
Partnership
A partnership involves two or more individuals or companies carrying on business in common as partners with a
view to profit. Subject to certain exceptions, there cannot be more than 20 partners. Unless the partnership is
conducted in the name of the partners, the name under which it operates must be registered as a business name.
Partnerships are governed by the Partnership Acts of the States and Territories, the terms of the partnership deed
or agreement and the common law. A partnership is not a separate legal entity. The partners are jointly and
individually liable for the debts and obligations of the business. In some States, there is legislation permitting
limited partnerships. This allows some (but not all) partners to have limited liability, but these partners are not
permitted to take an active part in running the business.
Although a partnership is not taxed as a separate taxpayer, the partners are required to lodge a tax return for the
partnership business as well as their individual tax returns. The requirement for a partnership tax return means
the partners are bound by a common approach to the tax treatment of income and expenses of their business.
The tax treatment of limited partnerships is different to that of normal partnerships, and similar to that of
corporations.
Sole trader
An individual may operate a business as a sole trader. Depending on the business arrangements, a sole trader is
usually personally liable for all debts and obligations incurred in the course of the business. The individual may
trade under his or her own name or a registered business name.
Company and business names
Company names are governed by the Corporations Act. Business names are registered independently of
company names. Both are now effective Australia-wide.
An individual or partnership which does not carry on business under its own name or its partners’ names must
register its business name. Business names are governed by the Business Names Registration Act 2011 (Cth)
and are effective Australia-wide. The Corporations Act provides that a registered foreign company must not carry
on business in Australia under a name other than the registered name of the company under the Corporations Act.
However, the business names legislation does not include this restriction, nor did the previous corporations
Guide to doing business in Australia / kwm.com 5

legislation. It may be possible to request ASIC to issue a no-action letter to address this anomaly and allow a
foreign company to use a business name it has registered under the business names legislation.
As soon as a decision is made to conduct business in Australia, a name availability search should be carried out
on the company or business name to ensure it is available. A name will not be registered if the same or a similar
company or business name is already reserved or registered.
Searches should also be undertaken of the Trade Marks Register and enquiries made to determine whether
another trader has a trade mark or service mark registered for similar goods or services, or has a prior reputation
or use of the name in related fields (see the Intellectual property section).
Guide to doing business in Australia / kwm.com 6

FOREIGN COMPANY
REGISTRATION
A non-Australian corporation wishing to carry on business in Australia must register as either a foreign company in
Australia, or establish or acquire a subsidiary here.
When must a foreign company register with ASIC
Carrying on business
Under the Corporations Act, a foreign company must register with ASIC to carry on business in Australia if, among
other things, it:
• has a place of business in Australia (eg a branch office)
• establishes or uses a share transfer office or share registration office in Australia, or
• administers, manages or deals with property in Australia as an agent, legal personal representative or
otherwise.
A foreign company is not required to register as carrying on business in Australia merely because it:
• maintains a bank account
• effects a sale through an independent contractor
• solicits or procures an order that becomes a binding contract only if the order is accepted outside Australia
• creates evidence of a debt, or creates a security interest on property
• secures or collects any of its debts
• conducts an isolated transaction that is completed within a period of 31 days and is not repeated from time to
time, or
• invests any of its funds or holds any property.
However, engaging in these activities in combination may, however, give rise to carrying on business in Australia.
There is also general case law regarding whether a person is carrying on business in Australia. It usually, but not
always, involves repetition and continuity. We can advise as to whether circumstances or activities will give rise to
carrying on business in Australia.
Registration
To register with ASIC, a foreign company must:
• establish that the company name is available (if available, you may apply to have the name reserved)
• appoint at least one local agent (either a natural person resident in Australia or an Australian company) who:
o is authorised to accept notices and service of process on behalf of the foreign corporation, and
o is responsible for ensuring compliance with the Corporations Act and may be personally liable for breaches
of the Corporations Act
• establish a registered office in Australia to which communications and notices may be sent, and
Guide to doing business in Australia / kwm.com 7

• lodge with ASIC:
o certified copies of its current certificate of incorporation or registration (or equivalent), which must be
certified by the corporate regulator in the company’s place of incorporation no more than 3 months before
lodgement, and
o certified copies of its constitution, which must be certified by the corporate regulator, notary public or duly
witnessed affidavit by a director or secretary of the company no more than 3 months before lodgement
• details of the directors and, if any of the directors reside in Australia and are a director on any Australian
company’s board of directors, a memorandum stating the powers of those directors must be provided on
lodgement, and
• details of its registered office or principal place of business in its country of origin and of its registered office in
Australia.
If all of the above is in order, ASIC should register the foreign company within 5-10 business days after lodgement
of the documents and payment of the fee.
Post-registration
Unless exempt, a registered foreign company must file its annual accounts (for the total operation, not just the
Australian operation) in the prescribed manner with ASIC. The balance sheet, cash flow statement and profit and
loss statement for the last financial year are required, as well as any other documents that the company is required
to prepare by law in its place of origin. In addition, changes in particulars (eg the appointment or resignation of
directors or changes to constituent documents) must be notified to ASIC in the prescribed manner.
Subsidiary
Rather than carry on business in Australia itself, a foreign corporation may instead use an Australian incorporated
subsidiary which may be a proprietary company or a public company. This can be done either through
incorporation of a new company or by acquisition of an Australian company. As to whether it is preferable to
register a foreign company or operate through a subsidiary, depends on tax, corporate and practical
considerations.
Australian financial services licence (AFSL)
Depending on the activities carried on in Australia, there may be a requirement to have an AFSL (see the Financial
services licensing regime section).
Foreign insurers
A foreign insurer must be a body corporate and be authorised by the Australian Prudential Regulation Authority
(APRA) under the Insurance Act 1973 (Cth) (IA) or be a Lloyd’s underwriter, to carry on insurance business
(including reinsurance) in Australia unless an available exemption applies. For the purposes of the authorisation
regime, with the exception of reinsurance, carrying on insurance business in Australia includes where a foreign
insurer conducts a business outside Australia that would be insurance business under the IA if it was carried on
locally and directly or indirectly another person acts on the insurer’s behalf locally or as a broker of the insurer’s
products. It also extends to inducing others to enter into insurance contracts or advertising and other marketing
Guide to doing business in Australia / kwm.com 8

and promotional activities, including if done outside of Australia to the extent that they have, or are likely to have,
their effect in Australia.
The requirement to be APRA authorised will not apply if the insurance contracts fall within one of the following
exemptions: insurance for high value insureds, specific atypical risks or risks that cannot reasonably be placed in
Australia (having regard to certain prescribed factors), or insurance to comply with foreign law requirements.
If a foreign insurer becomes APRA authorised, it must comply with certain prudential standards, including capital
adequacy requirements and maintaining assets in Australia to meet potential claims by policyholders. For most
locally authorised insurers there is a minimum prudential capital requirement of AUD$5 million.
Foreign insurers may also be required to hold an AFSL if they arrange, issue or provide financial product advice in
respect of insurance to customers in Australia. There are some exemptions to this requirement which may be
applicable, for example where:
• a broker or intermediary, which holds an appropriate AFSL, arranges the foreign insurer's insurance for the
insured in Australia, or
• a person in Australia approaches the foreign insurer for coverage, and the foreign insurer does not actively
solicit the persons in Australia in relation to the coverage.
Life insurance
Only a company registered by APRA under the Life Insurance Act 1995 (Cth) may carry on life insurance business
(including reinsurance) in Australia. Only a foreign incorporated life insurer from a jurisdiction covered by the Life
Insurance Regulations 1995 (Cth) is able to carry on life insurance business locally through a branch. Other
foreign insurers will need to conduct life insurance business through a locally incorporated subsidiary. The
jurisdictional nexus test for the local registration regime under the Life Insurance Act (Cth) is otherwise broadly
similar to that applied to general insurance business (there is no carve out for reinsurance and it only includes
business carried on through an agent rather than a broker). There are exemptions for certain types of insurance.
Life insurers are also required to hold an AFSL in certain circumstances.
Private health insurance
Anyone carrying on private health insurance business must be registered with the Private Health Insurance
Administration Council.
Please contact us if you would like us to:
• provide a registered office address;
• arrange for one of our firm entities to provide local agent services (including service of process);
• assist with registering a foreign company with ASIC; and/or
• assist with acquiring or incorporating a subsidiary.
Guide to doing business in Australia / kwm.com 9

MARKETS, REGULATION
& GOVERNANCE
Financial markets
Australia is home to a well-developed, innovative and highly-regarded financial services industry and capital
market, including: 3
• Financial development - Australia was ranked 5th out of 57 of the world's leading financial systems and capital
markets by the World Economic Forum
• Equity market - the 8th largest in the world (based on free-float market capitalisation) and the 2nd largest in the
Asia-Pacific, and
• Foreign exchange market - the 7th largest in the world in terms of global turnover, while the Australian dollar is
the 5th most traded currency and the AUD/USD is the 4th most traded currency pair.
ASIC and the Corporations Act
Companies, registered managed investment schemes and the securities industry are governed by the
Corporations Act, overseen by ASIC. The Corporations Act includes provisions which govern:
• the administration of companies, including financial reporting requirements
• company mergers and acquisitions
• disclosure of interests by shareholders in listed companies
• licensing of dealers, advisers, trustees, custodians, market makers, market operators and other providers of
financial products or services in relation to financial products such as securities, managed investment products,
deposits, certain types of insurance, derivatives, foreign exchange contracts and government debentures,
stocks or bonds
• conduct and disclosure requirements for participants in the financial services industry
• trading in financial products by holders of inside information and other forms of prohibited conduct relating to
financial products and services, and
• fundraising by companies and other entities.
Many provisions of the Corporations Act are technical and complex. Professional advice should be sought
whenever it is intended to undertake activities which may come within their operation.
3
www.asxgroup.com.au/the-australian-market
© King & Wood Mallesons 10

Australian Securities Exchange (ASX) and the Listing Rules
The Australian Securities Exchange is operated by ASX Limited (which is a listed company). ASIC supervises
trading activities by market participants, as defined in the Market Integrity Rules. Listed entities must comply with
the ASX Listing Rules (as well as the Corporations Act). The ASX Listing Rules include provisions requiring listed
entities:
ASX's Market Statistics 4
• to make regular reports and disclosures
• if they wish to undertake certain transactions, to make
prior disclosure and seek shareholder approval, and
• Market capitalisation: $1.4 trillion
• Number of listed companies: 2,185
• to ensure that matters of administration (eg issue of
holding statements for securities) and transactions (eg
on-market share buy-backs) conform to certain
requirements and standards.
Chi-X
• New listings (FY to date): 82
• Capital raised (FY to date): $46,383 million
• MSCI global index ranking: 8 th
(as at 30 June 2013)
Chi-X Australia Pty Ltd (Chi-X) also has a market licence to operate a securities exchange in Australia and offers
trading in ASX-quoted equities. Entities continue to list on, and deal solely with, ASX, and securities are officially
quoted on ASX only. Chi-X determines which securities in the S&P/ASX 200 and ASX-listed exchange traded
funds (ETFs) may be traded on its market. Chi-X was granted a licence as an alternative securities exchange to
boost competition in Australia’s financial markets. Chi-X now handles just under 11 per cent of stockmarket
trades. Off-market trades now account for somewhere near 25 per cent of total equity turnover of about $4 billion
a day.
Australia is an attractive investment destination for global investors as well as home to many major
multinational financial services providers. With a diverse investor group comprised of 40% foreign
investors, 40% domestic institutional investors and 20% retail investors, the Australian equity market is
well placed in the global economy. 5
4
5
See www.asxgroup.com.au/the-australian-market
As above
Guide to doing business in Australia / kwm.com 11

Corporate governance
“…better governed organisations outperform poorer governed organisations in a number
of key areas…” 6
Corporate governance concerns the organisational framework of a company and the manner in which authority is
exercised and overseen by others. Corporate governance in Australia is an evolving area focussing on the
composition and responsibilities of the board, executive remuneration, disclosure and reporting requirements,
audit reform, shareholder participation and payment of dividends. The Australian market has high expectations of
corporate governance compliance. Companies and trusts, particularly those listed on ASX, are subject to a large
range of corporate governance requirements and guidelines in Australia. These arise from various sources
including:
• the Corporations Act
• the ASX Listing Rules for listed entities
• the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations” (ASX
Recommendations) for listed entities
• prudential standards issued by APRA for regulated financial and superannuation institutions, including banks,
building societies and insurers, and
• other industry standards which are adopted voluntarily, often in line with those adopted in the United States
(US) and the United Kingdom (UK).
Most major corporations and other entities aim to comply with governance requirements, recommendations and
standards. Amendments to the Corporations Act prohibit the key management personnel (KMP) of certain entities
from hedging incentive remuneration. The amendments also strengthen the effect of the shareholders’ nonbinding
vote on whether the remuneration report regarding the KMP of the listed company should be adopted.
The board of directors
Most listed entities in Australia have boards of directors which comprise more non-executive, independent
directors than executive non-independent directors. It is rare in Australia for the chairperson of a listed entity to
hold an executive position with the entity. The ASX Recommendations make various recommendations regarding
director selection, appointment and independence of directors and also the role of the chairman. A listed entity
should also have a diversity policy addressing gender diversity on the board, in senior management and
throughout the entity.
Generally, directors may delegate any of their powers to another director, a committee of directors, an employee of
the company, or any other person. Consistent with the ASX Recommendations, larger listed entities usually
establish board committees to address oversight of audit, risk, compliance, nomination and remuneration issues.
Directors’ duties
Directors’ duties in Australia are prescribed by legislation, in particular the Corporations Act, and an extensive
body of case law (common law). As fiduciaries, directors owe stringent duties:
• to act honestly
• to exercise care and diligence
• to act in good faith in the best interests of the company and for a proper purpose
• not to improperly use their position or company information, and
6
Australian Treasury Working Paper (2009)
© King & Wood Mallesons 12

• to disclose their material personal interests and avoid conflicts of interest.
Directors have duties regarding financial and other reporting and disclosure and can be liable under various laws
including for breaches of fund raising, anti-money laundering, environmental, trade practices, privacy, and
occupational health and safety laws. If the company they manage is in financial distress, there are additional
duties and issues which the directors must address with particular care and consideration.
Some defences are available to directors, including under the business judgment rule in certain circumstances, for
reliance in good faith after making an independent assessment and for appropriate delegation. Directors can be
granted indemnities from companies (subject to the law) and companies often take out D&O (directors’ and
officers’) insurance to cover many of the directors’ liabilities. Breaches of directors’ duties carry a range of fines or
terms of imprisonment or both.
Current issues for directors include:
• Implications from recent cases: there have been several recent significant judgments concerning the duties
of directors and other officers, which have led to an increased focus by directors on better understanding the
company’s business and financial position, adoption of a more active and questioning role, increased risk
analysis and diligence, and reassessment of reliance on others and of the approach to obligations relating to
continuous disclosure.
• Continued scrutiny from regulators: in particular, ASIC and the Australian Competition and Consumer
Commission (ACCC), with a focus on investigation and enforcement actions.
• OHS laws: changes (except for Victoria and Western Australia) to workplace, health and safety laws have
introduced positive duties of due diligence on officers (including directors) and senior managers for
compliance with obligations, and the primary duty for safety is shifting to the “person conducting a business or
undertaking”. Officers should be familiar with OHS obligations, codes of practice and site risks. There should
be a robust and comprehensive safety management system complying with industry standards.
• Executive remuneration: significant regulatory reform includes restrictions on termination benefits for
directors and senior executives without shareholder approval, more information for shareholders about
executive remuneration in companies’ remuneration reports, and a “two-strikes” rule (giving shareholders the
right to vote on a possible Board spill if the company’s annual remuneration reports receive two consecutive
“no” votes).
• Other regulatory reform: this includes taxation, industrial relations and continuous disclosure reforms.
• Regulatory process and impact: many directors report that the time they dedicate to regulatory issues is
considerable as a result of the increasing volume and nature of regulatory reform. An independent
Government-commissioned review of the process by which the Federal Government assesses the likely
impact of regulation was conducted in 2012. It concluded that Australia’s RIA (regulatory impact analysis)
process is consistent with the OECD’s guiding principles. However, it recommended that more needs to be
done to ensure Government agencies adhere to the RIA process. The Government is looking into how best to
respond.
• Class actions (private enforcement actions): the growth of share market investment, the rise of litigation
funding and the increased sophistication of plaintiff law firms has seen a rise in claims in the financial services
and securities sectors, competition law claims and a resurgence in traditional consumer protection and
product liability claims.
Disclosure obligations
Financial and other reporting
All listed entities must prepare and lodge an annual audited financial report and an audited or audit-reviewed half
year financial report. Shareholders are entitled to receive either a hard copy of those reports or a notice of where
© King & Wood Mallesons 13

they can view an electronic copy, depending on the election made by the shareholder. These reports must comply
with Australian accounting standards and also, in the case of many major corporations whose securities are listed
in the US or the UK, with the accounting standards for those jurisdictions. All directors (executive and nonexecutive)
are responsible for the entity’s financial reports being accurate and complying with accounting
standards. The Corporations Act requires that the Chief Executive Officer (CEO) and the Chief Financial Officer
(CFO) of a listed entity sign-off on the reports to the rest of the board of directors.
Listed entities must describe their corporate governance practices in detail in their annual reports. They must
report on whether they comply with the ASX Recommendations and, if not, why not.
Unlisted companies and registered schemes must also prepare annual financial reports and directors’ reports
each financial year. There is an exception for small companies limited by guarantee and small proprietary
companies unless they have been controlled by a foreign company for all or part of the year. “Disclosing entities”
must also comply with half yearly financial reporting obligations.
Continuous disclosure
Listed entities and the responsible entities of listed schemes must fully disclose price-sensitive information to the
market (via announcements made to ASX) as soon as they become aware of the information. There are limited
carve-outs available (eg for information that is incomplete and remains confidential). The civil penalties for noncompliance
with the continuous disclosure requirements are significant and ASIC has been given powers to fine
entities which have not complied with the requirements. Most listed entities adopt rigorous monitoring and
reporting systems to enable price-sensitive information to be identified and disclosed in a timely fashion. The ASX
has recently updated the guidance it provides.
Unlisted “disclosing entities” must provide similar information to ASIC.
Auditors
With exceptions for small proprietary companies and small companies limited by guarantee, all companies must
appoint an independent auditor. Auditors owe a duty of care and are answerable directly to the company (ie its
shareholders as a whole) and, in some circumstances, to individual shareholders, creditors and other third parties.
The ASX Recommendations recommend that listed entities in Australia have audit committees comprising only
non-executive directors, a majority of whom are independent directors. This is obligatory under the ASX Listing
Rules for entities in the top 300 of the S&P / ASX All Ordinaries Index. The aim is to ensure the integrity of the
financial statements and the independence of the auditor. However, the full Board still retains responsibility for
approval of financial statements.
The Corporations Act addresses the reliability and credibility of financial statements by including:
• a general standard of auditor independence
• a requirement that key individual auditors (not firms) of listed companies be rotated every five years (or up to
seven years if ASIC relief has been granted)
• a cooling-off period of four years for former partners and key senior personnel who were directly involved in a
client’s audit before they can become directors of, or take a senior management position with, the client, and
• a prohibition on more than one former partner of an audit firm, at any time, being a director of or taking a senior
management position with an audited body.
Established under statute, the Financial Reporting Council has oversight of the audit standard setting process and
monitors and advises on auditor independence. Auditing standards have the force of law. The obligations for
auditors to report suspected breaches of the law to ASIC have been strengthened in recent years.
Guide to doing business in Australia / kwm.com 14

Anti-bribery and anti-corruption
Australia’s foreign anti-bribery and anti-corruption laws make it a crime for companies and individuals to bribe
foreign government officials to obtain or retain business. Corporations are deemed to be at fault if they expressly,
tacitly or impliedly authorised or permitted the conduct. This includes failing to create and maintain a corporate
culture of compliance with these laws.
In line with developments in the global regulatory
environment, Australia is increasingly concerned with
enforcement in this area. The Australian Federal Police
(AFP) laid the first charges under Australia’s anti-bribery
laws in 2011. Despite the low level of enforcement
activity to date, it is likely that more is to come. The
OECD has indicated that they expect to see an increase
in enforcement action by the AFP. 7
“Corruption debases democracy, undermines
the rule of law, distorts markets, stifles
economic growth, and denies many their rightful
share of economic resources or life-saving aid.”
Kofi-Annan, former secretary general, United
Nations
Australian companies should focus on ensuring that adequate systems, controls and policies are implemented to
prevent bribery and corruption. This is particularly important for Australian businesses operating in high risk
sectors and regions. Steps to take include:
• promoting and enforcing effective anti-corruption policies and programs including matters such as
procedures, training, monitoring compliance, investigations, incident management programs
• implementing risk assessment and due diligence in relation to potential operations and third parties
including associates and agents, and
• adding prevention of bribery and corruption as a fixed agenda item for board meetings.
The UK Bribery Act’s removal of the facilitation payments defence has caused issues with Australian companies
with a presence in the UK and operations in high risk jurisdictions. The Australian Government released a
consultation paper in 2011 regarding the potential removal of the facilitation payments defence. Despite the
feedback that facilitation payments are an essential part of doing business in certain jurisdictions, the Australian
government may follow the UK lead and remove the facilitation payments defence.
Other jurisdictions’ anti-bribery regimes can have a wider extra-territorial application than often appreciated. For
example, the UK’s Bribery Act applies to foreign companies carrying on a substantial business in the UK and
persons with a close connection to the UK. The US Foreign Corrupt Practices Act also has wide-reaching extraterritorial
effect. As a result, it is often the case that when a bribe is offered or made, the offeror or giver of the
bribe will be guilty of an offence in more than one jurisdiction and they may also implicate the organisation they are
working for.
The financial penalties for bribery offences can potentially be very significant and serious for individuals and the
organisation they work for. There is real risk that individuals involved may also be imprisoned.
Other governance issues
• Related party transactions - Australia has strict rules about related party transactions, particularly for public
entities. In general, shareholder approval is required unless the transactions are entered into on arm’s length
terms. Listed entities are subject to additional rules for related party dealings.
• Insider trading and trading policies - Australia has strict laws which prohibit insider trading in securities and
other financial / investment products. Listed entities must have trading policies which comply with minimum
content requirements of the ASX Listing Rules including specifying that key management personnel cannot
trade in the entity’s securities or in financial products issued or created over or in respect of the entity’s
7
OECD’s phase 3 report on Australia’s implementation of the OECD’s Anti-Bribery Convention (November 2012)
© King & Wood Mallesons 15

securities during prohibited periods. The Corporations Act prohibits hedging of incentive remuneration. Many
policies include the periods before the release of annual and half yearly financial statements and before the
AGM as closed periods and then permit trading at other times (subject to the policy and insider trading rules).
Further, directors of listed entities must disclose to ASX full details of trading in securities of those entities.
• Market misconduct - Australia has strict laws which prohibit manipulation of securities and financial markets.
The operators of those markets are also required to actively monitor transactions in their markets and report
any suspicious trading to the corporate regulator.
Further, Australia applies an overriding rule to all financial transactions which prohibits any person from
engaging in misleading or deceptive conduct.
• Insolvent trading - There are particular issues and considerations that arise for directors and officers when a
company is in financial distress. Amongst other things, directors face personal liability if they allow their
company to trade or undertake certain corporate actions (eg pay a dividend) if it cannot pay its debts as and
when they fall due.
Corporate groups
It is a general principle of Australian law that a company is a separate legal entity from its members. It follows that
members of a corporate group are each separate legal entities and that, in general, the legal rights and obligations
of a subsidiary company are not the rights and obligations of its parent company. This principle has the following
consequences for corporate groups:
• each member of the group is capable of incurring its own debts and having its own creditors. In general,
creditors must look only to the member with which they have contracted
• a parent company cannot normally claim under or enforce a contract made by its subsidiary against a third
person, and
• when ascertaining amounts (or assets) available for distribution to members, it cannot take into account the
financial position of other companies in the group.
Another consequence of the separate legal entity doctrine is that, in performing their duty to act in the best
interests of the company, directors must consider the interests of the company of which they are a director rather
than the interests of the corporate group. However, the position can be different for wholly-owned subsidiaries.
Under the Corporations Act, a director of a wholly-owned subsidiary is taken to act in good faith in the best
interests of the subsidiary if:
• the subsidiary’s constitution expressly authorises the director to act in the best interests of the parent company
• the director acts in good faith in the best interests of the parent company, and
• the subsidiary is not insolvent at the time the director acts and does not become insolvent because of the
director’s act.
This provides the directors with some, but not total, protection as the requirements must still be met and their
general directors duties considered.
There is no general principle under Australian law permitting Courts to pierce the corporate veil to find a
company’s members liable for the acts or omissions of the company and there are limited circumstances in which
a Court might do so. However, there are instances where, under statute, a company’s directors are subject to
certain liabilities for acts or omissions of the company.
Further, under the Corporations Act, although a parent company is not generally liable for the debts of its
subsidiary, the position is different where the subsidiary is insolvent. In that case, in certain circumstances a
parent company can be made liable for debts of the subsidiary incurred when it was insolvent if there were
reasonable grounds for the parent company to suspect the subsidiary’s insolvency.
Guide to doing business in Australia / kwm.com 16

Takeovers and schemes of arrangement
There is a “takeovers prohibition” in Chapter 6 of the Corporations Act which applies in relation to the acquisition of
interests in all Australian listed companies, listed managed investment schemes and unlisted companies with
more than 50 members. Under this prohibition, a person must not obtain a “relevant interest” in issued voting
shares of a company or voting interests in a scheme that results in a person having “voting power” of more than
20%, except through one of the permitted exceptions (eg a takeover bid, a scheme of arrangement, with target
security holder approval or making a permitted “creeping” acquisition).
A takeover bid may take the form of an off-market bid or a market bid. Off-market bids are made by written offers
to a target’s security holders. Market bids are undertaken by on-market acquisitions on ASX by the bidder at a
stated price.
Off-market bids are more common due to their flexibility. They may be conditional, either full or partial bids, and
the consideration offered may be cash, securities or a combination. There are few market bids as they must be
unconditional, in cash and a full bid for all securities in a class.
During the takeover bid, various documents must be lodged with ASIC and ASX, including the bidder’s statement
and target’s statement which provide disclosure to the target’s security holders and the market. The Federal
Treasurer may need to be notified of certain proposals under the Foreign Acquisitions and Takeovers Act (see the
Foreign investment regulation section). For mergers which may affect competition, clearance or authorisation from
the Australian Competition and Consumer Commission (ACCC) may need to be sought (see the Competition laws
section). The Takeovers Panel is the primary adjudication body for takeovers in Australia.
A scheme of arrangement is an alternative to a takeover bid and requires the support of the target and its security
holders to implement the scheme. It is a court approved process and provides flexibility to combine multiple
schemes in a transaction for multiple purposes (eg an acquisition with a de-merger).
For further information about takeovers and schemes, see these King & Wood
Mallesons’ publications on www.kwm.com:
• Guide to takeovers in Australia
• Guide to Trust takeovers / Reconstructions in Australia
Guide to doing business in Australia / kwm.com 17

FOREIGN INVESTMENT
REGULATION
“The Government welcomes foreign investment. It has helped build Australia’s economy
and will continue to enhance the wellbeing of Australians by supporting economic
growth and prosperity. Foreign investment brings many benefits. It supports existing
jobs and creates new jobs, it encourages innovation, it introduces new technologies and
skills, it brings access to overseas markets and it promotes competition amongst our
industries.” 8
Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and
its Regulations, and the Federal Government’s Foreign Investment Policy (Policy). The Minister responsible for
making decisions under the regime is the Australian Federal Treasurer. The body that administers FATA is the
Foreign Investment Review Board (FIRB).
Foreign investment regulation
Where a proposed acquisition falls within the scope of FATA or the Policy, a foreign person will need to consider
whether they must, or should, provide prior notification of the acquisition and seek a statement of no objections
(FIRB approval).
As a result of the implementation of the Australia-US Free Trade Agreement and the Protocol on Investment to the
Australia-New Zealand Closer Economic Relations Trade Agreement, certain US and New Zealand entities may
be entitled to higher thresholds before acquisitions fall within the scope of FATA, as well as some exemptions
under the Policy (see below for further details).
FATA and the Policy apply to foreign persons. For the purposes of FATA and the Policy, foreign person means:
• a natural person who is not ordinarily resident in Australia (ordinarily resident, for a person other than an
Australian citizen, means that the person has resided in Australia for 200 days or more in the immediately
preceding 12 months)
• a corporation in which a natural person not ordinarily resident in Australia, or a corporation incorporated
overseas (solely or together with associates), holds 15% or more of the corporation
• a corporation in which two or more of those persons or corporations (together with associates) hold 40% or
more of the corporation
• the trustee of a trust in which a natural person not ordinarily resident in Australia, or a corporation incorporated
overseas (solely or together with associates), holds a substantial interest of 15% or more of the assets or
income of the trust, or
• the trustee of a trust in which two or more of those persons, or corporations (together with associates), hold an
aggregate substantial interest of 40% or more of the assets or income of the trust.
Compulsory FIRB approval under FATA
Prior FIRB approval must be obtained with respect to certain proposed acquisitions in order to avoid criminal
sanction under FATA. This is where a foreign person proposes, or persons propose, to acquire:
8
From Australia’s Foreign Investment Policy, see The Foreign Investment Review Board - www.firb.gov.au.
© King & Wood Mallesons 18

• a substantial interest (15% or more) in an Australian corporation which has total assets valued at AUD$248
million 9 or more (a higher threshold may apply for some US and New Zealand entities). A substantial interest
includes actual voting power, number of shares held and a “potential voting power” or a “right to issued shares”
amounting to a substantial interest (15%) being acquired (eg through a convertible note), or
• any interest in Australian urban land (being all land except land used for the purpose of primary production), in
the absence of an exemption. This includes any interest in a company or trust where more than 50% of the
assets of the target are Australian urban land.
When determining whether prior FIRB approval must be obtained, a foreign person should bear in mind that:
• both the acquisition and the exercise of an option are considered to be an acquisition of an interest under
FATA - both events may therefore require FIRB approval
• foreign investments where potential voting power or potential shareholdings will be acquired (including the
acquisition of convertible notes) require prior FIRB approval if the relevant interest and value thresholds under
FATA are met, and
• holdings of any associates of a foreign person will be included when determining whether a substantial interest
is to be acquired.
Exemptions to compulsory FIRB approval under FATA
The exemptions with regard to acquisitions of interests in Australian urban land are set out in FATA’s Regulations,
and include:
• non-residential commercial property that is valued at less than AUD$54 million (a higher threshold may apply
for some US and New Zealand entities) and is not vacant land, or heritage listed, or
• certain approved developments acquired “off the plan”, that is, bought before the proposed development is sold
or occupied for 12 months.
There are some further limited exemptions provided in FATA including the acquisition of interests in land from
Government entities and acquisitions that are held solely as security for the purposes of a money lending
agreement.
Voluntary FIRB notice under FATA
Some proposed acquisitions are not compulsorily notifiable, but may activate the Australian Federal Treasurer’s
powers to make adverse orders. If the Australian Treasurer considers such a proposal to be contrary to Australia's
national interest, the Treasurer can make orders in relation to the proposal including prohibition or divestment
orders. To remove this risk, a foreign person can obtain prior FIRB approval.
Proposed acquisitions for which a “voluntary” notice may be given and FIRB approval should be obtained include:
• the acquisition of a substantial interest in a foreign target with downstream Australian assets valued at
AUD$248 million** or more (where the downstream Australian assets of the target comprise less than 50% of
the total assets) (a higher threshold may apply for some US and New Zealand entities)
• the acquisition of a substantial interest in a foreign target valued at AUD$248 million** or more (where the
downstream Australian assets of the target comprise more than 50% of the total assets) (a higher threshold
may apply for some US and New Zealand entities)
• the acquisition of assets comprising an Australian business (including rural land) valued in excess of AUD$248
million** (a higher threshold may apply for some US and New Zealand entities)
• where a foreign person has the ability to determine the policy of an Australian corporation in relation to any
matter
9
** Threshold AUD$ amounts are indexed annually. The amounts specified are as at 1 January 2013.
© King & Wood Mallesons 19

• certain board representation arrangements or alterations of the constitution or other constituent documents of
an Australian corporation carrying on an Australian business, and
• certain arrangements for leasing, hiring, managing or otherwise participating in the profits or management of an
Australian business.
Summary of triggers for seeking FIRB approval:
Acquire or add to a
15% (or 14%
aggregate) or more
interest in an
Australian company if
total assets more than
A$248m*
Acquire interests in
Australian urban land
(including interests in
a company or trust
that is land rich)
[Land in Queensland
requires separate
Acquire assets of an
Australian business of
more than A$248m*
Acquire interests in a
foreign target that has
Australian assets of
A$248m or more if
Australian assets are
less than 50% of total
CHECK FOR
FOREIGN
INVESTMENT
REQUIREMENTS
Investment of 5% or
more in the media
sector regardless of
size
Acquire interests in a
foreign target valued
at A$248m or more if
Australian assets are
50% or more of total
Investments by foreign
government investors
(and establishment of
new businesses)
* A higher threshold may apply for some US and New Zealand investors
FIRB approval under the Policy
The Policy has no legislative force, but adherence to its requirements is achieved in practice by a number of
means, including by refusal to grant necessary ministerial or other approvals under other Federal legislation and
by the prospect of on-going resistance from the Federal Government to the relevant investor, including the
likelihood that future applications under FATA might be refused.
The Policy provides that prior FIRB approval must be sought for:
• investments of 5% or more in the media sector regardless of size, and
• investments by foreign government investors, as discussed below.
Guide to doing business in Australia / kwm.com 20

Acquisitions by foreign government investors
The Policy provides that prior FIRB approval must be sought for direct investments by all foreign government
investors irrespective of the size of the investment (that is, there is no threshold for foreign government
investments).
“Direct” in this context essentially means that the investment is by the foreign government or the foreign
government agency. It does not mean “in Australia” and is intended to capture offshore investments with
underlying Australian interests. A direct investment includes offshore investments in companies that have assets
or operations or other economic links to Australia.
Despite the Policy requiring investments “regardless of the value” to be notified, a definition of “direct investment”
is provided in the Policy. The effect of that definition is that a purely passive investment by a foreign government
investor where an interest of less than 10% is acquired (and without any control elements) will not be considered
to be a direct investment for the purposes of the Policy and notice is not required of such investments. All
acquisitions of interest in Australian urban land are required to be notified regardless of size (save for consular
representation).
The Policy provides that foreign government investors include:
• a body politic of a foreign country
• companies or other entities in which foreign governments, their agencies or related entities from a single
foreign country have an aggregate interest (direct or indirect) of 15% or more
• companies or entities in which governments, their agencies or related entities from more than one foreign
country have an aggregate interest (direct or indirect) of 40% or more, or
• companies or entities that are otherwise controlled by foreign governments, their agencies or related entities
and any associates, or could be controlled by them including as part of a controlling group.
If an investor is regarded as a foreign government investor, it should notify its proposed acquisitions under the
Policy even where the acquisitions do not come under FATA. Foreign government investors must also notify
proposals to establish new businesses in Australia.
In examining proposed investments by foreign government investors, the Australian Government will typically have
regard to the “national interest considerations” as follows:
• an investment may impact on Australia’s national security
• an investment may hinder competition or lead to undue concentration or control in the industry or sectors
concerned
• an investment may impact on Australian Government revenue or other policies
• an investment may impact on the operations and directions of an Australian business, as well as its
contribution to the Australian economy and broader community, and
• Character of the investor:
o
o
an investor’s operations are independent from the relevant foreign government including any level of
control or influence the foreign government may have and the reasons for their investment and interest in
the investor, and
an investor is subject to and adheres to the law and observes common standards of business behaviour.
The fundamental core concern is that any investment by a foreign government investor is made on a commercial
basis with understood and clear predictable outcomes. It cannot be one made for a strategic government
objective.
© King & Wood Mallesons 21

Assessment
Proposals are assessed against a national interest test. There is no definition of “the national interest” and
applications are assessed on a case by case basis. There is no obligation to demonstrate that positive benefits to
Australia will flow from the proposal. Rather, the Treasurer may attach conditions to a statement of no objection,
where compliance with the conditions is necessary in order to prevent the proposal from being contrary to
Australia’s national interest.
Once a proposed acquisition is notified to FIRB under FATA, the Federal Treasurer has 30 days to decide whether
or not to object to the acquisition and a further 10 days to notify the applicant of the decision. Where the
Treasurer considers that further time is required to assess a proposal, an interim order may be made extending the
time to up to a further 90 days. Notifications under the Policy are not subject to a statutory deadline.
FIRB will circulate the proposal among relevant Federal and State government departments and other bodies,
such as the ACCC, to ascertain their views as to whether the proposal is contrary to the national interest.
Related approvals
In addition to approvals under FATA, certain types of acquisitions may require other special approvals. In
particular, acquisitions in the financial sector may require prior approval under the Financial Sector
(Shareholdings) Act 1998 (Cth), and acquisitions in the aviation industry may require prior approval under industry
legislation. Where a target has a sufficient market share in an Australian market for goods or services,
authorisation may need to be obtained from the ACCC (see the Competition laws section).
Land in the State of Queensland is affected by the Foreign Ownership of Land Register Act 1988 (Qld). This
legislation does not prevent foreign ownership of land but merely records it. It does require registration by foreign
persons who already own an interest in land. The Queensland Government’s policy on foreign investment is to
ensure an approach consistent with that adopted by FIRB.
In October 2012, the Federal Government announced that it would implement a national foreign ownership register
for agricultural land. This register is still to be implemented.
Sensitive sectors
When assessing FIRB applications, the Treasurer and FIRB will have regard to the Policy and to related
legislation, and will accordingly treat certain sectors as sensitive. Additional restrictions may apply to acquisitions
in sensitive sectors. Such sectors include:
• urban land (with the exception of acquisitions of interests in developed commercial real estate)
• media sector
• banking and financial sector
• aviation and airports
• shipping
• certain entities subject to specific legislation such as Telstra, Commonwealth Serum Laboratories, and Qantas
Airways Limited, and
• entities that are Australian icons, regardless of the industry sector.
FATA and US and New Zealand investors
As a result of the Australia-US Free Trade Agreement and the Protocol on Investment to the Australia-New
Zealand Closer Economic Relations Trade Agreement, United States and New Zealand entities may take
advantage of higher thresholds under FATA, and some additional exemptions under the Policy. Investors from the
Guide to doing business in Australia / kwm.com 22

United States and New Zealand have been prescribed under FATA. United States and New Zealand Government
investors are also able to take advantage of some, more limited, exemptions.
The Treasury does not apply a tracing exercise to determine whether the entity actually making the proposed
investment or acquisition is ultimately owned out of a prescribed country. To gain the benefit of the higher
threshold, the entity getting the benefit of the threshold must be incorporated or formed in the prescribed country
and be the actual entity which is acquiring or investing in the Australian business or assets.
The relevant thresholds for prescribed investors are indexed annually.
The exemptions that may apply include:
• direct investments or acquisition by prescribed investors in:
o
existing Australian businesses in non-sensitive sectors, or
o
developed non-residential commercial real estate,
where the total asset value or acquisition cost (whichever is higher) is under AUD$1,078 million**
• acquisitions of substantial interests (15% or more), including takeovers by prescribed investors of offshore
companies whose Australian subsidiaries or assets comprise less than 50% of the target company’s global
assets and are valued at under AUD$1,078 million**
• acquisitions of substantial interests (15% or more), including takeovers by prescribed investors of offshore
companies whose Australian subsidiaries or assets comprise more than 50% of the target company’s global
assets where the target company is valued at under AUD$1,078 million**, and
• direct acquisition by prescribed investors (except an entity controlled by a government of a prescribed country)
of interests in financial sector companies irrespective of value (although an application may still be required to
be given to the Treasurer under the Financial Sector (Shareholdings) Act 1998).
Sensitive sectors – prescribed investors
The AUD$1,078 million** threshold will not apply if the proposed acquisition or investment is within a sensitive
sector. Instead, the general threshold of AUD $248 million** applicable to all foreign persons will apply. In
addition to land, the sensitive sectors relevant to prescribed investment are:
• the telecommunications sector
• the transport sector, including airport facilities, rail infrastructure, international and domestic aviation and
shipping services provided either within or to and from Australia
• the manufacture or supply of training, human resources or military goods, equipment or technology to the
Australian or other defence forces
• the manufacture or supply of goods, equipment or technologies able to be used for a military purpose
• the development, manufacture or supply of, or provision of services relating to, encryption and security
technologies and communication systems, and
• the extraction of (or holding the right to extract) uranium or plutonium, or the operation of nuclear facilities.
In relation to entities controlled by a prescribed foreign government investor (US Government or New Zealand
Government), the AUD$248 million** thresholds will apply instead of the higher threshold of AUD$1,078 million**.
However, prescribed foreign government investors still need to comply with their obligations as foreign government
investors under the Policy.
© King & Wood Mallesons 23

FIRB update
The current threshold for notification of Australian rural land is AUD$248 million. However, a lowering of the
current threshold and use of conditions are likely changes to the regime in the near to medium term. Applicants
should ensure that they are kept up to date in respect of any change and should be aware that applications
involving rural land are being treated as sensitive in the meantime.
** Threshold AUD$ amounts are indexed annually. The amounts specified are as at 1 January 2013.
© King & Wood Mallesons 24

COMPETITION LAWS
Australia’s competition and consumer legislation is contained in the Competition and Consumer Act 2010 (Cth)
(CCA).
The CCA is similar to North American and European competition laws. It is administered by the ACCC. The
ACCC has an active enforcement policy and recognises that Australian competition laws must keep pace with
globalisation of the world economy. The ACCC has established ties with foreign competition law agencies,
including the United States’ Department of Justice, the European Commission, China’s State Administration for
Industry and Commerce, the Canadian Competition Bureau and competition law agencies in the Asia Pacific
region. The ACCC’s ties with foreign competition law agencies are governed by bilateral treaties, free trade
agreements and bilateral and trilateral co-operation agreements. In addition, the ACCC is an active participant in
the International Competition Network (ICN). The ICN is a global forum for national competition law agencies
designed to encourage international co-operation and the convergence of competition regulation on an
international basis.
Prohibitions against anti-competitive behaviour in Australia
CCA PROHIBITS ANTI-COMPETITIVE
BEHAVIOUR INCLUDING:
Acquiring
shares/assets
likely effect of
substantially
lessening
competition
Misuse of
substantial
market power
Arrangements:
purpose or likely
effect of
substantially
lessening
competition
Cartel conduct
Some forms of
vertical typing
Mergers can be notified to the ACCC for review and a decision (see below). Additionally, the ACCC has power to
grant exemptions for non-merger conduct which may breach the CCA, if the ACCC is satisfied that the proposed
conduct will be likely to give rise to a net public benefit.
Extra-territorial application of the CCA
The CCA has a degree of extra-territorial application and may apply to conduct engaged in outside Australia by
corporations that are incorporated in Australia, registered as a foreign company in Australia, or which carry on
business in Australia.
Civil penalties and criminal fines
The civil penalties and criminal fines for each contravention of the CCA by a corporation may be up to the greater
of:
• AUD$10 million
Guide to doing business in Australia / kwm.com 25

• if the Court can determine the gain from the contravening conduct, three times the gain from the contravening
conduct, or
• if the Court cannot determine the gain from the contravening conduct, 10% of the annual turnover of the
corporation and its related bodies corporate in the preceding 12 months from supplies connected with
Australia.
For individuals involved in a civil contravention of the CCA, the civil penalties may be up to AUD$500,000 for each
contravention, and orders may be made by a court prohibiting the individual from being a company director or
holding management positions.
For individuals involved in a criminal offence under the CCA, the criminal penalties may be up to AUD$340,000 or
up to 10 years imprisonment.
It is a criminal offence for a company to indemnify its officers or employees for penalties and legal costs arising as
a result of a contravention of the CCA.
Mergers and acquisitions likely to be investigated by the ACCC
The CCA prohibits direct and indirect acquisitions of shares or assets that would be likely to have the effect of
substantially lessening competition in an Australian market.
The ACCC is responsible for investigating mergers to assess whether or not they may substantially lessen
competition. Consequently, the ACCC may investigate any merger it becomes aware of, even ones of which it is
not notified by the parties. However, the ACCC prioritises its enforcement functions and investigates acquisitions
that would result in the acquirer having a market share of 20% or more in an Australian market, and where the
products supplied by the parties to the merger are substitutes or complements.
The ACCC also investigates mergers where the acquirer’s market share is less than 20% if the market is
concentrated, or the merger could give rise to conglomerate effects, or if there are high barriers to entry to the
market, or if the merger will increase the extent of vertical integration, or if the acquirer would have the ability to set
significantly higher prices despite having only a small market share.
Effectively, the ACCC’s policy means that each year it reviews a substantial number of mergers affecting markets
in Australia.
Creeping acquisitions
The ACCC has expressed concerns about the impact of “creeping acquisitions” on competition in Australia.
Creeping acquisitions comprise a series of acquisitions over time that do not raise competition concerns
individually, but may collectively have the effect of substantially lessening competition in any local, regional or
national Australian market.
The types of creeping acquisitions which the ACCC is likely to investigate are:
• where an acquirer purchases, over time, increments of the same company or assets, and
• where an acquirer purchases, over time, separate companies or assets in the same or related industries.
The ACCC considers that the supermarket industry is one where creeping acquisitions could potentially become a
concern. The petrol, liquor store, taxi cab, pathology services and childcare industries have also been cited as
examples of industries where creeping acquisitions may be of concern.
Guide to doing business in Australia / kwm.com 26

Mergers and acquisitions - clearance processes
The CCA does not contain a mandatory notification procedure for acquisitions of shares or assets. The question
of whether or not an acquirer wishes to notify the ACCC on a voluntary basis will depend on the likely impact of
the merger in Australia. However, where an acquisition would be likely to substantially lessen competition in
Australia and the parties proceed with the acquisition without approval from the ACCC, the parties bear the risk
that the ACCC will seek orders for an injunction, for divestiture or to void the acquisition, and for civil pecuniary
penalties. For this reason, parties usually seek clearance voluntarily from the ACCC for an acquisition in advance
of completion if the proposed acquisition would:
• exceed the ACCC’s market concentration threshold of 20%
• remove a vigorous and effective competitor
• create significant vertical integration issues or conglomerate effects
• be likely to be referred to the ACCC by other regulators (eg FIRB (see the Foreign investment regulation
section))
• attract considerable attention by the Australian media, or
• be likely to attract complaints from competitors, suppliers or customers.
Parties may seek informal or formal clearance from the ACCC for an acquisition, or apply to the Australian
Competition Tribunal for authorisation of an acquisition.
Informal clearance results in the ACCC providing a letter of comfort to the parties, stating that it does not intend to
oppose the acquisition based on the information it has considered about the likely effect of the merger on
competition.
In contrast, the grant of a formal clearance results in statutory immunity from prosecution for the acquisition,
whereas a refusal to grant formal clearance leaves a limited right of merits review before the Australian
Competition Tribunal.
Authorisation results in statutory immunity from prosecution for the acquisition, but only if the parties can satisfy
the Tribunal that the acquisition would likely result in a net public benefit through, for example, efficiencies or
import replacements.
Informal clearance
To facilitate assessment under the ACCC’s informal clearance process, the parties need to provide the ACCC with
information about themselves, the proposed acquisition and affected markets, and to allow enough time in their
transaction schedule to obtain informal clearance. The ACCC has indicated that clearance of non-confidential
acquisitions which do not pose any significant competition issues may be obtained within 4 to 6 weeks.
However, the ACCC may require between 8 to 12 weeks, possibly longer, to consider non-confidential acquisitions
which may pose significant competition issues. In a case which raises complex competition issues, the ACCC will
likely publish a Statement of Issues (which is similar to the Statement of Objections sent to the parties by the
European Commission). The Statement of Issues is a public document that sets out the principal competition
concerns raised by the transaction. The ACCC will also institute a secondary review timetable where a Statement
of Issues is published (equivalent to a “Phase II Review” by the European Commission) and invite comments from
the parties and other market participants.
Parties may approach the ACCC and notify a proposed acquisition on a confidential basis, seeking the ACCC’s
preliminary view as to whether the acquisition may substantially lessen competition. The ACCC will provide a
preliminary decision on a confidential basis, but this decision will be based on the information provided to the
parties and will not bind the ACCC. Accordingly, where the parties insist that the proposed acquisition be kept
confidential, the ACCC will be unable to conduct market enquiries and its assessment of the acquisition will not
© King & Wood Mallesons 27

progress beyond the confidential review stage until it may conduct market enquiries. Market enquiries are a public
process and involve the ACCC asking competitors, suppliers and customers for their views about the possible
effects on competition of the acquisition.
Where the ACCC is satisfied that the proposed acquisition would not be likely to have the effect of substantially
lessening competition in Australia, the ACCC issues a comfort letter to the acquirer which usually states that the
ACCC does not intend to take action in respect of the proposed acquisition but reserves its rights to do so if new
information becomes available. It is very rare for the ACCC to oppose an acquisition it has previously cleared. In
relation to “Phase II Reviews” in which a Statement of Issues has been published, the ACCC will also publish a
Public Competition Assessment which sets out the reasons supporting its decision to clear (or oppose) the
merger.
A decision by the ACCC to decline to grant informal clearance is not reviewable on the merits.
Formal clearance
In contrast to the informal clearance procedure, the formal clearance procedure requires the parties to complete
the Form O, a prescribed application form (which is similar to the Form CO used in Europe) and to pay a filing fee
of AUD$25,000. Subject to any claims for confidentiality, the application becomes part of the public record and the
remainder of the formal clearance process is transparent and public.
The formal clearance process is conducted in accordance with statutory timeframes. Provided the ACCC is
satisfied about the content of the application form, the ACCC has 40 business days to make a determination,
although the ACCC may extend the 40 day period with the consent of the parties. In addition, the ACCC may
extend the 40 day period by a further 20 business days, without the consent of the parties.
If the ACCC has not issued a determination at the end of the statutory period, it is taken to have refused to grant
the clearance. In those cases, the parties have a right to apply to the Australian Competition Tribunal for a limited
merits review of the ACCC’s decision. In conducting the review, the Tribunal may only have regard to material that
was before the ACCC when the ACCC considered the application for formal clearance, and must conduct its
review of the ACCC’s decision within 30 business days. The Tribunal may extend the 30 day period by a further
60 days if it considers the matter complex.
The ACCC has publicly discouraged applications for formal clearance, stating that it will inflexibly apply the
statutory framework to any applications. As far as we are aware, no application for formal clearance has ever
been made in Australia.
Authorisation
It is possible to obtain authorisation from the Australian Competition Tribunal for proposed acquisitions. The
Tribunal will only grant authorisation for an acquisition if it is satisfied that the public benefits of the acquisition
would likely outweigh any anti-competitive detriments resulting from the acquisition.
The parties are required to complete the Form S, a prescribed application form, and pay a filing fee of
AUD$25,000. The CCA provides a statutory timeframe during which the Tribunal must consider an application for
authorisation. The Tribunal must make its decision within three months or, if the acquisition raises complex
issues, within six months of the date of the application for authorisation. If no decision is made within this statutory
period, the Tribunal is taken to have refused to grant the authorisation. Merits review is not available for
authorisation decisions. If granted, authorisation results in statutory immunity from prosecution for the acquisition.
However, applications for authorisations of acquisitions are rare and it is fair to say that the experience in Australia
in respect of applications for authorisations of acquisitions has been discouraging.
Guide to doing business in Australia / kwm.com 28

Cartel conduct - criminal and civil prohibitions
Cartel provisions are subject to parallel civil prohibitions and criminal offences under the CCA. A cartel provision
involves competitors agreeing to fix, maintain or control prices, restrict output, allocate customers or suppliers, or
rig bids.
What differentiates the civil and criminal prohibitions is that, for the criminal offences, it is necessary for the
Federal Director of Public Prosecutions, acting under instructions from the ACCC, to prove beyond reasonable
doubt the existence of the cartel provision and that the parties knew or believed the cartel to exist, even if they did
not understand that the conduct in question was illegal. It is not necessary to prove an intention to dishonestly
obtain a benefit.
The CCA avoids double jeopardy in Australia for cartels by allowing for civil proceedings to be postponed until
criminal proceedings are completed. If the defendant is convicted in the criminal proceedings, the civil
proceedings will be permanently stayed.
There are a range of complete defences and exceptions to the criminal offences and civil prohibitions on cartel
conduct, including for limited types of joint ventures and collective acquisitions. Defendants bear the evidentiary
burden of proving that the complete defences or exceptions apply in their case.
The maximum penalties for civil and criminal cartel conduct are the same as for other breaches of the CCA (see
above).
ACCC’s immunity and co-operation policies
The ACCC has an immunity policy for cartel conduct. It also has a co-operation policy for granting leniency for
cartel conduct.
Under the immunity and co-operation policies, it is possible to avoid being prosecuted by the ACCC for civil cartel
conduct or the Commonwealth Director of Public Prosecutions for criminal cartel conduct. It is also possible for
the ACCC or the Commonwealth Director of Public Prosecutions to make submissions to the court in support of
reduced penalties (or jail sentences) in a prosecution in relation to the cartel. It is necessary for the company or
individual to co-operate fully with the ACCC’s investigation of the cartel in question before these benefits can be
obtained.
Other forms of anti-competitive conduct
The CCA also prohibits a range of other types of anti-competitive conduct, including misuse of substantial market
power, certain forms of tying conduct, resale price maintenance and provisions in contracts, arrangements and
understandings that have the purpose or likely effect of substantially lessening competition.
Price signalling
The CCA has been amended to prohibit price signalling in respect of certain types of goods and services supplied
in the banking sector. The prohibitions are civil in nature.
Complete defences and exceptions
The CCA contains a range of complete defences and exceptions for conduct that might otherwise breach the
CCA, such as where the conduct would be likely to give rise to a net public benefit.
The key complete defences and exceptions relate to limited types of joint ventures, limited types of collective
acquisition arrangements, related bodies corporate, and instances where the ACCC can be satisfied that the
conduct in question would be likely to give rise to a net public benefit.
© King & Wood Mallesons 29

The ACCC’s investigatory powers
The ACCC has a range of investigatory powers, including powers to compel the production of information and
documents and to cross examine individuals under oath and without privilege against self-incrimination.
Telephone interception powers can be used to investigate the criminal offences.
The ACCC cooperates with competition regulators around the world in relation to suspected cross-border mergers
and cartels.
Proposed changes to competition law
Following the Federal election and the Coalition forming a new government, Australia’s competition laws are up
for review. See www.incompetition.com.au. The likely areas of reform are:
• extending the unfair contract terms regime
• refining the national franchising code;
• reviewing the formal merger process, and
• creeping acquisitions.
King & Wood Mallesons was named Australian Competition Law Firm
of the Year in 2013 by Lawyers World Magazine.
Our Competition team also won 2 deal awards at the Global Competition
Review Awards 2013 in Washington DC.
© King & Wood Mallesons 30

BANKING SYSTEM
The Australian financial system consists of commercial banks, retail banks and merchant / investment banks
(including branches and subsidiaries of foreign banks) and other financial intermediaries. APRA is the regulator
which determines whether to authorise a company to conduct banking business. A company authorised by APRA
to carry on banking business is known as an Authorised Deposit-taking Institution (ADI). ADIs may also be
required to hold an Australian Credit Licence (ACL) (see the Consumer credit section) and/or an AFSL (see the
Financial services licensing regime section). ADIs generally provide the range of services usually found in
developed countries, including short-term wholesale finance and securities underwriting and placement. Certain
specialist ADIs provide assistance in areas such as resource and industry development.
A foreign bank which wishes to conduct banking business in Australia may operate either through an authorised
branch or an authorised locally-incorporated subsidiary. Authorised foreign bank subsidiaries can generally
engage in the full range of banking business in Australia, but authorised foreign bank branches in Australia are
generally subject to restrictions including a prohibition on engaging in retail banking (generally, taking deposits of
less than AUD$250,000 from non-corporates).
A foreign bank which does not wish to conduct banking business in Australia but wishes to have an Australian
representative office to provide liaison services to Australian customers in relation to its offshore banking services,
must obtain APRA’s consent. It will also be required by APRA to register with ASIC as carrying on business in
Australia (see the Foreign company registration section).
Foreign enterprises have the same access to the Australian capital markets as local enterprises. Foreign
governments, their agencies and international organisations may also access the Australian capital markets
subject to certain conditions.
There are also legal restrictions on using certain words and expressions relating to banking (such as ‘bank’) in
Australia without APRA’s consent.
Government guarantee schemes
As a result of the global financial crisis, the Federal Government introduced two schemes in 2008 intended to
promote financial system stability in Australia.
The Financial Claims Scheme (FCS) relates to deposits and was introduced through amendments to the Banking
Act. It was intended to protect a depositor with an ADI, such as a bank, building society or credit union, from loss
on their deposits up to AUD$1 million in aggregate per institution. Given improvements in funding conditions since
the global financial crisis, the FCS has been reduced in terms of coverage and has also been reduced to a new
permanent cap. Since 1 February 2012, the FCS has been reduced to a new cap of $250,000 per customer per
ADI, with some transitional arrangements applying to certain products such as term deposits. Among other
restrictions on coverage, the revised FCS does not apply to branches of foreign-incorporated ADI operating in
Australia or to balances denominated in foreign currency accounts. Another aspect of the FCS was introduced to
protect policyholders of insurers and was implemented through amendments to insurance legislation.
Guide to doing business in Australia / kwm.com 31

The Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding was also introduced in
2008. This scheme was aimed at protecting deposits held with a financial institution above AUD$1 million through
a guarantee, provided for a fee, that operated separately from the FCS, as well as guaranteeing wholesale term
funding liabilities of ADIs for a fee. The scheme was closed for new liabilities after 31 March 2010. Deposits and
wholesale liabilities guaranteed under the scheme as at that date remain guaranteed, for a fee, until their maturity
date (up to five years).
King & Wood Mallesons was named as Best Provider to the Finance &
Insurance Sector at the 2013 BRW Client Choice awards.
Guide to doing business in Australia 32

FINANCIAL SERVICES
LICENSING REGIME
Under Chapter 7 of the Corporations Act, all persons who carry on a financial services business in Australia are
required to have an Australian financial services licence (AFSL), to be appointed as an authorised representative,
or to have the benefit of an exemption from this requirement.
AFSLs are issued by ASIC on satisfaction of the relevant licensing application criteria. Licence applications can
require quite extensive proofs in support of the application. Licence holders have an extensive range of
obligations imposed on them.
Breaches of the AFSL regime can lead to criminal sanctions and the possibility that unlicensed Australian
counterparties can rescind transactions.
Under the relevant Australian legislation:
• a financial service provider may be deemed to carry on a financial services business in Australia even though it
has no physical presence in Australia, and
• while there are some general licensing exemptions based on a financial service provider only dealing with
institutional Australian counterparties (eg Australian banks, financial services licence holders, insurers and
fund managers), such exemptions will generally only apply to services provided from outside of Australia.
Lenders are, generally speaking, not covered by this licensing system (see the Consumer credit section regarding
licensing for providers of credit), but most other types of financial services are covered (for example, deposit
taking, foreign exchange contracts, derivatives, custody, managed investments, stockbroking, insurance and
superannuation). This also includes wholesale over-the-counter treasury and derivative trading, potentially even
by entities who would consider themselves end-users of these products.
Examples of a foreign company which may be affected by the AFSL regime include:
• a foreign company entering into spot, swap, repo, option or forward transactions in currency, commodities,
metals, rates and indexes with persons in Australia through either the over-the-counter markets or through
automated dealing systems
• a foreign company issuing securities, shares, stocks, deposits, debentures, bonds, managed investment
products or insurance to persons in Australia
• a foreign company effecting secondary market trades in securities, shares, stocks, debentures, bonds or
managed investment products as an agent or trustee of a person in Australia
• a foreign company, whilst acting as an agent or trustee of a third person, entering into secondary market trades
in securities, shares, stocks, debentures, bonds or managed investment products with counterparties who are
persons in Australia
• a foreign company providing giro post or other electronic non-cash payment facilities to persons in Australia, or
• a foreign company holding securities, shares, stocks, debentures, bonds, managed investment products, or
interests in such products, on trust for persons in Australia.
A number of exemptions may be available to foreign financial service providers. These can include:
• transactions arranged or effected by an Australian financial services licensee
Guide to doing business in Australia / kwm.com 33

• certain products or services offered to Australian wholesale clients by financial services providers who are
regulated by certain approved foreign regulators, such as the Securities and Exchange Commission in the US,
the Financial Conduct Authority in the UK, the Monetary Authority of Singapore or the Securities and Futures
Commission in Hong Kong, and who comply with other applicable conditions so as to qualify for this relief
• certain foreign service providers who are not otherwise carrying on business in Australia and who only provide
limited financial services to Australian wholesale or professional investor clients from outside Australia, and
• supplementary services to an Australian client in relation to a product issued and acquired outside Australia.
The exact scope of these exemptions is technical and complex. Much depends on the individual circumstances of
the relevant financial services provider.
The Australian financial services regime differentiates between retail and wholesale clients. The Federal
Government is currently considering reforms to the existing wholesale client tests. There are significant additional
disclosure and conduct requirements where financial services are provided to retail clients.
In addition, persons who operate financial markets in Australia must obtain an Australian market licence or fall
within an exemption from this requirement. In certain circumstances, this market licensing regime may affect
foreign companies that operate markets in financial products in which Australian persons are participants.
King & Wood Mallesons have advised numerous major local and overseas financial institutions on the
financial services regulatory provisions in the Corporations Act. We have also been active in making
submissions to Government and regulators and making relief applications to ASIC.
© King & Wood Mallesons 34

E-BANKING AND
PAYMENT SYSTEMS
E-banking and payment systems involve the use of electronic networks, including the internet, to offer e-banking
and payment services. Generally, e-banking and payment systems raise issues on two levels regarding:
• organisation - the development of an appropriate structure, and
• operation - determining the rights and obligations of consumers and other participants.
The legislative and regulatory restraints discussed below impact on both these levels. In addition, organisations
offering e-banking and payment systems in Australia place significant reliance on carefully drafted contracts to
determine the rights and obligations of consumers and other participants. Contracts for e-banking and payments
must comply with the range of regulatory requirements referred to below and must address a range of additional
legal issues. For example, the contracts must:
• comply with the requirements relating to e-commerce (see The digital economy and communications section),
competition, tax and privacy laws
• determine and attribute liability between participants in the payment system in an appropriate manner, and
• protect each party’s intellectual property.
In Australia, e-banking and payment systems are subject to regulation from a number of sources, including those
summarised below.
• Corporations Act, Chapter 7 - this legislation (discussed in the Financial services licensing regime section)
also regulates e-banking operations and products. It may be necessary to hold an Australian financial services
licence to provide any e-banking services or to operate any payment system.
• Payment Systems (Regulation) Act 1998 (Cth) - this legislation gives the Reserve Bank of Australia (RBA),
through the Payment Systems Board, the power to designate payment systems where the RBA considers it is
in the public interest to do so.
• Payment Systems and Netting Act 1998 (Cth) - this legislation was introduced to provide legal certainty for
multilateral netting undertaken in the Australian payment system.
• The ePayments Code (formerly the Electronic Funds Transfer Code of Conduct or ‘EFT Code’) - the
ePayments Code regulates electronic payments including ATM, EFTPOS and credit card transactions, online
payments, internet and mobile banking and BPAY. The ePayments Code imposes obligations such as:
o disclosure of terms and conditions relating to electronic payment transactions/facilities
o establishment of complaint investigation and dispute resolution procedures
o establishment of a regime for resolving mistaken internet banking payments, and
o apportionment of liability between organisations involved in a transaction (limiting the supplier’s ability to
make the customer liable for certain kinds of losses).
The ePayments Code was released on 20 September 2011 and replaces the EFT Code, which has existed since
1986. The ePayments Code came into effect on 20 March 2013. The ePayments Code is a voluntary code of
practice, however the significant majority of Australian financial services institutions are subscribers.
In addition to the RBA, e-banking and payment systems may be subject to regulation by the following regulators:
Guide to doing business in Australia / kwm.com 35

• Australian Prudential Regulation Authority - APRA regulates e-banking under the Banking Act 1959 (Cth)
(Banking Act). The Banking Act regulates banking business and requires all bodies carrying out such business
to become ADIs by application to APRA.
• Australian Competition and Consumer Commission - the ACCC has adopted an increasingly important role
in relation to payment systems. It ensures that payment systems arrangements comply with the Competition
and Consumer Act 2010 (Cth) provisions in relation to competition and access.
• Australian Securities and Investments Commission - the ASIC Act 2001 (Cth) gives ASIC the power to
prosecute organisations providing financial services where they are in breach of the consumer protection
provisions.
© King & Wood Mallesons 36

ANTI-MONEY
LAUNDERING
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) establishes
Australia’s Anti-Money Laundering (AML) regime. The AML regime consists of the AML/CTF Act, regulations
containing technical issues, legally enforceable rules, and non-binding guidelines. The AML/CTF Act covers all
entities participating in designated services. The definitions regulate the activity, not the person.
“Designated services” include:
• deposit taking • electronic funds transfers (EFT)
• issuing and selling securities & derivatives • remittance services
• foreign exchange contracts • providing interests in managed investment schemes
• lending and allowing loan transactions • finance leasing
• providing custodial or depository services • pensions, annuities & life policies
The AML/CTF Act regulates “designated services” generally only when they are carried on through a “permanent
establishment” in Australia. A permanent establishment in Australia includes a place in Australia where the entity
carries on business through an agent. It also regulates the activities outside Australia of a branch or subsidiary of
an Australian resident. The diagram below sets out the key obligations for a reporting entity under the AML/CTF
Act.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the regulator. Providers of ‘designated
services’ must register with the relevant regulator, AUSTRAC, and are charged a periodic tiered levy to recover
AUSTRAC’s supervisory and regulatory costs in each year. An additional levy component is payable on a per
transaction basis by designated service providers that report certain transactions to AUSTRAC.
Customer
identification
AML/CTF
program
Compliance
reports
EFT
transactions/
remittance
services
KEY
OBLIGATIONS
Record
keeping
Ongoing
customer
due
diligence
AUSTRAC*
reporting
*Suspicious matters,
transactions over
AUD$10,000 and, for
AIDs, on fund
transfers
Guide to doing business in Australia / kwm.com 37

PERSONAL PROPERTY
SECURITIES
Personal Property Securities Act
The Personal Property Securities Act 2009 (Cth) (PPSA) established a national system for the registration of
security interests in personal property, together with rules for the creation, priority and enforcement of security
interests in personal property. This system has replaced the former Commonwealth and State regimes, including
the regime under the Corporations Act for registration of charges. It is modelled on the personal property regimes
in New Zealand, Canada and the United States.
The PPSA commenced operational effect on 30 January 2012, with a two year transitional period. It has a
retrospective effect on security interests and security agreements arising before 30 January 2012 due to
transitional provisions.
How wide is its application
The PPSA regime affects a range of business activities, well beyond the banking sector. Security interests for the
purposes of the PPSA include:
• traditional securities such as charges and mortgages
• transactions that in substance, secure payment or performance of an obligation but may not have traditionally
been legally classified as securities, eg hire purchase agreements, leases such as a finance leases and capital
leases, retention of title arrangements, flawed asset arrangements and turnover trusts, and
• other interests that are deemed to be security interests whether or not they secure payment or performance of
an obligation, eg a transfer of an account, a transfer of chattel paper, a commercial consignment and a
Personal Property Securities (PPS) lease.
Some of these security interests might not be documented separately but may be embedded in other, more
general documents eg facility agreements, guarantees and intercreditor documents such as subordination
agreements and priority deeds.
What needs to be done
A person who holds a security interest under the PPSA must register (or otherwise perfect) the security interest to
ensure that the security interest has priority over competing interests (and in some cases, to ensure that the
security interest survives the insolvency of the grantor). If they do not:
• another security interest may take priority, or
• another person may acquire an interest in the assets which are subject to the security interest free of their
security interest, and
• they may not be able to enforce the security interest against a grantor who becomes insolvent.
Complexities and concerns
The new regime made fundamental changes to Australian law and therefore there is not yet settled market
practice on some issues and the regulatory framework raises issues which have not yet been tested in Australian
courts.
© King & Wood Mallesons 38

Some of the complexities and concerns in relation to PPSA are:
• volume of information: industry must cope with understanding the new regime, identifying security interests,
updating documents and implementing policies and procedures (including wide scale registration)
• joint venture issues: many of the mechanisms used to protect joint venture partners from the insolvency or
default of an individual joint venture partner may give rise to complicated characterisation, registration and
other PPSA issues
• intellectual property (IP): there are specific rules for IP including that a security agreement over goods is
deemed to include inherent IP rights. Security interests on the PPS register no longer need to be registered on
existing designs, patent and trade mark registers, but there may be benefits in dual registration
• leases and bailments: most finance and operating leases of equipment are treated as security interests, as
are other commercial arrangements which involve one party possessing and using the asset of another
• assignments of receivables: the transfer of receivables, such as accounts payable under sales or service
contracts, are treated as security interests so registration must be considered
• priority arrangements: the functionality of the registration system, the high volume of registrations and the
new priority rules will result in increased dealings between secured parties who will need to negotiate priority
arrangements or otherwise protect their priority position (for example, through notices to holders of “purchase
money security interests” such as suppliers who sell goods subject to retention of title arrangements)
• cross border rules: the PPSA has particular cross border rules for Australian companies with assets
overseas and also for non-Australian companies with assets in Australia (with significant additional security
registration issues), and
• obligations to disclose: the PPSA obligations to disclose may mean that commercial parties are compelled
to disclose to appropriate interested parties, documents that they thought could be kept confidential.
Depending on their terms, this may include joint venture agreements, sales contracts, intellectual property
licences, other licences and bailments.
Pre-PPSA transactions are affected
The PPSA has a retrospective effect on security interests and security agreements arising before 30 January 2012
by operation of the transitional provisions. A secured party may need to take additional steps under the PPSA to
maintain the effectiveness or priority of its pre-PPSA securities. Further, as a result of the broad definition of
“security interest” under the PPSA, a secured party may need to take steps under the PPSA to maintain the
effectiveness or priority of other transactions which would not under pre-PPSA law be considered to comprise a
security interest.
The first major Australian decision under the PPSA has been handed down. It followed Canadian
and New Zealand decisions and confirmed that the PPSA has significantly impacted on the
primacy of ownership in Australian law.
(see Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC
852)
Guide to doing business in Australia / kwm.com 39

TAX - OVERVIEW
A foreign entity may carry on business in Australia through various structures including an Australian branch of
itself, an Australian subsidiary company, an Australian trust or as a partner in a partnership.
The tax sections below address some issues in respect of:
• income tax imposed on a company in Australia (including an Australian branch of a foreign company or an
Australian subsidiary company) (see Tax - companies below)
• income tax imposed on an Australian trust and its members (see Tax - trusts below)
• income tax imposed on individuals (including non-residents) (see Tax - individuals below)
• taxes other than income tax (see Other taxes - FBT, GST, duty and other taxes below), and
• Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) (see Energy and Resources
below).
Changes to tax law
Australian tax law changes frequently so the comments in this guide could become outdated at any time.
See our Alert in www.kwm.com for key tax changes which the new Coalition government proposes to introduce.
King & Wood Mallesons was named as Best Tax Services Provider at the 2013 BRW Client Choice
Awards. We would be pleased to assist you in determining the Australian tax implications with
respect to your business operations.
© King & Wood Mallesons 40

TAX - COMPANIES
Overview of Australian income tax
Australian income tax is generally levied annually on the “taxable income” of a taxpayer. Broadly speaking,
taxable income is determined on the basis of “assessable income” less “allowable deductions”.
The Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth) (collectively the “Tax
Act”) provide that:
• the assessable income of an Australian resident taxpayer includes both ordinary and statutory income from all
sources (ie it includes worldwide income), and
• the assessable income of a non-resident taxpayer (ie foreign taxpayer) includes ordinary and statutory income
from Australian sources (including where such source is deemed). A non-resident taxpayer’s statutory income
can include capital gains to the extent to which the capital gain relates to an asset that has the necessary
connection (as determined by the Tax Act) with Australia (discussed further below).
A non-resident taxpayer should also consider the possible application of any relevant Double Tax Agreement
(DTA) between Australia and the country in which it is resident for income tax purposes, as this may restrict
Australia’s ability to tax the foreign resident notwithstanding the above. As a general proposition, a DTA will
override the Tax Act to the extent to which there are any inconsistencies.
Residency
As a general rule, a company will be treated as a “resident” of Australia if it is:
• incorporated in Australia, or
• not incorporated in Australia, but carries on business in Australia and has either its central management and
control in Australia or its voting power controlled by shareholders who are residents of Australia.
A company will be treated as a “non-resident” of Australia if it is not a “resident” of Australia for the purposes of the
Tax Act.
Accordingly, a subsidiary company that is incorporated in Australia will generally be treated as a resident of
Australia for Australian income tax purposes and a non-resident company who conducts business in Australia
through an Australian branch of itself will generally be treated as a non-resident for Australian income tax
purposes.
The corporate income tax rate for both resident companies and non-resident companies is currently 30%.
The normal accounting period for Australian income tax purposes is a 12 month period ending 30 June of each
year. However, a company may apply to the Commissioner of Taxation for what is known as a “substituted
accounting period” (SAP) to allow it to return its taxable income for a different accounting period (ie 1 January to
31 December). It is at the Commissioner of Taxation’s discretion as to whether a taxpayer may adopt a SAP.
A comprehensive Pay-As-You-Go (PAYG) system governs reporting, withholding and payment obligations,
including company income tax. An Australian company will generally pay tax on a quarterly basis (depending
upon its turnover) on, broadly, its income for the relevant period by reference to what is known as an “instalment
rate”. The instalment rate for a company is provided by the Commissioner of Taxation and is based on the last
income tax assessment arising from the lodgement of the relevant income tax return. This rate can be varied in
certain circumstances.
Guide to doing business in Australia / kwm.com 41

The effect of a Double Tax Agreement (DTA)
A DTA is an agreement between two countries, governing the way in which income and gains derived by residents
of those countries is taxed. The primary purpose of a DTA is to prevent the double taxation of the same income,
and eliminate tax avoidance.
If you are considering conducting business in Australia via an Australian branch of a foreign company, it is
important to consider the effect of an applicable DTA. This is because a DTA can influence the tax outcomes for a
non-resident company who conducts business in Australia via a branch. An applicable DTA is one which Australia
and the country in which the foreign company is a resident for tax purposes have ratified.
Among other things, a DTA allocates taxing rights between jurisdictions. Australian law provides that to the extent
to which the Tax Act is inconsistent with the DTA, the DTA will prevail. Accordingly, if the Tax Act seeks to impose
income tax on an amount of income but the DTA allocates the taxing rights to the other jurisdiction, no Australian
income tax liability will be imposed. Similarly, if the Tax Act does not impose income tax on an amount of income,
no Australian income tax liability will be imposed even if the DTA allocates the taxing rights to Australia.
The “business profits” article
Generally, the most relevant provision in a DTA for the Australian branch of a foreign company to consider is what
is known as the “business profits article”. Whilst each DTA can be different, most business profits articles provide
that a foreign entity will only be taxable in Australia if it carries on business in Australia via a permanent
establishment (PE). If a foreign entity has a PE in Australia, it will generally be taxable in Australia on the profits
that are attributable to that PE.
What constitutes a permanent establishment (PE)
Each DTA contains a different definition of PE, but it generally refers to a “fixed” place of business such as a
branch or office. Each DTA also provides a number of carve outs or exclusions to what constitutes a PE in
recognition of the fact that minor operations conducted in a jurisdiction should not trigger an income tax liability
despite the fact that they may constitute a “fixed” place of business.
Taxation of companies
The following overview is applicable to Australian subsidiary companies and, where appropriate, the Australian
branch of a non-resident company to the extent to which the branch is either carrying on business in Australia
through a PE or derives Australian sourced income.
Assessable income
The assessable income of a taxpayer includes all gross income according to ordinary concepts (ie ordinary
income).
It also includes items which would not be income according to ordinary concepts but which the Tax Act includes as
assessable income (called “statutory income”). For example, a net capital gain arising to a taxpayer under the
Australian capital gains tax provisions is included in the assessable income of a taxpayer (see Capital gains tax
regime below).
There are only limited situations in which income is either exempt from tax or is not assessable.
Allowable deductions
Allowable deductions include general business outgoings to the extent they are incurred in gaining or producing
assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing
that income.
Guide to doing business in Australia / kwm.com 42

Losses or outgoings of a capital, private or domestic nature, or which are incurred in relation to gaining or
producing exempt income, are generally not allowable deductions.
An outgoing will generally be deductible to a taxpayer in the income year in which it is incurred (which for a
company is generally when it becomes liable). However, the Tax Act contains rules which alter the availability or
timing of certain deductions.
In addition, the Tax Act contains what are known as “capital allowances” which allow the cost of certain assets to
be deducted over the economic life of the asset. In the case of depreciating assets, the depreciation rate is based
on the effective life of the asset. However, depreciation deductions are not available for certain types of property
(eg goodwill, trademarks or vacant land). The construction expenditure incurred in respect of certain buildings
may also be deductible in certain circumstances at rates specified in the Tax Act.
Deductions are also available for certain specified expenses (eg borrowing expenses and certain expenses in
relation to managing tax affairs).
Capital gains tax regime
Unlike other jurisdictions, there is no separate capital gains tax (CGT) imposed in Australia. Instead, the Tax Act
includes, in the assessable income of a taxpayer, any net capital gains made by the taxpayer in a year of income.
In general terms, the Australian CGT provisions apply to the disposal of an asset acquired (or deemed to have
been acquired) after 19 September 1985. There are some circumstances where a capital gain can arise to a
taxpayer even if there is no disposal of an asset (generally referred to as the “creation” CGT events whereby a
CGT event occurs upon the creation of an asset).
A resident taxpayer will make a capital gain in connection with a CGT event if the capital proceeds received (or
deemed to be received) in connection with the CGT event are more than the asset’s cost base. A capital loss will
arise if the capital proceeds received are less than the asset’s reduced cost base.
Broadly, capital proceeds include the total of the money the taxpayer receives (or is entitled to receive) and the
market value of any other property that the taxpayer receives (or is entitled to receive) with respect to the CGT
event. Provisions exist which will deem the amount of capital proceeds received in certain circumstances (ie
where parties to a transaction are not acting at arm’s length, the Tax Act may deem that taxpayer to have received
a higher or lower amount of capital proceeds irrespective as to the actual amount received). Generally, the cost
base or reduced cost base of an asset is what the taxpayer paid to acquire the asset, which again may be altered
in certain circumstances.
For non-resident taxpayers, only limited categories of assets are subject to the CGT provisions, namely:
• assets that the non-resident uses in its Australian branch operations
• real property situated in Australia (including a lease of land, if the land has the necessary connection with
Australia as stipulated in the Tax Act)
• non-portfolio interests in a company or trust whose value is principally attributable (directly, or indirectly through
interposed entities) to real property situated in Australia (see our discussion below on proposed changes to this
exemption for foreign residents), and
• options or rights to acquire interests in any of the above items.
If a non-resident taxpayer is subject to the CGT provisions, they will generally calculate their capital gain or loss in
the same way a resident taxpayer would (ie by reference to the capital proceeds and cost base /reduced cost base
with respect to the particular CGT event).
© King & Wood Mallesons 43

The CGT rules provide for various concessions and exemptions, examples of which include the following:
• generally, an individual, a complying superannuation entity and some trusts which hold an asset for at least 12
months, may qualify for the CGT discount concession. Under the concession, the assessable capital gain is
reduced by 50% for individuals and some trusts, and 33.3% for complying superannuation entities, after being
offset by any available capital losses (companies are not eligible for the concession)
• various concessions for small businesses are available
• CGT rollover relief is available in a number of circumstances, including for certain scrip for scrip takeovers,
demergers and some limited forms of corporate reorganisations. Under a rollover, any capital gain
consequence is deferred, and
• incentives are available for certain venture capital investments in Australia.
Proposed changes to CGT for foreign residents
The Australian Government in the 2013-14 Budget announced changes to the scope of the foreign resident capital
gains tax exemption that will expand the scope of indirect Australian real property interests that foreign residents
will be required to pay capital gains tax on. The announced changes relate to the “principal asset test”. Under the
“principal asset test”, foreign residents are only required to pay Australian capital gains tax on disposals of
interests in certain entities where, very broadly speaking, it can be established that the value of the taxable
Australian real property assets of the entity exceeds the value of the non-taxable Australian real property assets of
the entity.
The former Government announced that it would amend the “principal asset test” such that in determining the
value of the taxable Australian real property assets and non-taxable Australian real property assets of an entity,
intangible assets that are connected to rights to mine, quarry or prospect for natural resources (such as mining,
quarrying or prospecting information, rights to such information and goodwill) will be treated as part of the rights to
which they relate. This is likely to result in an increase in the value of the taxable Australian real property assets
and a decrease in the value of the non-taxable Australian property assets, given that such assets would usually be
regarded as non-taxable Australian real property assets. This change is to apply to CGT events that occur after
the time of the announcement.
The former Government announced that it would introduce a non-final withholding tax regime for disposals of
taxable Australian assets by foreign residents. In summary, the measure will require purchasers of assets from
foreign residents to withhold and remit to the ATO 10% of the proceeds from the sale. This will apply not only to
capital gains tax disposals, but also to disposals that are likely to generate gains on revenue account. However,
residential property transactions of less than $2.5 million will be excluded. This measure was announced to apply
from 1 July 2016.
Dividends
Generally, dividends paid to a shareholder of a company are taxable in Australia if the dividend is paid:
• to a resident shareholder
• to a non-resident shareholder, out of profits derived by the company from sources in Australia, or
• to a non-resident shareholder that carries on business in Australia at or through a PE in Australia, where the
company is a resident of Australia and the dividends paid to the shareholder are attributable to the PE of the
shareholder, to the extent the dividend is paid out of profits of the Company from sources outside Australia.
However, any such distributions must still satisfy the definition of “dividend” as provided for in the Tax Act in order
to be taxed as a dividend. If the distribution does not satisfy this definition, it will not constitute a dividend for the
purposes of the Tax Act.
Recent changes to Australian company law mean that a company can now pay a dividend if it has no retained
earnings if various tests are satisfied. In this regard, further changes to the company law (which would not change
Guide to doing business in Australia / kwm.com 44

our discussion above) have been proposed but have not, as at the date of this Guide, been enacted. Also, the
ability to “frank” such dividends (see discussion below) will depend on the particular circumstances.
Dividend imputation system
Australia has a system of imputation of company tax applying to distributions made by Australian resident
companies (and certain other entities taxed as or like companies, such as limited partnerships) in respect of their
equity (see the discussion below on the tax rules for classifying instruments as debt or equity).
The dividend imputation system does not apply to non-resident companies operating via an Australian branch.
In effect, the imputation system allows resident shareholders to claim a credit (a franking credit) for Australian tax
paid by a company on profits from which the dividend is paid. The ability of a taxpayer to claim a credit requires
the taxpayer to satisfy a number of criteria. Under this system, a dividend paid out of “profits” (as determined
under the Tax Act) which have been subject to Australian tax, is referred to as a franked distribution (as opposed
to an unfranked distribution). There are complex rules in relation to dividend imputation, including wide reaching
anti-avoidance rules.
Franked distributions
If the recipient of the franked distribution is a non-resident taxpayer, the dividend is normally exempt from dividend
withholding tax.
Where a franked distribution is paid to a resident taxpayer, the taxpayer is generally required to include in its
assessable income, the sum of the cash distribution and the franking credits attaching to it. The taxpayer is then
entitled to reduce its income tax liability by the amount of the franking credits attached to the distribution.
Depending on the level of franking of a distribution and the recipient’s tax rate, in practical terms the availability of
franking credits means that the distribution may be wholly or partly free of tax in the hands of the recipient. Also,
certain taxpayers (but not companies) can obtain a refund from the Australian Taxation Office (ATO) for any
excess franking credits.
Unfranked distributions
If the recipient of an unfranked distribution paid by an Australian resident company is a non-resident taxpayer, the
dividend is normally subject to dividend withholding tax (discussed further below). An exemption from dividend
withholding tax may apply if the dividend is paid out of foreign sourced income derived by the Australian resident
company. The full amount of unfranked distributions (in effect, distributions representing profits of the company
that have not been subject to Australian tax at the corporate level) is included in the assessable income of a
resident shareholder.
Anti-avoidance measures
The imputation rules aim to ensure that persons who do not bear the economic risks and opportunities of
ownership of equity, or who own equity only briefly, cannot gain the benefit of franking credits in relation to that
equity. This is generally achieved by requiring that equity be held at sufficient risk (as defined in the Tax Act) for
more than 45 days (or 90 days for preference shares) by a taxpayer before they will be eligible to qualify for a
franking benefit in respect of a distribution. A similar rule applies when a taxpayer is under an obligation to make a
related payment with respect to a distribution paid on equity. There are exceptions to these rules.
The imputation system applies in a modified way to any company that is directly or indirectly at least 95% owned
by non-residents or by tax exempt bodies. The objective is to prevent trading in franking credits by restricting the
ability of companies which are effectively wholly owned by non-residents or tax exempt entities to provide franking
benefits to resident shareholders. Similarly, any franking account surpluses of companies which were formerly
effectively owned by non-residents or tax exempt entities (at least to 95%) may be quarantined.
© King & Wood Mallesons 45

Share capital distributions
It is possible for Australian companies to distribute capital to shareholders. However, specific anti-avoidance tax
provisions and rules governing the distribution of share capital may apply.
Withholding tax on interest, dividends and royalties paid outside Australia
Overview
Withholding tax is imposed on the payment of unfranked dividends from residents to non-residents (except where
the dividend is attributable to an Australian PE of the non-resident).
It is also imposed on payments of interest and royalties that, in broad terms, are paid from Australia to another
jurisdiction. For example, withholding tax generally applies to interest payments made from an Australian office of
one entity, to the non-Australian office of another entity. It is not relevant whether the entities are Australian
residents.
Tax rules for the classification of financial arrangements as either debt or equity must be considered in
characterising a payment for withholding tax purposes. For example, it is possible that a payment may be treated
as a dividend for withholding tax purposes even if it is interest at general law (refer to the discussion on classifying
instruments in Debt and equity rules below).
A non-resident company which operates a branch in Australia must pay income tax in Australia on its Australian
source income, but should not generally be subject to any Australian withholding tax when the branch remits the
profits offshore.
Impact of Double Tax Agreements (DTAs)
The “basic” withholding tax rates are set out in the Australian tax legislation. However, if the person entitled to the
interest/dividend/royalty payment is resident in a country with which Australia has a DTA in place, the rate may be
“capped” under the DTA (at a lesser rate than the “basic” rate).
Australia has double tax treaties with many countries including virtually all of the OECD countries and most of
Australia’s major trading partners in Asia (except Hong Kong). Companies which are tax resident in a country
which has ratified a DTA with Australia may be entitled to the benefit of these DTAs depending on the terms of the
particular DTA.
Australia is in the process of reviewing its international tax arrangements, including a review of its DTA policy and
processes. A number of DTAs have recently been renegotiated or are currently being renegotiated (for example,
the DTA with India), and a number of new DTAs have been or are due to be finalised, or to come into force, shortly
(including those with Chile and Turkey).
Interest withholding tax
If interest (or, broadly, an amount in the nature of interest) is paid by an Australian company or the Australian
branch of a foreign company to a non-resident taxpayer, this amount will be subject to withholding tax at 10% of
the gross amount of the interest (or the amount in the nature of interest). This is consistent with the maximum rate
limits under all of Australia’s DTAs, subject to some exceptions. However, interest withholding tax is not imposed
on interest paid on debentures (and certain other kinds of debt instruments) that are issued by way of a public
offer which meets certain conditions.
Further, under certain of its DTAs, Australia will not impose withholding tax on interest payments made to banks
and financial institutions in certain circumstances.
Guide to doing business in Australia / kwm.com 46

The former Government confirmed in the 2013-14 Budget the previously announced phasing down of interest
withholding tax payable by financial institutions. It has announced that interest withholding tax would be phased
down where interest is paid by:
• Australian subsidiaries and branches of foreign financial institutions on borrowings from their overseas parent
• Australian-owned financial institutions on borrowings from related parties overseas, and
• any financial institution borrowing under offshore retail deposits which they on-lend in Australia.
The measures are not proposed to extend to offshore borrowings by entities that are not financial institutions.
Corporate borrowers would still need to rely on existing interest withholding tax exemptions, such as for publicly
offered debt under section 128F of the Tax Act.
Dividend withholding tax
In general, a franked dividend paid by a resident company to a non-resident should not be subject to Australian
dividend withholding tax (see the commentary above on Dividend imputation system).
A dividend that is not franked and is paid by an Australian company to:
• a resident of a country which does not have a comprehensive DTA with Australia will be subject to withholding
tax at a rate of 30% of the gross amount of the dividend, or
• a resident of a country which has a comprehensive DTA with Australia will normally be subject to withholding
tax at a rate of 15% of the gross amount of the dividend. Under some of Australia’s DTAs, a lesser rate may
apply (eg 5% or 0%) if the recipient holds 10% or more of the company and certain other conditions are
satisfied. However, the rates will generally not apply if the payment of the dividend is effectively connected
with a permanent establishment of the non-resident in Australia.
Where a dividend is partially franked, the unfranked component is dealt with as if it were a separate unfranked
dividend.
However, if the unfranked dividend is paid from foreign source income derived by the Australian company (on
which the company has not been required to pay Australian tax), the unfranked dividend may not be subject to
dividend withholding tax.
Royalty withholding tax
In the case of royalty payments, the withholding rate is 30% if the payee is a resident in a country with which
Australia does not have a DTA. If the recipient is a resident in a country with which Australia has a DTA, the rate
will generally not exceed 15% and, under some treaties, may be as low as 5%.
Carry forward of losses
In certain circumstances, taxpayers may carry forward revenue and/or capital losses to be offset in later income
years.
Generally, a carry forward revenue loss of a taxpayer may be offset against the future assessable income of the
taxpayer. Tax losses cannot currently be carried back to claim tax refunds for prior years. However, new rules
have been proposed to amend the income tax law to allow corporate tax entities that have paid tax in the past, but
are now in a tax loss position, to carry their loss back to those past years to effectively obtain a refund of some of
the tax they previously paid. A one-year loss carry-back will apply in 2012-13, where tax losses incurred in that
year can be carried back and offset against tax paid in 2011-12. For 2013-14 and later years, tax losses can be
carried back and offset against tax paid up to two years earlier. Loss carry-back will:
• be available to companies and entities which are taxed like companies who elect to carry-back losses
• be capped at $1 million of losses per year
© King & Wood Mallesons 47

• apply to revenue losses only, and
• be limited to the company's franking account balance.
A capital loss carried forward may only be offset against taxable capital gains in future income years, ie, not
against assessable income generally.
In the case of corporate taxpayers, there are additional restrictions on the availability and use of losses. Very
broadly, the company (or the tax consolidated group - see below) must satisfy a “continuity of underlying
ownership and control” test, or, if it fails this test, must satisfy a “continuity of business” test. These tests are
complex and are applied stringently.
Losses can only be effectively grouped and utilised within a corporate group if the wholly-owned corporate group
consolidates for tax purposes (see Tax consolidation below).
There are also special rules that apply in respect of unrealised losses. Certain rules have also been proposed to
provide concessions to certain eligible infrastructure entities to enable those entities to carry forward and utilise
their tax losses in circumstances where the continuity tests outlined above may not be satisfied. These rules will
be limited to entities that are designated infrastructure project entities. To qualify under the draft legislation at a
particular time (referred to as the relevant time):
• the entity must be a company or fixed trust which is not a member of an income tax consolidated group at the
relevant time
• the entity must carry on a single investment in, or enhancement to, infrastructure at the relevant time or a later
time (ie the Infrastructure Project)
• the only activities carried on by the entity at the relevant time, or before the relevant time, must be for the
purpose of the entity carrying on the Infrastructure Project, and
• the infrastructure project must be, or must become, a designated infrastructure project.
Debt and equity rules
These rules deal with the characterisation of financing arrangements for certain (but not all) income tax purposes,
especially the treatment of returns on, and of, the interests. They characterise some financing arrangements as
giving rise to debt interests and, in the case of companies (and trusts and partnerships for certain purposes), some
interests as equity interests, such as ordinary shares. This characterisation for tax purposes may differ from the
legal form of the interest. For example, it is possible for some shares (such as redeemable preference shares) to
be treated as debt interests for certain tax purposes, rather than as equity interests.
In simple terms, distributions made in respect of debt interests are usually deductible and are not frankable. On
the other hand, distributions made in respect of equity interests are usually non-deductible, but are frankable.
Thin capitalisation rules
The thin capitalisation rules can apply to both foreign controlled Australian operations or investments (inward
investment) and to Australian entities investing overseas (outward investment). The rules seek to limit the amount
of debt used to fund Australian operations or investments. This is achieved by disallowing debt deductions (such
as interest payments or loan fees) that an entity can claim against Australian assessable income where the entity’s
debt, as a proportion of its assets, exceeds certain limits (for example, 75%, for most non-financial entities).
The thin capitalisation rules apply to companies, trusts, partnerships and individuals, and to associate entities.
Different rules (and debt limits) apply depending on whether the entity is an inward investing entity or an outward
investing entity, a general entity or financial entity, or an ADI. There are de minimis exceptions to the rules.
The thin capitalisation rules are complex and need to be considered on a case by case basis. For example, there
are special rules for banks, various financial entities and special purpose securitisation entities.
Guide to doing business in Australia / kwm.com 48

The Government announced in the 2013-14 Budget that it will tighten the thin capitalisation safe harbour limits
from the current 3:1 ratio (ie 75% debt) to 1.5:1 (ie 60% debt). For non-bank financial entities, the limit will be
reduced from 20:1 to 15:1 and for banks the capital limit will increase from 4% to 6%. Small business will benefit
from a higher de minimis threshold of $2 million (up from $250,000). These changes are proposed to be effective
for income years starting on or after 1 July 2014.
International transfer pricing
The Tax Act includes rules designed to prevent taxpayers engaged in international transactions from increasing
deductions or decreasing income so as to reduce their liability to Australian income tax. The rules may apply to
the provision or supply of goods and services, property, technology, and the lending of money, between either
members of the same group of corporations or alternatively other parties not dealing at arm’s length. The
underlying intention is to ensure an appropriate level of taxable income is taxed within Australia.
The Commissioner of Taxation may deem the consideration receivable under an international agreement to be
equal to the arm’s length consideration in certain circumstances. If an arm’s length consideration in relation to the
international agreement cannot be determined, an amount representing it may be determined by the
Commissioner of Taxation. Certain other transfer pricing rules may also apply which allow the Commissioner of
Taxation to “negate a transfer pricing benefit” in certain circumstances. The application of these rules should be
monitored in the context of cross border dealings (noting that new rules have also been proposed to be introduced
by the Australian Government in this space). In particular, the Tax Laws Amendment (Countering Tax Avoidance
and Multinational Profit Shifting) Bill 2013 has been passed by the House of Representatives and has been
introduced in the Senate. The Bill proposes amendments to "modernise Australia's domestic transfer pricing
rules".
Tax consolidation regime
Australian income tax laws permit the consolidation of entities which are wholly owned by an Australian holding
company. The rules are complex (especially in relation to the treatment of tax losses). In simple terms, the main
consolidation rules have the following effect:
• Wholly-owned corporate groups may have the option of consolidating for income tax purposes (consolidation is
optional, but irrevocable). Furthermore, there is a “one in, all in” rule with respect to consolidation which means
that all entities that are eligible to be members of the consolidtable group will become members of that
consolidated group if the head entity elects to form a consolidated group.
• To consolidate, a group must consist of a head company and at least one other entity (being a company, trust
or partnership) that is wholly-owned by the head company. The other entity loses its separate tax status and is
treated as part of the head company (ie a division) for income tax purposes.
• The consolidated group effectively operates as a single entity for income tax purposes, lodging a single income
tax return and paying a single set of PAYG instalments. As a result, most transactions between group
members are ignored for income tax purposes. However, the members of the group continue to be separately
liable for other taxes, such as fringe benefits tax.
• In some cases, it is possible to have a MEC (multiple entry consolidated) group, as an alternative to a
consolidated group. A MEC group consists of certain Australian resident entities that are wholly-owned
subsidiaries of a foreign top company.
• The consolidation rules have replaced the various forms of corporate group reliefs (eg intra group loss
transfers, dividend rebates for intra-group dividends and certain capital gains tax rollovers). Accordingly, as a
general observation, groups must consolidate if they want any form of group income tax relief.
• A member of a consolidated group may be jointly and individually liable for the group’s income tax liabilities
referable to the period that it was a member, unless the liability is covered by a tax sharing agreement (TSA)
between group members, or the member is prohibited under an Australian law from entering into any
arrangement under which it becomes subject to joint and several liability. The treatment of group tax liabilities
© King & Wood Mallesons 49

will often be extremely important for purchasers who acquire a company (ie subsidiary) from a consolidated
group. The subsidiary continues to be responsible for its own tax liabilities for periods prior to consolidation.
• The Government announced in the 2013-14 Budget that it will address concerns raised by the Board of
Taxation about inconsistencies in the tax treatment for MEC groups used by multinationals and ordinary
consolidated groups. The Government will ensure that MEC groups cannot access tax benefits not available to
domestic consolidated groups. A tripartite review chaired by the Treasury and involving the Australian Taxation
Office and the private sector will consider how best to implement the measure. The amended tax treatment will
apply from 1 July 2014 (with the caveat that amendments could take effect from 14 May 2013 if necessary to
preserve the integrity of the tax system).
Taxation of financial arrangements (TOFA)
The Tax Act contains rules which effectively represent a code for the taxation of receipts and payments in relation
to “financial arrangements”. The rules contain a number of different methods for bringing to account gains and
losses in relation to “financial arrangements” (including fair value, accruals, retranslation, realisation, hedging and
financial records).
The rules apply from the commencement of the first tax year beginning on or after 1 July 2010 (although, in certain
circumstances, taxpayers may have made an election to apply the rules for a tax year commencing on or after 1
July 2009). Further, the rules do not generally apply to “financial arrangements” which were current as at the
commencement date, unless the taxpayer elected for them to apply.
The TOFA rules do not affect the provisions relating to the imposition of interest withholding tax. In particular, the
rules do not apply in a manner which overrides the exemption currently available for debentures and certain other
kinds of debt interests that are issued by way of a public offer (and which satisfy certain other conditions).
Australian branch or subsidiary
As noted above, the Australian tax implications for a non-resident investor may be different depending upon
whether they conduct business in Australia using an Australian subsidiary or an Australian branch of a foreign
company (see also Foreign company registration above). Factors to determine which is preferable include:
• the disclosure and registration obligations of a branch of a foreign corporation operating in Australia
• the profitability of the Australian operation
• the profitability of the foreign corporation
• the taxation regime applicable to the foreign corporation in its home tax jurisdiction, and
• the extent to which the assets of the Australian operation comprise Australian land.
Branch: Before the Australian operations are profitable, it may be desirable to operate through a branch, so that
the expenses of the Australian operations are available to be offset against the income of the foreign corporation.
This assumes that the expenses can be offset and that the foreign corporation is a net taxpayer in its home tax
jurisdiction.
Subsidiary: On the other hand, it may be more efficient to borrow offshore and provide the borrowed funds to an
Australian subsidiary as equity, debt or a combination of both (bearing in mind the thin capitalisation rules referred
to previously). The interest costs may then be available as a tax deduction to the foreign corporation in its home
tax jurisdiction.
If the foreign corporation already has Australian subsidiaries, it is often advantageous to carry on any new
business through an Australian subsidiary company (ie rather than through a branch of the foreign corporation), so
that any tax losses may be utilised efficiently throughout the Australian group and to confine the Australian
operations to the Australian subsidiary company. By confining the Australian operations to an Australian
subsidiary company (as opposed to having the Australian operations conducted by an Australian branch of a
Guide to doing business in Australia / kwm.com 50

foreign company), it may be easier to satisfy compliance obligations, as it will not be necessary to separate
expenses and income as between the Australian and non-Australian operations of the foreign company for the
purposes of preparing financial accounts and/or tax returns. However, this is only one of the factors which should
be considered when deciding between a branch or subsidiary.
If the proposed Australian business operations involve minimal Australian land holding, more favourable CGT
consequences are likely to result from operating through a subsidiary than from operating through a branch. This
is because, generally speaking, the non-resident will be subject to CGT if it sells business assets held through its
Australian branch, but will not be subject to CGT if it sells shares in its wholly owned Australian subsidiary.
However, CGT will still apply to the sale of the shares if more than 50% of the market value of the Australian
subsidiary is attributable to real property in Australia (either directly or indirectly).
It is imperative that the particular situation is fully considered before deciding on the most appropriate structure.
As it can be costly to restructure business operations once they have commenced, we strongly recommend that
you obtain tax advice as to the structuring of your business operations in Australia before commencing those
operations.
The Investment Manager Regime
The Federal Government introduced the Investor Manager Regime (IMR) to deal with uncertainties in Australia’s
tax laws which discourage foreign funds from investing through Australian managers and intermediaries. The
purpose of the IMR is to promote Australia as a financial services centre.
The Federal Government has proposed three “elements” to the IMR (two of which are in effect) which are outlined
below.
First element (known as the “FIN 48 exemption”): An exemption from Australian income tax has been
introduced for certain widely held foreign funds on income, gains and losses arising from:
• portfolio interests (ie interests of less than 10%) in companies, portfolio interests in other entities and bonds
(except to the extent the amount gives rise to a withholding tax liability), and
• financial arrangements and foreign exchange transactions (except to the extent they are in respect of an
underlying interest that is otherwise taxable, such as taxable Australian property).
The introduction of the IMR was (in part) a response to issues that foreign funds were experiencing in relation to
the application of US accounting standards (FIN 48) to profits derived in respect of Australian investments.
Broadly, the issue involved fund managers who invested in Australia being compelled to include a provision in
their financial accounts in relation to Australian income tax, due to uncertainty in the law as to whether Australia
has the right to tax that income. Importantly, the “FIN 48 exemption” should apply, with some exceptions, to
exempt all income, gains or losses from portfolio investments and eligible financial arrangements which potentially
had an Australian source. The “FIN 48 exemption” applied to the 2010 – 2011 and prior income years only in
respect of foreign funds which had not lodged a tax return for those income years and have not had an
assessment made of their income tax liability. For later income years, the “full” IMR is intended to remove any
uncertainty that may arise in connection with FIN 48 (see Third Element).
Second Element (known as the “interim” IMR): An exemption from Australian income tax has also been
introduced for certain foreign funds that use Australian fund managers in circumstances which create a PE risk for
the foreign fund. Under these rules, income from certain investments is exempt from Australian tax where the tax
liability arises as a result of a presence of a PE in Australia by reason of the trade (ie because of the use of a local
dependent agent). The exemption essentially covers the same range of portfolio investments and financial
arrangements as the “FIN 48 exemption” (above), but only to the extent:
• they generate foreign sourced income and gains that would only have become taxable in Australia because the
fund is taken to have a PE in Australia, and
© King & Wood Mallesons 51

• income and gains from Australian assets are held on capital account which similarly could otherwise become
taxable in Australia because the fund is taken to have a PE in Australia.
The “interim” IMR applies to the 2010-2011 income years and subsequent years.
It is expected that any exemption for IMR foreign funds in relation to Australian sourced investment income arising
from Australian assets which are held on revenue account will be covered as part of the third and final element of
the IMR, being the “full” IMR (see below).
Third Element (known as the “full” IMR): The Federal Government has, on 4 April 2013, released exposure
draft legislation proposing to introduce the final element of the IMR. The aim of the full IMR regime is to provide
certainty in relation to the Australian income tax treatment of qualifying investment income of certain widely held
foreign managed funds. The key points in relation to the exposure draft legislation for the full IMR include the
following:
• A foreign managed fund will be exempt from Australian taxation in relation to all income, gains or losses from
portfolio interests or financial arrangements which have an Australian source. This would include the eligible
Australian sourced trading gains of the foreign managed fund. Foreign sourced income or eligible conduct
income will continue to be outside the Australian tax net for a foreign managed fund.
• The exemption will be restricted to foreign managed funds domiciled in countries that are recognised by
Australia as engaging in effective exchange of information (EOI). There is currently a broad list of EOI
countries, which includes the US, UK, Canada, Cayman Islands, Singapore, Bermuda, Ireland, Jersey,
Guernsey and the British Virgin Islands. However, the current EOI list does contain some significant
exclusions in the context of the global managed funds industry (eg Luxembourg and Hong Kong are not
currently EOI jurisdictions).
• To qualify for the exemption, an entity must lodge an information statement in respect of the income year with
the Commissioner in the approved form.
• The exemption will apply to the foreign managed fund. The exemption can flow through to foreign resident
beneficiaries and partners where the IMR foreign fund is a trust or partnership.
• The exemption will not apply to the extent that withholding tax is currently payable on the income. The normal
non-resident withholding tax rules will continue to apply (ie withholding tax relating to interest, dividend,
royalties and MIT fund payments).
• The exemption will not cover income or gains from a relevant interest in taxable Australian real property.
The full IMR will apply retrospectively from 1 July 2011. The “full” IMR is expected to be the long term solution for
the tax issues relating to foreign managed funds. The Federal Government is consulting extensively with industry
and the tax profession on the development of the legislation to implement the final element of the IMR.
© King & Wood Mallesons 52

TAX - TRUSTS
General overview
The tax status of a trust is determined by the terms on which it is constituted, the activities the trust undertakes,
and the nature and number of persons holding beneficial interests in the trust.
A “widely held” unit trust that carries on, or controls another entity that carries on a “trading” business, will be taxed
as if it were a corporation (there are complex definitions for “widely held” and “trading business”). These trusts pay
the prevailing corporate tax rate, and distributions to unit holders are taxed as if they were dividends paid to
corporate shareholders. Franking credits may attach to distributions.
Other trusts are not taxed (except in respect of certain limited classes of beneficiaries such as non-residents - see
below), provided that the trust has trust income and the beneficiaries are presently entitled to all of the trust
income for the income year. That is, generally a trust is treated as a flow through entity for tax purposes so that
the beneficiaries (and not the trustee of the trust) are taxed on the net income of the trust. However, the trustee
will generally be required to lodge a tax return for the trust. If the relevant trust income is from a tax-exempt
source, the distributions to beneficiaries will similarly be tax-exempt.
The taxation of trusts and beneficiaries is complex, particularly in relation to how, and in whose hands, trust capital
gains are taxed. The treatment of losses for trusts is also complex. Losses incurred by a trust are “trapped” in the
trust, ie the loss does not “flow through” to the beneficiaries. Further, there are restrictions on the availability and
use of losses at the trust level.
In some cases, a trustee of a closely held trust, which makes distributions to a beneficiary that is a trustee of
another trust (trustee beneficiary), must disclose to the Commissioner of Taxation certain details about the trustee
beneficiary. If the trustee fails to do so it may be liable to “non-disclosure tax” at the top marginal rate plus the
Medicare levy (which currently total 46.5%). “Non-disclosure tax” may also be payable where certain “round robin”
arrangements exist between the trustee and the trustee beneficiary.
Broadly, trustees are required to “withhold” amounts from distributions to non-resident beneficiaries. The rate of
withholding (and whether the withholding is a “final” tax) will depend on various factors. If the trust is a “managed
investment trust”, concessional withholding rates may be available depending on the beneficiary’s country of
residence. Otherwise the rate will depend on whether the beneficiary is an individual, company or trustee.
Managed Investment Trusts (MITs)
MITs are widely held entities which are used to facilitate collective investment in Australia by both resident and
non-resident investors.
If a trust constitutes an MIT, it will generally be eligible to obtain the benefit of certain concessions, which include:
• Enhanced after-tax returns for foreign residents - Qualifying foreign resident investors will benefit from a
reduced rate of withholding tax of 15% (instead of 30%) on certain “fund payments” comprising Australiansourced
net income. The reduced rate of MIT withholding tax should apply to distributions of rental income
from an investment in Australian real estate assets, and more importantly, distributions of capital gains which
may ultimately be realised on the disposal of those real estate assets. This reduced rate of withholding does
not apply to distributions of interest, royalties and dividends.
• Certainty of tax treatment - The availability of a capital account election (which generally applies to shares,
units or real property held by an MIT, as well as a right or option to acquire one of those assets) allows an MIT
Guide to doing business in Australia / kwm.com 53

to make an election to treat the gain on disposal of most forms of passive investments as capital gains rather
than ordinary income. In this regard, the capital account election:
• removes the existing uncertainty surrounding the capital versus revenue treatment of assets which are
covered by the election
• enables the CGT discount (of up to 50%) to flow through to eligible Australian resident investors, and
• preserves the foreign resident capital gains tax exemption for foreign investors (ie in relation to gains
realised in respect of shares, units, or options over those securities, which are not otherwise subject to
Australian CGT).
Changes to streaming rules
The Federal Government has amended the Tax Act, with effect from the 2010 - 2011 and later income years, to
allow the streaming of capital gains and franked dividends (including franking credits) through trusts to “specifically
entitled” beneficiaries. Importantly, the changes do not seek to alter how trusts are taxed more generally, but
provide a specific mechanism to allow streaming of capital gains and franked dividends. Whether, and the extent
to which, a beneficiary of a trust is “specifically entitled” in this regard is determined under prescriptive rules.
The provisions also contain a carve out for MITs and certain trusts treated like MITs in recognition that these trusts
generally do not ‘stream’ capital gains or franked distributions and instead distribute all of their trust income
proportionally. This carve-out enables MITs to use the current ‘proportionate approach’ until the Government’s
new MIT regime commences on 1 July 2014 (see the MIT tax update below).
Trusts tax update
The Assistant Treasurer announced in December 2010 that the income tax provisions relating to the taxation of
trusts would be updated and rewritten. The announcement provided that the Government intends to undertake a
consultation process in relation to what changes should be made. The Government has since released in
November 2011 a consultation paper titled “Modernising the taxation of trust income - options for reform”. The
paper confirms that it is the Government’s intention that the rewrite will retain the broad policy framework that
currently applies to the taxation of trust income (that is, trustees will only be assessed and liable to pay tax to the
extent that amounts of taxable income are not otherwise assessable to the beneficiaries). The Assistant
Treasurer announced on 30 July 2012 that the reforms would be delayed until 1 July 2014.
The Government released an options paper for the proposed reforms to the scope of the trust taxation rules on
24 October 2012. The options paper contains two main proposed models for how trust taxation will operate, and
poses questions to stakeholders regarding how certain aspects of those models should operate. The options
paper does not provide any further guidance with respect to the timing of the reforms.
Guide to doing business in Australia 54

MIT tax update
The Government announced a further 1-year deferral in the commencement date of the new comprehensive
MIT regime from 1 July 2013 to 1 July 2014. Whilst the comprehensive regime is yet to be enacted, MITs may
utilise the existing concessions as outlined above.
In summary, the key aspects of the new comprehensive MIT regime are:
• an elective ‘attribution’ system of taxation to replace the present entitlement system, so that investors are
only taxed on the income the trustee allocates to them on a fair and reasonable basis, consistent with
their entitlements under the trust’s constituent documents
• the establishment of a carry-over facility to deal with ‘unders’ and ‘overs’ within a 5% cap, so trustees are
not required to reissue tax statements and investors are not required to amend their income tax returns
• the removal of double taxation that may arise where the taxable income of a MIT differs from the amount
distributed to beneficiaries, and
• the abolition of the tax law which relates to corporate unit trusts.
Guide to doing business in Australia / kwm.com 55

TAX - INDIVIDUALS
Australian tax is levied on the taxable income of an individual taxpayer. As with corporations, the taxable income
of an individual resident taxpayer is determined on the basis of the assessable income less allowable deductions
in the year of income.
Generally, an individual is a resident for Australian tax purposes if that person:
• is domiciled in Australia
• has been in Australia continuously or intermittently for more than one half of the year of income, or
• is resident in Australia under ordinary common law principles.
With some exceptions (such as earnings from foreign service), income from all sources will be included in the
taxpayer’s assessable income if they are a resident of Australia. A “tax offset” is normally available for foreign tax
paid on foreign source income. However, if the individual is both an Australian resident for tax purposes and a
“temporary resident”, most of the individual’s foreign income will not be subject to tax and the CGT regime will
generally apply to the individual as if they were a non-resident. Special rules apply to temporary residents for
capital gains on shares and rights acquired under employee share schemes. A “temporary resident” is someone
who holds a temporary visa (and satisfies various other requirements).
An individual who is a non-resident taxpayer will be taxed on a similar basis as non-resident corporations, ie the
assessable income from Australian sources will be included in the assessable income of the non-resident
taxpayer. In some cases, non-residents may be entitled to DTA relief.
The rates of taxation of individuals in Australia are progressive with a maximum rate of 45% currently applying to
taxable income in excess of AUD$180,000 for the 2012 - 2013 tax year.
Resident individuals are also liable to pay a Medicare health care levy based on the amount of their taxable
income. The Medicare levy, currently 1.5% of taxable income, is collected with income tax collections. An
additional levy may be payable by certain residents not covered by adequate private patient hospital insurance.
The Prime Minister announced on 1 May 2013 that the Government will increase the Medicare levy by 0.5% from 1
July 2014. This would take the Medicare levy from 1.5% to 2% of taxable income. The Bills to increase the
Medicare levy have been passed by the Senate and now await Royal Assent.
Employees will generally be taxed on any employee shares or options that they receive. A tax deferral or tax
exemption concession is available if the plan meets certain conditions. The relevant rules are complex and
prescriptive.
© King & Wood Mallesons 56

OTHER TAXES - FBT, GST,
DUTY AND OTHER TAXES
There are also a number of other taxes and charges to take into account when investing in Australia.
Fringe benefits tax (FBT)
FBT is levied on employers in respect of the value of taxable benefits (such as motor vehicles, schooling, health
care or loans at discounted rates of interest) provided to employees or their associates in relation to their
employment. The benefit is then exempt from tax in the hands of the employee.
The objective of FBT is to ensure that the provision of benefits to employees does not provide tax advantages for
either the employee or employer.
FBT is generally levied on the total taxable value of benefits provided (inclusive of any applicable GST) grossed up
to minimise any tax saving that would otherwise arise through packaging (ie an employee choosing to receive
fringe benefits rather than cash salary). The fringe benefit and the associated FBT is generally an allowable
deduction from an employer’s assessable income, although there are some exceptions.
Goods and Services Tax (GST)
GST is a broad-based tax calculated at the rate of 10% on the value of the supply of a broad range of goods,
services, rights and other things acquired in, or in connection with, Australia (referred to here as GST items). It is
conceptually similar to the value added taxes operating in many OECD countries.
GST is paid at each step in the supply chain. The liability to pay GST to the ATO is generally on the supplier of
the GST items (which is usually the seller). Where the supplier is liable to pay the GST, the supplier will usually
seek contractually to recover its GST liability from the recipient as a matter of commercial practice. In some
circumstances however (in particular, where certain supplies are made offshore by a non-resident supplier), the
GST liability falls on the recipient by virtue of a “reverse charge” mechanism.
If an entity is carrying on an enterprise and is registered (or required to be registered) for GST purposes, in most
cases it will be able to claim an input tax credit for certain acquisitions that it makes. The input tax credit is
calculable with respect to the amount of the GST included in the price paid for those acquisitions for which the
supplier is liable. The input tax credit generally has the effect of offsetting the GST included in the price of the
GST items that the entity acquires for use in carrying on its enterprise. Accordingly, it is intended that the GST
liability will flow through the supply chain to the end consumers who will ultimately bear the cost of the GST
(because they are not registered or required to be registered, and so cannot claim input tax credits). However,
there are different rules applicable to financial services providers (eg banks) which are not entitled to claim input
credits for some acquisitions which relate to their provision of financial services or other supplies.
An entity must register for GST if it is carrying on an enterprise in Australia and its current or projected annual
turnover is equal to or exceeds the relevant threshold. The current threshold for a business is AUD$75,000 or
more, however if the relevant entity is a qualifying non-profit organisation the threshold is AUD$150,000 or more.
An entity may also be required to register even if it is not carrying on an enterprise in Australia, but is making
supplies that are connected with Australia and its annual turnover of supplies connected with Australia exceeds
the relevant threshold.
Guide to doing business in Australia / kwm.com 57

The concept of an entity is very broad for GST purposes. It extends beyond natural persons and companies to
include entities which are not legal entities, such as trusts, partnerships and government entities. This is the case
even though such entities may not be considered an entity under the general law.
An entity that is carrying on an enterprise in Australia may choose to register even if it does not meet the turnover
threshold (discussed above). An entity should consider the benefits of voluntary registration. Benefits include the
entitlement to claim input tax credits (which cannot be claimed if the entity is not registered). Input tax credits can
offset the GST included in the price paid for GST items acquired and GST on importations if they are for use in
carrying on its enterprise.
GST is payable on, amongst other things, taxable supplies. An entity makes a taxable supply if:
• the entity makes the supply for consideration (e.g. a monetary payment or non-monetary benefit)
• the supply is made in the course or furtherance of an enterprise that the entity carries on
• the supply is connected with Australia
• the entity is registered or required to be registered for GST, and
• the supply is not a GST-free supply or input taxed supply (see below)).
Supply is a very broad concept for GST purposes and includes the supply of goods, services and most other
things.
GST is also payable on all taxable importations regardless of whether the entity importing the GST items is
registered for GST. The entity importing the GST items is usually liable to pay the GST together with the customs
duty. However, in some situations a GST registered importer may be given approval to defer payment of the GST
to the ATO until the importer lodges its Business Activity Statement (BAS) for the reporting period covering the
importation (see the Import / export regulation section).
There are other supplies that are not subject to GST. These are called GST-free supplies and input taxed
supplies. If supplies are GST-free, no GST is payable by the entity in respect of those supplies but the entity is
still entitled to claim an input tax credit for any GST items acquired or imported for the purpose of making the GSTfree
supply. The main categories of GST-free items include certain itemised foods, exports, most health services,
most educational services, most childcare services and some non-commercial activities of charities and religious
services. The supply of a going concern will be GST-free if specified requirements are met (noting that at the time
of going to print, there is a Government proposal to change some of the technical aspects relating to the “going
concern” concession).
GST is also not payable in respect of input taxed supplies. However, unlike GST-free supplies, the entity is not
entitled to claim input tax credits in respect of GST items acquired or imported for the purpose of making an input
taxed supply (although, in some circumstances, it may be entitled to claim a reduced input tax credit equal to 75%
of the GST payable by the supplier to the ATO, or 55% in the case of acquisitions of certain services made by
trustees of recognised trust schemes from 1 July 2012). The main categories of input taxed items include financial
supplies, supplies of certain residential rental accommodation, sales of residential premises (excluding new
houses and commercial residential premises) and supplies of precious metals (other than the first supply after
refinement, which is GST-free).
Further, the GST legislation contains a margin scheme which is a concessional scheme which allows the GST
which is ordinarily payable on the transfer of certain property (namely real estate) to be reduced, subject to
agreement by the buyer and seller. If the margin scheme applies, GST is payable on the margin between the sale
price and either the amount that the seller paid for the property or (if the seller acquired the property before 1 July
2000) the value of the property provided in an approved valuation as at 1 July 2000. If the margin scheme is
applied in a transaction, the buyer will not be able to claim input tax credits for GST paid. This makes the scheme
appropriate primarily where the end buyer would not be able to claim input tax credits (eg where the buyer is not
registered for GST or is a private individual).
Guide to doing business in Australia / kwm.com 58

Entities registered for GST have either monthly or quarterly reporting periods depending on their turnover. GST is
included in the BAS which must be filed by all entities with Australian tax reporting obligations together with the
relevant net payment of GST (ie total GST payable less total input tax credits). The BAS must be filed for a
reporting period generally within 21 days of the end of that period.
Customs duty
Customs duty is imposed on various goods imported into Australia at rates prescribed in the customs legislation.
The customs legislation conforms to general international practice in relation to customs duty (see the Import /
export regulation section).
Pay-roll tax
Pay-roll tax is imposed by the various States and Territories on wages paid or payable by an employer to an
employee. There is a requirement for employers to register under relevant legislation. Calculation of pay-roll tax
is dependent on thresholds and rates, which vary between the States and Territories. Each jurisdiction has
differing exceptions and exemptions from pay-roll tax. Payments to individual contractors may also be subject to
pay-roll tax under extended definitions in the relevant legislation.
Generally, allowances or other benefits provided to employees are deemed to be wages for the purposes of payroll
tax law and are calculated in accordance with FBT provisions (see above).
Stamp duty
In Australia, stamp duty is payable on a number of different transactions. Each of the States and the Australian
Capital Territory (ACT) and Northern Territory (NT) has a different stamp duty regime and imposes duty on a range
of different transactions.
Each Australian state and territory primarily levies transfer duty on the transfer of land or any interest in land in that
state or territory. A direct acquisition of land in Australia will therefore be subject to stamp duty in the particular
state or territory in which that land is located.
Where an indirect acquisition of land is made, on the other hand, a liability to landholder (or land rich) duty might
arise. This will occur if the acquisition:
(a) of itself entitles the acquirer to an interest in a “landholder” or “land rich” entity above the acquisition threshold
which applies to the specific state or territory, or
(b) when aggregated with other interests held by the acquirer, or together with its associates, results in an
aggregated interest in the “landholder” or “land rich” entity above the acquisition threshold.
Broadly speaking, the acquisition thresholds for landholder duty in each state or territory (other than Tasmania)
depend on whether the specific “landholder” is a company or trust, and whether or not that entity is listed on the
ASX or a recognised securities exchange. A “landholder” is any entity that holds land above a certain value, which
differs across the states and territories (eg $1,000,000 in Victoria or $2,000,000 in New South Wales). In
Tasmania, a “land rich” regime applies, but only to private companies that hold land of $500,000 or more in that
state in circumstances where the company’s worldwide landholdings comprise 60% or more of its total property.
In New South Wales and South Australia, a different kind of stamp duty (known as marketable securities transfer
duty) is payable on transfers of marketable securities (ie shares or units) that are not quoted on ASX or a
recognised stock exchange.
There will also be unique stamp duty consequences if units in a unit trust are transferred and the underlying
property of the trust is located in South Australia or Queensland.
© King & Wood Mallesons 59

In business or asset transfers, the liability to pay the stamp duty (if any) depends on the assets being transferred
and the jurisdictions involved. For example, transfers of business goodwill are dutiable in all jurisdictions except
Victoria, the ACT and Tasmania. Further, the statutory liability to pay the transfer duty (if any) is generally borne
by the buyer. However, in Queensland and South Australia, the transacting parties are jointly and severally liable
to pay the duty (although the usual commercial practice is for the purchaser to pay the duty).
The rate of stamp duty in Australia varies across the states and territories and depends on the value of the
relevant property acquired and the type of transaction involved. For example, in Victoria, stamp duty is payable at
approximately 1.4% on real estate with a value of less than $25,000 and at approximately 5.5% on real estate with
a value greater than $960,000. In contrast, marketable securities transfer duty, where applicable, is imposed at a
flat rate of 0.6%.
Another head of duty is mortgage duty, which is currently only imposed in NSW (at a rate of up to 0.4%) in respect
of transactions which have a connection with New South Wales. Mortgage duty is only imposed on instruments
which fall within the definition of “mortgage”. This generally refers to securities by way of mortgage or charge.
The duty is not imposed on the transactions of lending money or granting security as such.
As a general observation, each Australian state and territory has a different time limit for the lodgement and
payment of stamp duty. In New South Wales, for instance, duty is payable within 3 months after the liability to pay
the duty arises. In Victoria, on the other hand, duty is payable within 30 days after the liability arises. A similar
period applies in Queensland in respect of lodgement for assessment.
Land tax
Land tax is imposed by each of the States and the Australian Capital Territory (but not the Northern Territory) on
the ownership of land within the State or Territory. Land tax is levied annually on the unimproved value of all nonexempt
land held by the “owner”. The definition of “unimproved” varies from jurisdiction to jurisdiction. In general,
land tax is not levied on property if it is a principal place of residence of the owner who is a natural person, or is
exempt under the relevant land tax legislation.
Municipal rates
Municipal rates are the most common levy imposed on the value of land serviced by local or municipal
governments.
Real Estate, Real Opportunities
Investing in Australian Real Estate – A guide for global investors 2013
For real estate investment in Australia, our KWM publication Real Estate, Real Opportunities offers a quick overview
of the legal, taxation and structuring issues. There is also a summary of key practical considerations and the risk
mitigation strategies often used in the acquisition of direct or indirect interests in Australian real estate. For further
information, see www.kwm.com.
© King & Wood Mallesons 60

SUSTAINABILITY IN
BUSINESS
In recent years, sustainability has increasingly become a major strategic business issue, particularly for large
Australian and international companies. This has been driven by concerns about the impact of climate change,
the expectation that companies should operate responsibly and the need for sustainable development. It has
become common place, especially for large companies, to report on sustainability issues that impact on
customers, community, environment, employees, supply chain and governance.
Companies with specific market interests in electricity,
energy, resources, water and heavy manufacturing are
likely to be most directly affected by the Australian
legislative push towards sustainable development. There
are also industry-specific policies which will affect
companies operating in these areas in Australia.
Water rights: In the face of rising demand for
water, investors in agribusiness need to ensure that
appropriate water rights are available or can be
acquired.
Approaches to corporate sustainability in Australia have advanced rapidly in recent years. Sustainability now
affects almost all facets of doing business in Australia. The diagram below shows some of the key sustainability
concepts businesses need to consider. Many of these concepts permeate all aspects of a corporation, from
corporate governance to staff engagement to planning and development. Other sustainability fields are more
precisely focused and require specific corporate compliance programs.
SUSTAINABILITY PRESSURES
ENVIRONMENT COMMUNITY PEOPLE GOVERNANCE
- Greenhouse
- Energy
- Water
- Waste
- Biodiversity
- Social impact
- Investment
- Local suppliers
- Human rights
- Local health
- Health
- Safety
- People & skills
- Diversity
- Retention
- Responsibility
- Governance
- Reporting
- Investor demands
- Strategy
CORPORATE SUSTAINABILITY STRATEGY
CARBON
DEVELOPMENT
PEOPLE
GOVERNANCE
NEW MARKETS
WATER
- Emission permits
- Carbon trading
- Reporting
- Offset projects
- Tax/accounting
- Sustainable growth
- Permits & approvals
- Planning controls
- Adaption
- Green buildings
- Engagement
- Work safety
- Systems & policies
- Training
- Values
- Responsibility
- Governance
- Reporting
- Director duties
- Strategic advice
- Voluntary carbon
- Carbon reduction
- Green marketing
- New technology
- Renewables
- Water trading
- Water rights
- Access
- Desalination
- Water utilities
CORPORATE REPSONSES
Guide to doing business in Australia / kwm.com 61

Carbon pricing
A Carbon Pricing Mechanism (CPM) now operates in Australia, which places a price on carbon emissions and
paves the way for an emissions trading scheme. The CPM was introduced in 2011 under the Clean Energy Act
2011(Cth) and other supplementary legislation (together, the Clean Energy Legislative Package).
Key features of the CPM are as follows:
• The scheme is divided into two distinct phases: a fixed price period and a flexible price period. Under the
current phase, there is a fixed price on carbon, starting at $23 per tonne of CO2-e in financial year 2012-2013
(escalating by 2.5% annually). During this initial period, carbon permits are available at the fixed price and
automatically surrendered to the government. The Federal Labor government have announced they will move
towards an Emissions Trading Scheme (ETS) for the financial year beginning 1 July 2014, one year earlier
than under the current Clean Energy legislation. When that happens, the market will set the price of carbon
and extensive trading of permits will be possible.
• Approximately 500 liable entities from the power generation, air, rail and marine transport, industrial process,
mining and waste sectors are covered by the scheme, representing around 60% of Australia’s greenhouse gas
emissions.
• Liable entities must report on their emissions and buy and surrender to the government a carbon permit for
each tonne of carbon pollution they produce. The scheme applies to facilities generating emissions in excess
of 25,000 tonnes of CO2-e per year.
• The Government controls the supply of permits and sets forward looking annual caps which are linked to the
overall goal of achieving a 5% reduction in emissions by 2020 and 80% by 2050 (based on Australia’s
emissions in 2000).
• The scheme does not include the agricultural and land use sectors, emissions from most on-road vehicles and
decommissioned coal mines.
• Extensive compensation arrangements (including allocations of free permits, cash payments, government
loans and technology support incentives) are established to assist emissions-intensive sectors such as coalfired
power stations and certain trade exposed industries. The Jobs and Competitiveness program is the
centerpiece of this scheme. It includes calculation methodology of compensation for many emissions-intensive
trade-exposed industries.
• The Government and the European Commission have announced an intention to establish a full two-way link
between the EU ETS and the Australian scheme by 1 July 2018 at the latest. A link would enable liable entities
in one ETS to acquire and use units issued under the other ETS for compliance purposes.
• The Government has also announced very large programs to stimulate investment in renewable energy, energy
efficiency and associated research and development so as to assist reaching the emissions reduction targets.
While a number of these programs were subject to funding cuts in the 2013 Government budget, there remains
significant Government support for renewable initiatives.
• The legislation establishes several bodies to oversee the implementation of the scheme, including the Clean
Energy Regulator and the Climate Change Authority.
Coalition Direct Action Plan
The Liberal Party of Australia has repeatedly announced its intention to repeal the CPM if it takes control of the
Parliament as a result of the 2013 election. If the Coalition can garner sufficient support from minor parties and
independents, the legislative process for repealing the Carbon Scheme would be comparatively quick and straight
forward. While this outcome is possible, it remains unlikely, in which case the Coalition faces a potentially
prolonged legislative timeline if it wishes to repeal the CPM. Without support of the Senate, a repeal can only be
achieved through a double dissolution of Parliament, which we estimate would take a minimum of 9-12 months.
According to the Coalition, the Direct Action Plan will be instituted to replace the CPM. The Coalition believes the
Direct Action Plan can deliver a five per cent reduction in carbon dioxide emissions by 2020 from 2000 levels (a
target shared by the Australian Labour Party). The Coalition intends to do this through a number of measures
including:
Guide to doing business in Australia / kwm.com 62

• a $2.55 billion Emissions Reduction Fund which will provide incentives for the lowest-cost emissions
reduction
• expansion of the Carbon Farming Initiative
• continuation of the REC scheme, and
• creation of a community solar program.
Carbon pricing updates
King & Wood Mallesons’ Sustainable Enterprises team monitors this area of government policy and regularly
provides targeted client updates. Check for Market Alerts on our website: www.kwm.com.
Mandatory reporting on energy and greenhouse gas emissions
The National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) requires controlling corporations
(which, depending on the corporate structure, may include foreign corporations with operations in Australia) that
meet one or more of the thresholds in respect of greenhouse gas emissions, energy production and energy
consumption to register and report under the NGER scheme.
In determining whether the threshold is met, a corporation needs to look at facilities over which it or one of its
members (including joint ventures, subsidiaries and partnerships) has operational control. The NGER scheme
forms the basis of the CPM, so reporting obligations are to be taken seriously.
Renewable Energy in Australia - REC scheme
The Australian Government has a policy to encourage investment in renewable energy for electricity generation.
This policy, in substance, has bipartisan support. Under the scheme, wholesale purchasers of electricity have an
obligation to purchase and surrender an annually increasing number of renewable energy certificates (being either
“large-scale generation certificates” or “small-scale technology certificates”) which are created by or in respect of
certain renewable energy generators or other sources (REC scheme). The goal of this scheme is to reach the
Renewable Energy Target of 41,000 GWh of Australia’s energy needs generated from renewable sources.
In early 2013 the Climate Change Authority released a review of the Renewable Energy Target scheme. That
review found that the scheme was effective. However, the review highlighted that care must be taken to ensure
the broad objectives of the scheme are achieved. In particular, there was discussion of whether the RET target,
which was initially intended to equate to 20% of Australia’s energy needs in 2020 should be adjusted. Due to
reduced energy demands, based on current forecasts, 41,000GWh is likely to be greater than 20% of Australia’s
actual energy needs in 2020. Despite industry pressure, the Authority did not recommend altering the target.
However, the review did suggest aiming for greater consistency between the REC scheme and obligations or
compensation imposed by the CPM on emissions-intensive trade-exposed activities.
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Carbon Farming Initiative
The Carbon Credits (Carbon Farming Initiative) 2011 incentivises agricultural sector initiatives that reduce carbon
emissions through issue of permits (or Australian Carbon Credit Units) for eligible projects. Issued permits may be
traded by the recipient or surrendered to meet liability under the CPM, or used for voluntary or international
schemes (such as the EU scheme). Eligible types of initiatives include establishment of permanent plantings,
capture and combustion of methane and other measurable reductions in emissions. While the Carbon Farming
Initiative and the CPM are interlinked, they remain independent. If the CPM was repealed, any permits could be
traded under the voluntary carbon markets. Unlike the CPM, there is bipartisan support for the Carbon Farming
Initiative.
Clean Energy Regulator
The Clean Energy Regulator, which is a regulatory body independent from the government, is an administrative
body, and is responsible for administering:
• the CPM, which includes enforcing the Clean Energy Act’s penalty provisions, overseeing the trading of carbon
units after 2015 and allocating “free” carbon units to emission-intensive industries;
• the REC Scheme, which includes maintaining the register of certificates under the REC scheme;
• the Carbon Farming Initiative; and
• the National Greenhouse and Energy Reporting Scheme.
Climate Change Authority
The Climate Change Authority has an advisory role and will make recommendations to the Government on policyrelated
issues such as the setting of carbon pollution caps, the carbon price floor/ceiling and other climate change
laws.
Voluntary carbon market
The voluntary carbon market is also important in Australia. There are several competing schemes which accredit
renewable generation and other carbon offset projects as “green” developments. Companies are currently trading
these credits to substantiate green marketing claims. We anticipate that if the CPM is repealed, these voluntary
markets could experience a resurgence of interest.
Green marketing
Reflecting growing consumer demand for climate and environment friendly products and services, green marketing
has become a major issue. The ACCC has clamped down on environmental claims that are being made to
differentiate products and services. The ACCC released guidelines on ‘Green marketing and the Competition and
Consumer Act’ which provides guidance to assist businesses in minimising the risk of making claims that are
misleading, deceptive or false. The ACCC highlighted their continuing role in “carbon price claims” in their 2013
list of key priorities.
Development and infrastructure approvals
In addition to reporting and the trading schemes, sustainability is increasingly impacting on business in Australia in
the following ways:
• sustainability issues are becoming critical to obtaining approvals to proceed with new developments and
infrastructure. The focus for this at the moment is on legal challenges to the grant of project approvals
• energy efficiency and renewable energy schemes
• mandatory energy disclosure requirements under the Building Energy Efficiency Disclosure Act 2010 (Cth)
when commercial property is sold or leased
Guide to doing business in Australia / kwm.com 64

• green building controls, and
• town planning challenges, for example resulting from sea level rises and coastal processes, and potential
liability of decision makers.
King & Wood Mallesons’ sector expertise includes:
Sustainable Enterprises: Our team is at the forefront of climate change issues and regulatory policy and we
have experience on a wide range of climate change and sustainable development issues. Our team draws on
our expertise in a range of disciplines and has acted in a number of high-profile transactions.
Agribusiness: Our reputation in the Agribusiness sector is built on a successful track record of advising some
of the leading Australian and international agribusinesses on some of the sector’s largest and most challenging
transactions, and on a range of legal and regulatory issues. See AgriThinking – our quarterly newsletter
available from www.kwm.com or contact one of our Agribusiness Sector Leaders.
© King & Wood Mallesons 65

ENERGY AND
RESOURCES
Overview
The energy and resources industries are iconic in Australia and continue to make significant, and growing,
contributions to Australia's economy. There are extensive legislative frameworks that apply to these industries
and, in particular, to the development and operation of projects. Broadly, these frameworks comprise regulatory
and environmental schemes under the jurisdiction of the States and Territories, and taxation, corporate
governance, environmental and native title law under the jurisdiction of the Commonwealth. In some cases, these
regimes overlap. (See the relevant sections of this Guide for further information.)
The general rule is that the Crown (in right of the State) owns all minerals. For this reason, each of the States and
Territories has its own legislation regulating the exploration for, and production of, minerals. The mining legislation
of each State and Territory can apply to a wide range of minerals, including gold, coal, iron ore and uranium.
The regime for oil and gas production is slightly different. Although the States have petroleum legislation (which
has some similarities with the mining legislation), the States do not own petroleum if it is offshore and more than 3
nautical miles from the coast. Outside this territorial limit, oil and gas is owned and regulated by the Federal
Government.
As the State (generally) owns the minerals, one of the important characteristics of a mining lease granted by the
States and Territories is the obligation to pay “royalties” to the relevant State or Territory. In 2010, there was
significant political debate over a proposed Resources Super Profits Tax (as it was then called). The Federal
Government has introduced a Mineral Resource Rent Tax (MRRT) and has expanded the existing Petroleum
Resource Rent Tax (PRRT), which commenced on 1 July 2012, in addition to the State royalties.
MRRT and PRRT
The Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) are stand-alone profit based
tax regimes which apply to certain mining and extraction activities in Australia.
MRRT
MRRT is an entirely new regime which applies with effect from 1 July 2012. The MRRT regime imposes a tax on
profits from:
• certain Australian iron ore and coal mining activities,
• coal mine methane production (where the methane is produced as a necessary incident of certain mining
activities), and
• the in situ consumption of coal and iron ore.
MRRT applies as a separate tax to ordinary income tax and the payment of existing State and Territory royalties.
This means entities which are subject to MRRT must determine their MRRT liability applying the particular rules for
identifying MRRT income, deductions, carry forward losses etc which are contained in the MRRT legislation.
The key components of the MRRT regime include:
• an effective tax rate of 22.5% on “MRRT profits”
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• “MRRT profits” are based, broadly, on the proportion of a project’s revenues which are attributable to the
underlying taxable resource (being, the coal or iron ore), less a range of expenditures and allowances
• the expenditure regime recognises all “mining expenditures” as immediately deductible for MRRT purposes
(including capital expenditures)
• the allowance regime permits a further reduction to MRRT profits for:
o
o
o
expenditure incurred prior to the introduction of the MRRT regime in relation to existing projects (which
may be claimed on a depreciation basis)
royalty payments (which are grossed up to effectively offset MRRT liabilities), and
certain carry forward and transferred mining losses and pre-mining losses.
• the value of unutilised royalty payments and MRRT losses are uplifted for future years at specified rates, and
• there is an exemption for miners with MRRT profits below $75 million in an income year (with modified
application for miners with MRRT profits between $75 million and $125 million).
PRRT
PRRT is a separate profit based tax, which is applied in respect of a “petroleum project”. A petroleum project
exists when a production licence comes into force, broadly, for the extraction of oil and gas in Australia. The
PRRT came into effect in January 1988. At that time, PRRT applied to all offshore areas except Bass Strait and
the North West Shelf. In addition, the legislation applied retrospectively to exploration permits awarded on or after
1 July 1984, and recognised expenditures incurred on or after 1 July 1979.
PRRT is levied at the rate of 40% of the petroleum project’s “taxable profit”. Each participant in the petroleum
project is subject to the PRRT on an accruals basis, depending on the participant’s receipts and expenditure.
The “taxable profit” is determined as the “assessable receipts” derived by the participant, less:
• deductible expenditure incurred by the participant, and
• certain transferred and unused exploration expenditures.
The “assessable receipts” of a petroleum project include all amounts receivable from the sale of petroleum or of a
marketable petroleum commodity (whether of capital or revenue nature). The “assessable receipts” are specified
to include, petroleum receipts, tolling receipts, exploration recovery rights, miscellaneous compensation receipts
and employee amenities receipts.
The identification of expenditures for PRRT purposes is limited. Allowable expenditures are characterised as
either ‘exploration expenditure’, ‘general project expenditure’ or ‘closing-down expenditures’. Where assessable
receipts are less than deductible expenditure in an income year, the undeducted expenditure is compounded at a
specified rate (which depends on the type of the expenditure).
The PRRT regime has been extended from 1 July 2012 to also apply to onshore and coastal production licences
issued by a State or Territory (rather than to merely certain off-shore production licences). There have been
consequential amendments to the type of receipts and expenditures which may be taken into account in respect of
onshore petroleum projects. A transitional mechanism has also been included in the extended PRRT regime to
take into account investment into onshore projects prior to the extension of the regime.
Other laws
In addition to State laws, mining is also regulated by Federal laws, such as those relating to native title and the
environment (see the Environmental Regulation and Native Title and Indigenous Heritage sections).
Environmental protection is regulated at both the State and Federal level and, in many cases, a project may need
both State and Federal environmental approvals to proceed. Moreover, the grant of an exploration tenement or a
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mining lease will only be made after the relevant government has completed the processes relating to Native Title.
Additionally, the Corporations Act and the ASX Listing Rules contain special provisions governing the conduct and
reporting requirements of mining companies.
King & Wood Mallesons has a leading resources-related M&A practice in Australia, particularly in the
area of foreign investment. Our Energy, Resources & Projects team has broad and extensive experience
advising leading industry participants across coal, iron ore, oil & gas, LNG, gold, nickel, alumina and
electricity. We also advise financial institutions, regulators and industry groups focused on these
sectors.
King & Wood Mallesons was named Best Provider to the Power & Utilities Sector at the BRW Client
Choice Awards 2012.
© King & Wood Mallesons 68

INTELLECTUAL
PROPERTY
The principal forms of intellectual property protection available in Australia are trade marks, designs, patents and
copyright. All of these forms of protection are governed by legislation. The common law also provides remedies
against a person passing off goods or services as those of another, as well as protection for confidential
information or trade secrets.
Trade marks
Trade marks can be registered in Australia under the Trade Marks Act 1995 (Cth). Trade marks can be obtained
for names, logos, aspects of packaging, shapes, colours, sounds and scents.
Initial registration is for 10 years, renewable for a further 10 year term. As the application process can take
between 6 to 12 months, intending traders should consider applying to register their trade marks as far in advance
of their commencement of trading in Australia as possible. Australia is a signatory to a number of international
trade mark conventions. Accordingly, if an application for registration of a trade mark is made in Australia within 6
months of an application by the same person in a convention country, the applicant can claim the convention
country filing date as the priority date.
Trade marks, names and brands may also be protected under the common law doctrine of passing off and under
the CCA, which prohibits corporations from engaging in misleading or deceptive conduct in trade or commerce. In
both cases, it is necessary to establish a reputation for the particular trade mark, name or brand.
Patents
Patents for inventions can be granted under the Patents Act 1990 (Cth), conferring an exclusive right to exploit the
invention during the term of the patent (typically 20 years for standard patents, but may be extended by up to five
years in the case of certain patents for pharmaceutical substances). In order to qualify for standard patent
protection, an invention must satisfy a number of criteria, including that it be novel, inventive and useful. The
Patents Act also recognises innovation patents, which are intended for less significant inventions and have a lower
inventive threshold. The innovation patent has a term of eight years and cannot be extended. Australia is a
member of the Paris Convention and the Patent Co-operation Treaty, which are both designed to facilitate the
filing of patent applications internationally.
Copyright
Copyright is protected under the Copyright Act 1968 (Cth). Registration is not required. Australia is a signatory to
the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention). Therefore, works
created in other countries which are also signatories will be treated as if created in Australia for the purposes of
Australian copyright protection, and Australian copyright law will apply to those works. Computer programs are
protected by copyright, as are literary works, while circuit layouts are protected by the Circuit Layouts Act 1989
(Cth). In general, copyright subsists until 70 years following the death of the author.
In Australia, moral rights laws (the right of attribution and non-derogation) are also protected under the Copyright
Act.
Guide to doing business in Australia / kwm.com 69

Designs
Designs are protected under the Designs Act 2003 (Cth).
Designs relate to the overall visual appearance of a
product including features of shape, configuration, pattern
and ornamentation. In order to register a design in
Australia, it must be new and distinctive. New means that
Other regimes: Other intellectual property regimes
may also apply to certain investments, such as plant
breeder’s rights for the licensing and
commercialisation of plant varieties.
the design has not been publicly used in Australia nor published in a document in or outside of Australia before the
application date. Distinctive means substantially different in overall appearance to other designs already in the
public domain.
A design can be registered for a period of five years and can be renewed for a further five years. Convention
priority can be claimed for designs filed internationally six months prior to the application date in Australia.
Raising the bar on patents and trade marks
The Intellectual Property Laws Amendment (Raising the Bar) Act 2011 (Cth) has now come into full effect, the
majority of the provisions having commenced on 15 April 2013. The Act represents a significant shift in patent
and trade mark practice in Australia.
The reforms to patent law include:
• raising the threshold for inventive step (by including worldwide common general knowledge and by removing
the requirement that prior art information would have to have been ascertained, understood and regarded as
relevant by a person skilled in the relevant art)
• replacing the requirement of utility with a new requirement that an invention disclose a specific, substantial
and credible use
• inserting the requirement that a patent specification disclose the invention in a manner which is clear and
complete enough for the invention to be performed by a person skilled in the relevant art, in lieu of the
requirement that a complete specification ‘describe the invention fully’
• replacing the requirement that claims of a patent be fairly based on the specification with a new requirement
that they be supported by the specification, and
• inserting an exemption to patent infringement for activities undertaken for the sole purpose of research, and
extending the existing exemption for acts done for the purpose of obtaining regulatory approval to nonpharmaceutical
patents.
The reforms to trade mark law include:
• making it easier to obtain registration of a trade mark by reinstating the presumption of registrability
• reducing the delays in the opposition process, including by contracting timeframes for some milestones
• imposing harsher penalties designed to deter counterfeiting activities
Guide to doing business in Australia / kwm.com 70

Raising the bar on patents and trade marks
• creating new summary offences for drawing, or programming a device to draw, a registered trade mark if it is
likely to be used for an offence, and for possessing a die, block, computer or other device or instrument if it is
likely to be used for an offence, and
• granting courts discretion to award additional damages for trade mark infringement.
Certain changes will not apply to patents and trade marks already granted/registered before the amendments
took effect (and some granted/registered after), and the old law will continue to apply in those cases.
Guide to doing business in Australia / kwm.com 71

THE DIGITAL ECONOMY
AND COMMUNICATIONS
The Australian Constitution gives the Federal Government the power to make laws with respect to postal,
telegraphic, telephonic and similar services. In the last two decades the Federal Government has reformed the
telecommunications industry from telecommunications services being provided by publicly-owned organisations
with statutory monopolies into an open market regime subject to full competition. Further, the current Federal
Government is making a large investment in a high-speed broadband network that will reach a significant
proportion of the Australian population (see below). This network will further promote the e-commerce and
communications sectors in Australia. These are two key components in Australia’s “Digital Economy”.
E-commerce involves the use of computers and other wireless electronic devices to conduct business using
electronic communications technologies. While a relatively small proportion of national sales revenue is currently
generated through transactions effected by electronic means, growth in such sales has been strong. In addition,
Australian courts have been willing to enforce contracts entered into electronically, such as through online auction
sites (eg with eBay and Pay Pal).
There are a number of specific laws that affect particular aspects of e-commerce and there is industry specific
regulation for the telecommunications industry.
Electronic transactions
Electronics Transactions Acts (ETAs) have been passed in each State and Territory, as well as at the
Commonwealth level, and the collective effect of the ETAs is that contracts transacted electronically are as legally
enforceable as written contracts. In addition, the ETAs create an “opt-out” framework that means that any legal
obligation can be complied with electronically, unless explicitly stated to the contrary. The ETAs are facilitative in
nature, and do not prevent transaction-specific requirements from being imposed in other pieces of legislation in
relation to certain types of electronic transactions. The ETAs are based upon the UNCITRAL Model Law on
Electronic Commerce (1996), with some modifications, and at the Commonwealth level, amendments have also
been made to give effect to the United Nations Convention on the Use of Electronic Communications in
International Contracts (2005).
If your business involves electronic transactions with the government, the Australian Government has an e-
Authentication Framework, which represents a consistent whole-of-government approach to authentication for,
and managing the risks of, online dealings between business and government. The framework provides a guide
for businesses on how to conduct transactions securely with Australian Government agencies on a wide range of
matters and through a wide range of delivery channels.
Electronic transactions entered into with individuals or bodies in Australia are subject to a range of regulation, such
as consumer protection laws (see the Consumer protection section below).
Cybercrime
To help protect organisations and individuals who conduct e-commerce, the Australian Government has
incorporated provisions into the Crimes Act 1914 (Cth) to deal with electronic crimes or cybercrime. Australia has
recently acceded to the Council of Europe Convention on Cybercrime, and passed some amendments to domestic
criminal legislation which has the intent of aligning Australia’s treatment of cybercrime with that of the existing
signatories to the Convention. Criminal offences included in the Crimes Act address a number of activities which
are very damaging to organisations and individuals engaged in e-commerce. For example, it is an offence
© King & Wood Mallesons 72

(punishable by up to 10 years’ imprisonment) to use a telecommunications service to gain unauthorised access to
data, to make unauthorised modifications of data, or to impair electronic communication to or from a computer.
Responsibility for content
Organisations with websites need to be careful that the content on their sites does not infringe various legislative
requirements. Under the Broadcasting Services Act 1992 (Cth) the Australian Communications and Media
Authority (ACMA) can order the removal of offensive material (such as pornography) on a website hosted in
Australia. It can also order Australian Internet Service Providers to prevent access to an overseas website
containing offensive material.
Internet gambling is prohibited under the Interactive Gambling Act 2001 (Cth). Accordingly, organisations must not
supply certain types of gambling services to persons in Australia through or over the Internet. This includes
electronic forms of scratch lotteries and other instant lotteries. Advertising of such services is also highly
regulated.
As a consequence of the Australia-United States Free Trade Agreement, Australia has enacted a “takedown”
regime, with similarities to the United States’ Digital Millennium Copyright Act (DMCA), for content that breaches
intellectual property rights. The liability of Internet content hosts and Internet Service Providers for infringement of
intellectual property rights by their users is largely resolved now that Australia’s highest court found that iiNet, one
of Australia’s larger internet service providers, was not responsible for intellectual property infringements by its
customers in using peer-to-peer file sharing technologies. This remains an area of significant industry and political
debate.
Organisations that intend to communicate directly with Internet users also need to be aware that Australia has
specific legal provisions regulating the sending of spam email (see the Spam section below).
Domain names
Organisations intending to use a website with an Australian domain (ending in the .au suffix) can register a domain
name with a number of domain name providers, provided they satisfy certain eligibility requirements. Businesses
with no presence in Australia are eligible to register a .com.au or .net.au domain name if they have applied for, or
own, a registered trade mark in Australia. Organisations must be careful not to infringe the rights of anyone who
holds a trade mark registered in Australia which is the same as, or deceptively similar to, the desired domain
name.
Organisations should also monitor the use of their own trade marks in order to protect themselves from
cybersquatters. Cybersquatters deliberately use another person’s trade mark as a domain name (or part of a
domain name) in an attempt to mislead people into confusing the site with that of the trade mark holder, extort the
trade mark holder into paying a high fee for the domain name, or otherwise attempt to disrupt the business of the
trade mark holder.
If there is dispute relating to a second level Australian country domain name (eg .com.au, .org.au and .net.au), the
parties may lodge a complaint under an administrative dispute resolution policy. The policy is modelled on the
widely-used ICANN Uniform Dispute Resolution Policy, but contains a number of differences reflecting the stricter
eligibility and allocation policy for .au domain names. Commencement of an administrative proceeding under the
dispute resolution policy does not prevent either party from initiating legal proceedings at any time.
Telecommunications
Australian law imposes obligations on businesses that operate in the telecommunications sector. The relevant
laws distinguish between “carriers” (infrastructure owners), “carriage service providers” (including, but not limited
to, Internet Service Providers (ISPs)) and “content service providers”. Depending upon a business’s classification,
it may be required to provide interception and access capabilities to Australian law enforcement authorities, to
follow the directions of the relevant regulators (eg ACMA), and to comply with quasi-regulatory “industry codes”. In
© King & Wood Mallesons 73

addition, some aspects of the telecommunications legislation have extraterritorial application, so the compliance
obligations of a regulated entity may apply to activities conducted, and data stored, outside of Australia.
National Broadband Network
In April 2009, the previous Labor Government announced that an AUD $43bn Fibre-to-the-Premises (FTTP)
National Broadband Network (NBN) would be built in Australia. The proposal is that at least 93% of premises will
be serviced by fibre-to-the-premises and the last 7% of premises will be serviced by a combination of wireless and
satellite technologies. Building the NBN has remained an important political issue in Australia. It is a core promise
of the current Government, including that regional rollout will be prioritised.
The NBN is being built and operated by NBN Co, a company established and owned by the Government. NBN Co
may be privatised after completion of the NBN. NBN Co is required to offer telecommunications services on a
wholesale-only, open and equivalent access basis, with nationally uniform wholesale prices. In June 2011, NBN
Co entered into Definitive Agreements with the incumbent, Telstra Corporation Ltd, under which Telstra agreed to
disconnect progressively certain copper and HFC Broadband Services, to provide NBN Co with long-term access
to large volumes of infrastructure to be used in the building of the NBN and to acquire wholesale fibre access
products from NBN Co. These Definitive Agreements came into force on 7 March 2012.
Additionally, in 2009 the Federal Government enacted reforms to the telecommunications access regime, which is
supervised by the ACCC, with the object of facilitating the transition to the NBN, enhancing competitive outcomes
and strengthening consumer safeguards. A number of additional legislative changes have also been
subsequently enacted to support the rollout of the NBN, including technical and open access requirements on
certain new, extended or upgraded networks and to change the model under which the provision of universal
services is managed.
The new Coalition government is proposing to rework the NBN to deliver a cheaper Fibre-to-the-Node (FTTN)
solution, combined with retention of existing HFC networks owned by Telstra and Optus. It claims the changes will
reduce costs and allow a faster rollout, but will lead to lower minimum speeds of 50 Mbps for 90% of the premises
served by fibre. The proposal is also to remove certain restrictions on new superfast fixed-line networks to
encourage greater infrastructure-based competition.
The NBN is easily the most complex telecommunications reform in Australian history and
marks a new era for telecommunications in Australia. King & Wood Mallesons has been
extensively involved for a number of years in the project, including advising in relation to the
proposals, negotiating the terms of the agreements and through our dealings with the
regulators and Government.
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PRIVACY / DATA
PROCESSING AND SPAM
Privacy / data processing
Australian privacy law (which has a similar coverage and effect to European data processing laws) regulates the
collection, storage, use and disclosure of personal information by organisations carrying on business in Australia,
and the rights of individuals to access information held about them. Special rules apply to:
• the use and disclosure of credit information by credit providers and credit reporting agencies
• the collection and use of tax file numbers
• the collection of sensitive information, including information about health, race, sexual preference, criminal
record, and religion or political affiliation, and
• sending personal information outside Australia.
An organisation subject to the Privacy Act 1988 (Cth) must also publish a privacy policy, and establish complaints
handling and access procedures. Various industry sectors have additional obligations under industry codes and
common law duties - principally the health sector, telecommunications, and financial services.
The Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Cth) was passed in December 2012. From 12
March 2014, it replaces the Information Privacy Principles and National Privacy Principles with a single
consolidated list, the Australian Privacy Principles (APP). The APPs contain special rules about direct marketing
and the amendment introduced a concept of accountability by organisations carrying on business in Australia for
breaches by their offshore service providers or data processors, so that Australian individuals can pursue a claim
in Australia rather than against the offshore business. In addition, the Privacy Commissioner will be granted new
powers of enforcement – failure to comply with the Act can attract penalties of up to AUD $1.7 million.
Australian privacy laws are based on the same OECD directive on which comparable schemes in other
jurisdictions are based. There are a number of broad exemptions under the Privacy Act, such as an employee
records exemption and an exemption for small businesses. The European Union (EU) does not recognise the
Australian data regime as providing EU-equivalent protection and, as a result, EU data cannot be transferred into
Australia without taking additional steps (such as a contractual undertaking).
Privacy update
The previous Federal Government was considering introducing rules akin to those in many US states
requiring entities holding personal information to notify affected individuals and the Privacy
Commissioner whenever the information is lost or subject to unauthorised access or disclosure.
Guide to doing business in Australia / kwm.com 75

Spam
The Spam Act 2003 (Cth) and associated regulations govern the sending of electronic messages with a
commercial purpose to persons in Australia. An electronic message includes email, SMS, MMS and instant
messaging, but excludes voice calls and faxes. Essentially, a person or organisation can only send a commercial
electronic message if:
• the recipient has consented to receiving messages. Consent can either be express or can be inferred from the
recipient’s conduct or the parties’ business or personal relationship
• it contains a statement detailing an electronic means of unsubscribing from receiving messages in the future,
and
• it identifies the sender and contains the sender’s contact details.
Under the Spam Act, a single electronic message may be spam. The message does not need to be sent in bulk or
received in bulk.
The prohibition on sending commercial electronic messages does not apply to the sending of an electronic
message which is purely factual and not for the purpose of promoting or selling goods or services.
Substantial penalties may apply for repeat offenders. The supply, acquisition or use of email address harvesting
technology is also an offence.
A review of the Spam Act in 2006 found that the Act was working effectively to reduce the amount of worldwide
spam originating in Australia. Companies involved in e-marketing are also subject to the 2005 Australian
eMarketing Code of Practice, enforced by the Australian Communications and Media Authority. The Code
provides a plain English application of the provisions of the Spam Act, and promotes best practice use of
commercial electronic messaging.
Do Not Call Register
Australia has a Do Not Call Register. Individuals, as well as emergency services and Government bodies, are
able to place their phone numbers on the Register without charge, and the listing will remain valid for a minimum
of eight years. The Minister has the power to extend this period by legislative instrument. Australian fax numbers
are also eligible for inclusion on the Register. It is an offence to make an unsolicited marketing call, or send an
unsolicited marketing fax, to a number on the Register unless the relevant account holder has given their express
or inferred consent.
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CONSUMER
PROTECTION,
CONSUMER CREDIT AND
PRODUCT LIABILITY
Consumer protection
The Australian Consumer Law (ACL) was introduced in two tranches over the course of 2010-2011 by amending
the multiple Acts containing consumer protection provisions (the Trade Practices Act, the ASIC Act and State and
Territory fair trading laws). The ACL, which is found in Schedule 2 of the CCA, involves a national approach to
consumer protection laws in Australia.
The ACL contains provisions dealing with:
• unconscionable conduct
• misleading or deceptive conduct (including using misleading and false advertising, names and market practices
(including look-alike products))
• unfair contract terms
• various consumer protection issues (such as bait advertising, referral selling, inertia selling, multiple and
component pricing and pyramid schemes)
• door-to-door and outbound telesales (also known as “unsolicited consumer agreements”)
• consumer guarantees (which replaces the implied terms regime), providing statute-based remedies for
consumers and regulator-initiated actions, and
• product safety.
In some cases, a breach of the ACL may result in:
• civil penalties of up to $1.1 million (for corporations) and $220,000 (for individuals), or
• substantiation notices, infringement notices or public warning notices.
The ACCC is the relevant regulator at the national level and enforces consumer protection laws vigorously. State
and Territory consumer regulators (such as Consumer Affairs Victoria) may also enforce consumer protection laws
at that level.
Unfair contract terms
A national unfair terms regime has also been introduced based on the Victoria regime which had been operating
since 2003. The regime applies to (most) terms in standard form consumer contracts that are entered into after 1
July 2010, or that are renewed or varied after 1 July 2010 (to the extent they are renewed or varied). The regime
only applies to standard form contracts that involve an individual whose acquisition of a good or service is wholly
or predominately for personal, domestic or household use or consumption. A standard form contract is a relatively
fluid concept and covers more than typical take-it-or-leave-it contracts. A contract will be presumed to be a
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standard form contract unless proven otherwise. An unfair term is void and consumers and regulators have the
ability to seek a declaration from a Court that a term is unfair. A term will be “unfair” if:
• it would cause a significant imbalance in the parties’ rights and obligations arising under the contract
• it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged
by the term, and
• the term would cause detriment (whether financial or otherwise) to a party if it were applied or relied upon.
The transparency of a term and the contract as a whole (ie countervailing terms) are also relevant to an unfairness
assessment.
The national unfair contract terms regime applies to offshore businesses that supply goods or services to
Australian consumers. The ACCC has indicated that this is a priority enforcement area and recently issued
proceedings in its first unfair terms case.
Consumer guarantees
The ACL gives consumers the benefit of a number of non-excludable guarantees in respect of consumer goods
and services (such as goods being fit for purpose, of acceptable quality and services being rendered with due care
and skill). The consumer guarantee regime defines the concept of “consumer” broadly, and includes any person
that acquires goods or services for a price of less than AUD $40,000 not for the purpose of re-supply, or to
use/transform those goods in the course of a production, manufacture or repair process.
A breach of a consumer guarantee gives the consumer certain rights against suppliers of goods/services
depending on the severity of the breach (for example, if the failure to comply with a consumer guarantee amounts
to a major failure, the consumer may be entitled to obtain a refund or replacement at their (not the supplier’s)
election) and rights against manufacturers for damages where certain guarantees are breached. Manufacturers
are also obliged to indemnify suppliers in certain cases. In addition, terms purporting to exclude rights conferred
by the consumer guarantees regime will be void. Attempts to exclude these rights could result in a contravention
of the ACL. Lastly, the ACCC has new powers in the area of consumer guarantees, including to take
representative action on behalf of consumers to enforce their statutory rights.
Consumer credit
Participants in the Australian consumer credit industry (such as credit providers, finance brokers and certain
service providers) are subject to a Federal licensing and conduct regime under the National Consumer Credit
Protection Act 2009 (Cth) and related legislation and regulations (collectively, the National Credit Laws).
The National Credit Laws also include a ‘National Credit Code’ which sets out a range of requirements regarding
advertising of regulated credit, pre-contractual and contractual disclosure, how credit contracts may be varied and
enforced, security such as mortgages and guarantees and related matters. Generally speaking, the National
Credit Code regulates credit contracts under which credit is provided to individuals or strata corporations wholly or
predominantly for personal, domestic or household purposes, or residential investment property purposes, where
certain other criteria are also met. While the Australian Government has discussed the possibility of extending the
laws, to some extent, to small business and investment credit contracts, whether these reforms will progress, and
in what time frame, is not clear.
An Australian Credit Licence (ACL) must be held by any person who engages in a “credit activity” unless they are
appointed as a “credit representative” of a person who has an ACL, or a licensing exemption applies to them.
Depending on what connection an entity’s business has with Australia, an entity could be undertaking credit
activities covered by the National Credit Act even though it has no physical presence in Australia.
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Credit activities are prescribed types of activities that relate to credit contracts, leases, mortgages or guarantees
that are regulated under the National Credit Code. They include, for example, carrying on the business of
providing regulated credit, acting as an intermediary between customers and regulated credit providers and
suggesting that customers apply for regulated credit, or assisting them to apply for such credit.
ACLs are issued by ASIC on satisfaction of the relevant licensing application criteria. Licence applications can
require quite extensive proofs in support. Licence holders have an extensive range of obligations imposed on
them, including relating to conduct, disclosure and ‘responsible lending’. They also have extensive responsibility
and liability for their representatives.
Product liability
Australia has extensive laws giving protection to consumers, regulating food and drug marketing, labelling and
promotion, and governing product liability. Australia’s federal product liability law is based on the EC Product
Liability Directive and makes manufacturers and importers strictly liable for injury caused by defective or unsafe
goods. Consumers also have common law rights in tort and contract, and under the various state Sale of Goods
Acts. Product recalls are governed by the CCA and industry recall protocols. Class actions in relation to product
liability claims are available to groups of seven or more consumers where the claim arises out of the same or
similar circumstances giving rise to common issues and are being increasingly utilised.
In addition, the Australian Consumer Law in the CCA sets
out a number of detailed provisions relating to product
liability, including Ministerial discretion to take any of the
following steps in prescribed circumstances:
• make a safety standard for consumer goods or productrelated
services of specified kind
Industry-specific requirements: Investors should
also be aware of industry-specific requirements,
such as the Australia New Zealand Food Standards
Code for businesses involved in the production,
processing and/or marketing of food.
• declare safety standards for consumer goods or product related services of specified kind, which will be
prepared or approved by Standards Australia Limited
• introduce interim or permanent bans on consumer goods or product-related services of a specified kind if the
consumer goods or services will or may cause injury to any person
• issue a recall notice for consumer goods if those goods will or may cause injury to any person, do not comply
with a safety standard or are the subject of a ban
• publish a written safety warning notice in relation to any consumer goods or product-related services of a
specified kind that may cause injury and/or are under investigation to determine whether or not those goods will
or may cause injury to any person, and
• introduce a minimum standard of information relating to specified goods or services.
The CCA also sets out product safety reporting requirements under which, in general terms, suppliers of consumer
goods and product-related services who become aware of death or serious injury or illness caused by the use or
foreseeable misuse of that good or service must report it to the Commonwealth Minister within 48 hours of
becoming aware. Anyone in the supply chain is considered a supplier (eg retailer, manufacturer, distributor and
importer).
Guide to doing business in Australia / kwm.com 79

LABOUR LAWS
The terms of employment of workers in Australia are primarily regulated by legislation and also, for certain classes
of workers, by industrial awards or workplace agreements. The common law of employment also has an important
role.
Federal legislation
The Fair Work Act 2009 (Cth) (FWA) is the key piece of legislation governing workplace relations in Australia. It
applies to the vast majority of Australian employers (other than some State and Local Government employees),
including all trading corporations. It includes rules relating to:
• unfair dismissal
• protections from “adverse action”
• industrial instruments (industrial awards and enterprise agreements)
• collective bargaining
• industrial action
• industrial unions
• transmission of business
• sham contracting, and
• the Federal industrial tribunal known as the Fair Work Commission.
The FWA contains minimum entitlements relating to:
• wages
• annual leave
• personal and carer’s leave
• parental leave
• maximum hours of work
• public holidays
• notice of termination of employment
• severance pay where employment is terminated due to redundancy
• community service leave
• enhanced parental leave
• a Fair Work Information Statement, and
• for some parents or carers - a right to request flexible working arrangements.
Each of the matters mentioned above forms part of the “National Employment Standards” in the FWA (other than
wages, which are dealt with separately).
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State legislation
State laws impose obligations in respect of various employment matters such as long service leave entitlements,
workplace health and safety and equal opportunity employment.
Industrial awards and workplace agreements
Awards are industrial instruments which have been created by an industrial tribunal. Under the Federal system
there are approximately 120 awards which apply to certain employees working in particular industries (for example
the Banking, Finance and Insurance Award) or to particular occupations (for example the Private Sector Clerks
Award). They specify minimum terms and conditions of employment for certain classes of workers. An employer
cannot generally contract out of those minimum conditions of employment, which usually include:
• minimum rates of pay, including overtime and penalty rates
• hours of work
• types of leave, and
• the regulation of termination of employment (eg notice and redundancy pay entitlements).
Awards may be supplemented or overridden by collectively negotiated enterprise bargaining agreements. These
agreements enable employers to set appropriate terms and conditions of employment tailored to their particular
enterprise. The FWA permits employers to negotiate collective enterprise bargaining agreements and requires
parties to bargain in good faith when negotiating such agreements.
Common law
All employees, regardless of whether or not they are covered by an award or enterprise agreement, will have a
common law contract of employment (whether written or unwritten). For employees not covered by awards, the
contract of employment is the principal source of obligations between the employer and the employee. A contract
of employment can and often does provide for benefits in excess of the minimum standards required by labour
laws.
Compulsory superannuation
Under Federal legislation, employers are required to make compulsory superannuation contributions to complying
superannuation funds on behalf of their employees. The minimum contribution rate from 1 July 2013 is 9.25% of
the employee’s salary or wages (capped to a maximum contribution in respect of high earning employees). This is
set to increase gradually over the next few years.
Workers’ compensation
State and Territory laws also regulate the obligations of an employer to provide workers’ compensation payments
to employees suffering from work-related injuries or diseases. Depending on the system applicable in the relevant
State, employers are either required to contribute a levy to the State or to keep and maintain insurance cover for
the full amount of the employer’s statutory liability.
Occupational health and safety
State and Territory laws impose strict obligations on employers to ensure the health, safety and welfare of
employees and other people in the workplace or affected by the employer’s undertaking. A breach of these
obligations means that the employer and its managers and directors are exposed to prosecutions and significant
monetary penalties.
Health and Safety laws have been harmonised in recent years such that the legislation is essentially the same in
each State and Territory except for Victoria and Western Australia who have not adopted the harmonised laws.
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The laws impose a positive obligation on officers (ie directors and senior managers) of a business to exercise due
diligence to ensure the business is complying with its obligations under the health and safety legislation.
Equal employment opportunity
Federal and State laws also:
• prohibit discrimination against employees and job applicants on certain grounds including race, sex,
pregnancy, age, sexual preference, politics, religion, trade union membership or disability
• make provision for equal opportunity and affirmative action in respect of the employment of women, and
impose reporting requirements on workforce gender ratios (but do not impose quota requirements), and
• prohibit sexual harassment and vilification in the workplace and render employers vicariously liable for the
unlawful conduct of employees.
Industrial disputes and union coverage
Labour laws provide for limited conciliation and arbitration of industrial disputes by the Fair Work Commission.
Industrial action which is protected by law is permissible in certain limited circumstances in support of bargaining
for a new enterprise agreement. Employee membership of trade unions is not compulsory but is very common in
particular industries.
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INTERNATIONAL TRADE
Although a detailed consideration of international trade issues is beyond the scope of this publication, matters for
consideration include:
• Free trade agreements: Australia is party to free trade agreements (FTAs) with various countries including
New Zealand, Thailand, Singapore, Malaysia, Chile and the United States of America.
In 2009, Australia entered into its largest free trade pact yet with New Zealand and 10 ASEAN (Association of
Southeast Asian Nations) countries being Singapore, Thailand, Malaysia, Indonesia, Vietnam, Philippines,
Brunei Darussalam, Lao PDR, Cambodia and Myanmar. The agreement aims to reduce or eliminate tariffs
across a region that is home to 600 million people and the agreement will deliver new opportunities across the
board.
Australia has entered into negotiations with China, India, Japan, Korea, Indonesia and the Gulf Cooperation
Council with the aim of securing bilateral FTAs.
The aim of the FTAs is to promote trade, reduce tariff barriers, simplify customs administration, grant access to
government procurement opportunities and often provide other advantages to individuals and corporations of
the party states not otherwise available.
• Other trade agreements: other bilateral and multilateral treaties affect trade between states (and individuals
and corporations of the party states). For example, the Australia-European Union bilateral wine agreement
governs, among other things, the use of geographical indications between these bodies. The World Trade
Organization Agreement on Trade-Related Aspects of Intellectual Property also deals with geographical
indications.
• The World Trade Organization: the World Trade Organization administers multilateral trade agreements
which may impact on setting up and operating businesses in Australia.
• Australia in APEC: Australia is also a member of the Asia-Pacific Economic Cooperation (APEC) which was
established in 1989 and is the premier forum for facilitating economic growth, cooperation, trade and
investment in the Asia-Pacific region. APEC operates on the basis of non-binding commitments and open
dialogue. Decisions made within APEC are reached by consensus and commitments are undertaken on a
voluntary basis.
APEC’s 21 Member Economies are Australia, Brunei Darussalam, Canada, Chile, People's Republic of China,
Hong Kong, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru,
The Republic of the Philippines, The Russian Federation, Singapore, Chinese Taipei, Thailand, the United
States of America and Vietnam.
“The [Malaysia-Australia FTA] will further integrate the Australian economy with the fastgrowing
Asian region, benefitting Australian exporters, importers and consumers.” 10
10
Joint media release from the Australian Prime Minister and the Minister for Trade and Competitiveness 22 May 2012.
Guide to doing business in Australia / kwm.com 83

IMPORT / EXPORT
REGULATION
Imports
Importing is subject to a variety of legislation, primarily the Customs Act 1901 (Cth) (Customs Act), which broadly
regulates importation, and the Customs Tariff Act 1995 (Cth), which imposes customs duty.
Imported goods will also normally be subject to GST on importation. GST may also be payable by the importer on
the domestic transport within Australia of imported goods, to their place of consignment in Australia under the
primary agreement.
Imported services and other non-tangible supplies will generally not be subject to customs duty, nor to GST,
unless they are connected with Australia (eg where they are provided through an Australian enterprise of the
overseas supplier). However, these types of supplies (unless they would be GST-free or input taxed if connected
with Australia) will be subject to GST where they are provided by overseas suppliers to entities in Australia which
are not entitled to full input tax credits (eg financial institutions such as banks). In these cases, the GST liability
will generally fall on the Australian recipient.
Imported goods
Most goods imported into Australia are not subject to restrictions, although it is necessary to comply with customs
procedures. However, certain classes of goods, such as drugs, animal products and weapons, will be subject to
specific import controls and the import of these goods may be prohibited or restricted (in the latter case, permits
may be required to import). In certain circumstances, it is possible to obtain post-importation permissions, licences
or other documents in respect of certain goods, the importation of which is otherwise prohibited.
With a few exceptions (eg certain low-value goods), the importer or the importer’s agent must submit a customs
entry to the Australian Customs and Border Protection Service (ACS), giving details of the goods at or before the
time the goods arrive in Australia. Import cargo reporting requirements require all air and sea cargo to be declared
to the ACS, including specified low-value imports. However, if the customs value of imported goods is AUD$1,000
or less, only a self-assessed clearance declaration needs to be completed for goods to be released from customs
control.
Where duties and other requirements are applicable, ACS may also require security to be lodged for the payment
of duties or compliance with those requirements.
From the time of importation until the time of the payment of duty and GST, goods generally remain under the
control of the customs authorities. In some circumstances, however, eligible importers may register for the Import
Deferral Scheme and defer the payment of GST on imported goods. This allows both the GST payable, and any
input tax credit entitlements on the taxable importation, to be included on the first Business Activity Statement due
after the goods enter Australia for home consumption.
Customs duty
Where goods are not exempt from duty under any concession, an amount of import duty will generally be payable.
A percentage rate is imposed on imported goods on an ad valorem basis. In general, the customs value of the
goods is assessed based on the total amount paid for the goods, packaged and in export condition, at their place
of export. This may be adjusted depending on the terms of trade. In relation to contracts on free on board terms
© King & Wood Mallesons 84

(where the vendor pays all costs up to the point at which the goods pass onto the vessel), little or no adjustment
may be required to the price to determine the customs value.
Tariff Concession System
The Customs Act provides for the making of Tariff Concession Orders (TCO) in respect of import duties and the
goods to which they apply. A TCO is available to all importers of goods falling into that tariff classification and
meeting the description as set out in the TCO.
TCOs allow certain goods to be subject to a lower rate of import duty. A TCO can allow duty-free entry of goods
that are identified as consumption goods, and a 3% duty on other eligible goods. An intending importer should
ascertain if the goods are the subject of such an order or if an order can be obtained. The latter will depend on
whether substitutable goods are produced in Australia in the ordinary course of business. In general, a TCO will
only be granted where it is proven that substitutable goods are not made in Australia.
Anti-dumping
Competition from imports can be considered by the Australian Federal Government to be unfair in certain
circumstances. Under the Australian anti-dumping legislation, which broadly follows the World Trade Organization
Anti-Dumping Agreement, local industries are entitled to protection where dumped imports are found to cause or
threaten material injury. Dumping by itself is not prohibited, however, remedial action may be taken where
dumping causes, or threatens to cause, material injury to an Australian industry.
Dumping is taken to occur when the export price of products of one country is less than their Normal Value in the
domestic market of the exporter. Normal Value is defined as the price of like goods sold in the domestic market of
the country of export, in the ordinary course of trade, for home consumption in arm’s length transactions by the
exporter or by other sellers of like goods. If there are no equivalent sales, the Normal Value may be calculated
from the cost to make and sell the like goods in the exporter’s domestic market, or by reference to the export price
at which like goods are sold in the ordinary course of trade in arm’s length transactions in the country of export to
an appropriate third country.
If these criteria are met, the Government may impose a dumping duty, which in effect is the difference between the
export price of the goods and their Normal Value.
The Government may also impose a provisional or interim dumping duty at an early stage in a dumping enquiry if it
believes that a positive finding will be made. To satisfy a demand for provisional duty, the importer is sometimes
obliged to put up security in the form of cash. Further, if a positive dumping finding is made at the conclusion of
the enquiry, dumping duties can then be imposed retrospectively in certain circumstances.
Selling goods in Australia at less than their Normal Value is not the only form of dumping prohibited by the
legislation. Where goods sold in the exporter’s domestic market are the subject of any subsidy, bounty, remission
or reduction of freight or other financial assistance, an alternative duty known as a countervailing duty may be
imposed up to the amount of the subsidy. Before this duty is imposed, it must still be established that the
subsidised imports cause or threaten material injury to the relevant Australian industry.
On 17 October 2011, the Customs Amendment (Anti-dumping Improvements) Act 2011 was enacted by
Parliament, based on the recommendations in the Productivity Commission's Inquiry into Australia's Anti-dumping
and Countervailing System. The Act is intended to enhance the effectiveness of Australia's anti-dumping regime
by improving accessibility, strengthening administrative powers and facilitating a closer alignment with antidumping
rules in other countries. The Act represents the first tranche of the Government’s improvements to
Australia’s anti-dumping regime as announced on 22 June 2011.
Exports
Exports from Australia are also regulated by a range of legislation, including the Customs Act and the Export
Control Act 1982 (Cth). There are few regulations on exports from Australia. Generally, goods to be exported
© King & Wood Mallesons 85

must be declared for export with the ACS and an authority to deal with the goods must be granted. However,
certain goods, such as wildlife, heritage and hazardous materials, may be subject to additional requirements,
which may include Federal Government approval, or even total prohibition.
Exports of most goods will be GST-free if they are exported within a specified time of receiving payment or issuing
an invoice. Exports of services are also GST-free in many cases, provided that relevant requirements in the GST
legislation are met.
Administration and enforcement of customs obligations
Significant changes have been made over the past few years to the administration and enforcement of customs
obligations. This included the introduction of the Customs Accreditation program, which provides tailored
arrangements for accredited low-risk importers and exporters. Accreditation status offers importers and exporters
faster goods clearance, reduced costs and more efficient document processing.
Enforcement of customs obligations has become stricter, with the introduction of a range of strict liability offences
(eg failure to declare goods for export, the making of false and misleading statements, and the moving, altering,
delivering or interfering with goods without authority).
Record retention obligations have also increased. In addition to importers and exporters, those who cause goods
to be imported / exported (such as freight forwarders) are now required to maintain detailed records of certain
commercial documents for up to five years from the time goods were imported or exported. Further, documents
relating to all exports, not just goods declared for export, must be retained for five years. Records of
communications with the ACS are required to be retained for one year.
As part of the Customs Cargo Management Re-engineering project (CMR), the Customs export entry and reporting
system (EXIT) is no longer available. All export reporting must be completed through the Integrated Cargo System
(ICS). In addition, all import cargo arriving in Australia must be reported in ICS.
Guide to doing business in Australia / kwm.com 86

ENVIRONMENTAL
REGULATION
General
Environmental considerations are important to proposed developments in Australia and to the continued operation
of a project or venture. Australia has over 300 Acts (in addition to numerous regulations under those Acts) relating
to environmental matters, and more than 80 agencies or authorities at both Federal and State level. The potential
for duplication and conflict between these laws has been reduced by Federal legislation which provides for State
accreditation of assessment processes and inter-governmental agreements relating to matters of national
environmental significance. Matters which are not of national environmental significance are regulated under the
laws of the relevant State. Many aspects of those laws, however, incorporate national standards and guidelines.
See also the issues discussed in the Sustainability in business section.
Legislative controls
The Federal and State laws (generally operating as described above) regulate the following areas which are
relevant to conducting business in Australia.
Land use and development
The classification of land by zoning is a common approach throughout Australia and allows particular areas of land
(zones) to be set aside for certain types of uses (eg land used for industrial purposes).
Traditionally, zoning requirements have categorised land use as residential, commercial, light industrial, general
industrial, rural and public purposes or special uses. As a consequence of the zoning, activities are grouped
together so that, on any particular parcel of land, activities may be prohibited, permissible with consent, exempt, or
subject to some special assessment procedure (either greater or lesser than development permissible with
consent).
In addition to the general legal controls that are used in relation to the use and development of land, there are a
number of policy guidelines and objectives which are used in the decision-making process. In practice, the
relevant authority exercises broad discretion with respect to the day-to-day decisions relating to the issue of
consents and permits for the use and development of land.
The relevant authority is also usually identified in the planning instrument which sets out the zoning of the land.
For most routine developments, the local government authority will be the consent authority. For larger
developments, a State minister may be the consent authority. The State also generally controls the final consent
of planning instruments, because those instruments usually require approval of the State minister before being
made. Development applications may also be subject to referral to other agencies for comment and conditioning
(for example to the New South Wales Office of Environment and Heritage).
Other legislative controls also aim to conserve natural, urban, historical and cultural resources by giving them
special protected status, generally through State and local planning instruments and orders.
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Environmental impact assessment
Both Federal and State legislation may require an environmental impact assessment of a development or a major
project (ie the grant of a petroleum or mining lease). The level of assessment required will vary, depending on the
jurisdiction, the type and location of the development proposed and the terms of the relevant planning instruments.
For example, petroleum and mining projects in Australia will generally be required to undergo extensive
environmental impact assessment under State and Federal laws.
The information required to accompany an application for assessment and approval (or for a consent or a permit)
may include some common elements. These common elements of an application may include the objectives of a
development, its justification, the consequences of the project not proceeding, a detailed description of what is
proposed, the location, waste generation, infrastructure requirements, examination of alternatives and the
assessment of potential impacts and measures of environmental management.
Depending on the jurisdiction and nature of the impact assessment required, third party objectors to proposals
may gain standing to challenge environmental/development approvals granted to projects following assessment.
Building
The erection of buildings is also regulated, primarily by State laws relating to the building code (eg fire safety and
disabled access). Generally, a further technical permit, certificate or licence will be required to be issued before
the erection of any building.
Pollution, waste and contamination
All States and Territories in Australia have environmental legislation addressing the pollution of air, land and
waters (surface, marine and groundwater). The nature of the controls and penalties vary from jurisdiction to
jurisdiction, but in each jurisdiction the following matters are regulated:
• contamination
• emission of effluent
• emission of pollutants (including CO 2 in some jurisdictions) to the atmosphere, waters, or land
• emission of noise or odours
• generation, transport and depositing of waste, and
• storage, handling, use or transport of dangerous goods.
Some jurisdictions also regulate environmental harm, which may include clearing of native vegetation.
The penalties for pollution offences are significant and include fines and jail sentences, or both.
Many jurisdictions also now have the capacity to establish general licences for a site or area, enabling trading in
pollution rights. Many jurisdictions also now have the capacity to allocate pollution credits (including for CO 2 ) to
enable greater control over overall emissions, rather than dealing with them on a site-by-site basis. Presently,
however, the vast majority of licences are site specific.
The legislation also generally incorporates the following matters.
• Imposition of strict liability for certain environmental offences
Under a strict liability offence, an entity’s intentions and any precautions it may have taken to avoid committing
an offence are irrelevant to guilt (but are relevant to penalty). The fact that the breach has occurred is
sufficient to constitute the offence. An entity may also be held liable for breaches committed by independent
third parties such as contractors.
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• Personal liability of directors and managers
Under many of the States’ environmental legislation, where a company is guilty of an offence the directors and
managers of that company are also guilty, unless they can establish one of the defences available under the
relevant Acts. There are essentially two defences:
o not being in a position to influence the events leading to the incident, or
o the use of all due diligence or reasonable care (ie taking all reasonable steps to ensure that the company
complied with the relevant legislation).
• Retrospective liability for the clean-up of contaminated land
Most of the clean-up provisions under State legislation for contaminated land or waters operate retrospectively.
Liability may potentially be imposed, regardless of fault, for past conduct on sites and facilities which are
currently occupied, and for past operations which may have been disposed of many years ago. Liability may
exist even though at the relevant time the operations were lawful, state-of-the-art technology was used, harmful
effects were not recognised and operations had the approval of environmental authorities.
Liability is generally sought to be imposed on the polluter, but most jurisdictions also authorise the service of
clean-up notices on owners, occupiers and even notional owners (eg mortgagees in possession). For
example, in circumstances where a polluter is unknown or cannot be located, a landowner may be held liable
for historical contamination.
Implications
Given the potential for significant environmental liability, corporations in Australia are pursuing various risk
management strategies and environmental management programs. Financiers in Australia are now paying
particular attention to risks associated with environmental regulation when evaluating credit proposals.
Reporting on environmental regulation of an entity’s operations
If an entity’s operations are subject to any particular and significant environmental regulation, the annual directors’
report for a financial year (see the Markets, regulation and governance section) must give details of the entity’s
performance in relation to environmental regulation.
Guide to doing business in Australia / kwm.com 89

NATIVE TITLE AND
INDIGENOUS HERITAGE
Background to Native Title
The Native Title Act 1993 (Cth) (NTA) recognises and protects the rights and interests in Australia of
Aboriginal and Torres Strait Islander people in land and waters, according to their traditional laws and
customs, determined under the common law. The rights are referred to as “Native Title”.
Investments in projects in Australia may be impacted by Native Title by:
• registered or determined Native Title claims (if any) over the land which is to be the subject of the project
development, and
• the requirement to comply with the procedures in the NTA in relation to the grant of tenure where the
subject land is affected by Native Title claims.
Native Title may impact the grant and renewal of tenure such as exploration and mining tenements and pastoral
leases. It should be noted that the procedural rights that need to be given to Native Title holders do not amount to
a veto on the grant of tenure but often give the native title party a right to object, be consulted or to negotiate.
To date, there have only been a small number of Native Title claims that have been determined by the Federal
Court to hold Native Title, however there are a large number of Native Title claims that have been registered by the
National Native Title Tribunal (NNTT) and attract Native Title procedural rights.
Native Title claims and NTA procedural rights
Whether or not Native Title rights and interests exist will depend upon whether the relevant Indigenous peoples
have maintained their connection with the land and waters. Native Title rights and interests can only exist if they
have not been extinguished by the prior valid grant of rights in the land by Government which is inconsistent with
the continuation of Native Title rights and interests.
It is important to note that the existence of a Native Title claim is not an indication that Native Title in fact
exists over the land covered by the claim, as this is a matter ultimately determined by the Federal Court. In
order to gain the procedural rights under the NTA (see below) a Native Title claim must be accepted for
registration by the NNTT, and/or determined by the Federal Court and/or there must be a representative
Aboriginal and Torres Strait Islander body for the area.
Native Title is extinguished if there is an inconsistent grant of an interest in the land by the Government to people
other than the Native Title holders that is valid as to Native Title pursuant to the NTA (granted prior to 23
December 1996, or after 23 December 1996 in accordance with the NTA procedures). Such grants include the
grant of freehold land, most forms of lease, and some forms of reservation. Native Title is not extinguished by
the grant of mining tenements, as mining tenements are not considered to be grants of exclusive
possession and are therefore not inconsistent with Native Title rights and interests.
If Native Title is extinguished, then there are no Native Title procedural requirements under the NTA that
need to be followed before tenure can be granted.
If Native Title is not extinguished, then there are Native Title procedural requirements under the NTA that must be
followed before tenure can be granted. In relation to the grant of interests after 23 December 1996 (defined as
© King & Wood Mallesons 90

“future acts” in the NTA) these will only be valid if the Native Title procedures, namely “future act procedures” set
out in the NTA, are followed.
Mining tenements
Generally, resources projects are the main investments affected by Native Title issues.
Mining tenements granted prior to 23 December 1996 are likely to be valid as to Native Title (provided
certain statutory criteria are met). Mining tenements will not need to follow the Native Title procedures
under the NTA prior to renewal or extension where:
• the earlier right was granted and valid as to Native Title prior to 23 December 1996, and
• the area, term or rights (ie use) under the renewal or extension are the same as under the prior valid grant.
In order for tenements to be granted and valid as to Native Title after 23 December 1996, the tenement
applicant must follow the relevant Native Title procedures established under the NTA if the grant of the
tenements will have an effect on the Native Title rights and interests of certain Native Title claims.
In relation to mining projects, the more common NTA procedural requirements in relation to the grant of tenure
include:
• in respect of the grant of a mining lease, a procedure involving the Native Title party’s “right to negotiate” (RTN
procedure)
• in respect of tenure required to build an infrastructure facility, an “infrastructure procedure”
• in respect of the grant of an exploration licence, a procedure for “low impact” future acts, and
• the “expedited procedure” may apply to the grant of tenements (such as some exploration licences) where
there is no interference with social and community rights, the act is unlikely to interfere with significant sites or
areas, and there is no major ground disturbance.
RTN procedure
The RTN procedure requires the State and the proponent to negotiate in good faith with the Native Title party, with
a view to obtaining their agreement to the doing of the future act (for example, the grant of a mining lease), and
may include the payment of compensation by reference to the amount of profit made, any income derived or any
thing produced after the act (ie production of minerals following grant of a mining lease).
The obvious practical effect of the RTN process is the time which it involves. For a six month period, the party
who is seeking the land grant or tenement is required to negotiate in good faith with Native Title party with a view
to reaching agreement in relation to the doing of the future act. The ultimate outcome of the RTN process is
generally an agreement with the relevant Native Title party which allows the future act to occur. If agreement
cannot be reached within six months of notification to the Native Title party of the doing of the act, the doing of the
act can be referred to the NNTT for determination. The NNTT rarely refuses the doing of the act.
Infrastructure procedure
The “infrastructure procedure” is a less procedurally onerous process than the RTN procedure that will validate a
future act when it involves the grant of tenure resulting in:
• the compulsory acquisition of Native Title rights for the purpose of the construction of an infrastructure facility,
or
• the creation of a right to mine for the purpose of the construction of an infrastructure facility associated with
mining.
Guide to doing business in Australia / kwm.com 91

Before such tenure can be granted, the “infrastructure procedure” requires the proponent to follow a “consultation
and objection” procedure under the NTA. Under this procedure, the Native Title party has two months from the
date that they are notified of a proposal to grant such rights of tenure to object to the grant. If objections are
received, then the Native Title party is required to be consulted in relation to the proposed grant of tenure. The
consultation process is a less involved process than negotiations required under the RTN procedure, but can still
take some months to resolve. The Native Title party may refer the objection to an “independent person or body” to
make a determination regarding the objection.
Low impact future acts
A “low impact future act” is an act that:
• does not continue after a determination that Native Title exists (ie there is no determined Native Title claim) and
it must be capable of being stopped if there is a determination of Native Title, and
• must not consist of, or relate to, a number of different acts, ie it must not fall into one of the exclusions (such as
mining, clearing or the construction of fixtures).
An example of a “low impact future” act is the grant of a prospecting licence, and in certain circumstances,
exploration licences. There are no Native Title procedural requirements in relation to “low impact future acts”,
therefore they can be granted without any delay or compensation being payable.
Expedited procedure
In addition to the Native Title procedures outlined above, the “expedited procedure” may be used to bypass the
normal Native Title procedure where the future act will not materially affect a Native Title interest. A future act will
attract the “expedited procedure” if:
• the act is not likely to interfere with the carrying on of the community or social activities of the Native Title party
• the act is not likely to interfere with areas or sites of particular significance, and
• the act is not likely to involve major disturbance to any land or waters concerned.
Typically, exploration licences may be granted under the “expedited procedure” in circumstances where they do
not attract the “low impact future act” procedures. Where the “expedited procedure” applies, the Native Title party
must be notified by the Government party, and has four months from the date of that notification to lodge an
objection. If no objection is lodged, then the Government may do the act (ie grant the tenure). If an objection is
lodged, the NNTT will determine whether the act attracts the “expedited procedure”. If it does, the Government
party may do the act, if not, the parties must proceed with the relevant Native Title procedure (for example, the
RTN procedure).
Indigenous Land Use Agreements
The NTA enables any person to negotiate and enter into an Indigenous Land Use Agreement (ILUA) with a Native
Title holder about the use and management of traditional land and waters (regardless of which/whether Native
Title procedures are required). An ILUA provides for the validation of past and future acts (such as the granting of
a mining tenement), and in certain circumstances may provide for the non-extinguishment of Native Title. ILUAs
will typically deal with matters such as compensation for the effect of the act/s on Native Title rights and interests
(including employment opportunities for Indigenous peoples), access to traditional lands and waters, protection of
Aboriginal heritage, and ongoing consultation.
An ILUA may be registered on the Register of Indigenous Land Use Agreements by the Registrar of the NNTT.
Once registered under the NTA, an ILUA has the effect of law as between the parties to the agreement.
Guide to doing business in Australia / kwm.com 92

Indigenous public housing and community facilities
As a result of amendments made to the NTA in 2010, there now exists a Native Title process specifically for
Indigenous public housing and a limited class of community facilities, including education, health, police and
emergency facilities. As a result, such housing and facilities may be constructed on Indigenous held land where
Native Title may exist. Native Title parties have the flexibility to choose the level of consultation appropriate to
each project. The construction of each individual housing or community facility project does not, however, require
the consent of Native Title parties.
This process is for a period of ten years from the 2010 amendments; in line with the Australian Council of
Governments’ commitment to delivering increased Indigenous housing and community facilities.
Indigenous heritage
The protection of Indigenous heritage is an important matter, and is separate to Native Title. There is both State
and Commonwealth heritage legislation. Indigenous heritage legislation protects sites and objects of significance
to Aboriginal and Torres Strait Islander people. Indigenous heritage sites may exist on land that is not the subject
of Native Title. Indigenous heritage issues may also be problematic even though the Native Title process has
been followed.
It is an offence to disturb or interfere with an Indigenous heritage site, so consent of the relevant Government
Minister may be required if use of the land may disturb or destroy Indigenous sites. The Commonwealth
legislation provides for emergency (and permanent) declarations in the event that State legislation fails to protect a
significant Indigenous site.
Generally speaking, proponents need to undertake indigenous heritage surveys to determine whether there are
any archaeological or ethnographic heritage sites on the land before they commence ground disturbance. The
various registers kept by Government agencies are usually not a complete record of every heritage site on the
land. Once the surveys are completed and sites are identified, the proponent can elect to change the areas it
proposes to disturb (eg by moving an infrastructure corridor) to avoid identified heritage sites or obtain
authorisation to disturb the site, usually from a Government agency.
Heritage agreements are often reached as part of Native Title negotiations.
Guide to doing business in Australia / kwm.com 93

GLOSSARY
TERM
ABN
ACCC
ACMA
ACL
ACS
ACT
ADI
AFP
AFSL
ALRC
AML
AML / CTF Act
APEC
APRA
ASEAN
ASIC
ASIC Act
ASX
ASX Recommendations
ATO
Banking Act
CCA
CGT
Chi-X
Corporations Act
CPM
Cth
Customs Act
DTA
EFT
EU
FATA
FBT
FCS
FIRB
FTAs
FTTN
FTTP
MEANING
Australian Business Number
Australian Competition and Consumer Commission
Australian Communications and Media Authority
Australian Credit Licence or Australian Consumer Law (depending on context)
Australian Customs and Border Protection Service
Australian Capital Territory
Authorised Deposit-taking Institution
Australian Federal Police
Australian financial services licence
Australian Law Reform Commission
Anti-money Laundering
Anti-money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Asia-Pacific Economic Cooperation
Australian Prudential Regulation Authority
Association of Southeast Asian Nations
Australian Securities & Investments Commission
Australian Securities Investments Commission Act 2001 (Cth)
Australian Securities Exchange or ASX Limited as appropriate
ASX Corporate Governance Council’s “Corporate governance principles
and recommendations”
Australian Tax Office
Banking Act 1959 (Cth)
Competition and Consumer Act 2010 (Cth)
Capital Gains Tax
An alternative securities exchange operating in Australia
Corporations Act 2001 (Cth)
Carbon Price Mechanism
Commonwealth of Australia
Customs Act 1904 (Cth)
Double tax agreement
Electronic funds transfer
European Union
Foreign Acquisitions and Takeovers Act 1975 (Cth)
Fringe benefits tax
Financial Claims Scheme
Foreign Investment Review Board
Free trade agreements
Fibre-to-the-Node – proposed by the Federal Liberal Party
Fibre-to-the-Premises – proposed network design of the NBN
© King & Wood Mallesons 94

TERM
FWA
GST
ICANN
ICN
ILUA
IA
Listing Rules
M&A
MEC
MIS
MIT
MRRT
National Credit Act
Native Title
NBN
NNTT
NSW
NT
NTA
OECD
OHS
Patents Act
PAYG
PE
PPS
PPSA
PRRT
RBA
RTN procedure
Tax Act
TCO
UNCITRAL
MEANING
Fair Work Act 2009 (Cth)
Goods and Services Tax
Internet Corporation for Assigned Names and Numbers
International Competition Network
Indigenous Land Use Agreement
Insurance Act 1973 (Cth)
The ASX Listing Rules which apply to listed entities
Mergers and acquisitions
Multiple Entry Consolidated group for tax purposes
Managed investment schemes
Managed investment trust
Minerals Resource Rent Tax
National Consumer Credit Protection Act 2009 (Cth)
Rights and interests in Australia of Aboriginal and Torres Strait Islander people in
land and waters, according to their traditional laws and customs, determined under
the common law
National Broadband Network
National Native Title Tribunal
New South Wales
Northern Territory
Native Title Act 1993 (Cth)
Organisation for Economic Co-operation and Development based in Paris
Occupational health & safety (also known as Workplace health & safety (WHS))
Patents Act 1990 (Cth)
Pay-As-You-Go system governing reporting, withholding and payment obligations,
including company income tax
Permanent establishment (or Private Equity)
Personal Property Securities
Personal Property Securities Act 2009 (Cth)
Petroleum Resource Rent Tax
Reserve Bank of Australia
The “right to negotiate” procedure in the Native Title Act
Income Tax Assessment Act 1936 (Cth) and Income Assessment Act 1997 (Cth)
Tariff Concession Orders
United Nations Commission on International Trade Law
$ / A$ / AUD Australian dollars, being the lawful currency of Australia
Guide to doing business in Australia 95

ABOUT KING & WOOD
MALLESONS
King & Wood Mallesons is a legal powerhouse for the Asian century. We are the market leader in three of the
world’s most dynamic economies: Mainland China, Australia and Hong Kong and the only firm in the world able to
practise PRC, Hong Kong, Australian and UK law.
On 1 November 2013, we combined with leading international law, firm SJ Berwin, confirming our position as a
leading global law firm, with offices around the world and over 2700 lawyers. We are reshaping the global legal
industry as the only global law firm headquartered in the Asia Pacific, focused on connecting Asia to the world and
the world to Asia. Our ever-expanding international capability provides clients with a unique choice amongst
global elite firms.
Our Australian offices are in the major transaction centres of Sydney and Melbourne, supported by our
government practice in Canberra and our resources and energy driven practices in Brisbane and Perth. We have
a strong understanding of regulatory regimes and are focused on the markets where our clients operate, both at
an industry and geographic level. Our industry groups showcase our depth of knowledge and breadth of
experience.
Our high performance and intellectual rigour enable us to provide legal solutions that are often ground breaking.
We help our clients adapt to challenging markets and regulatory landscapes. From the way we deliver our
services to the technologies we use, we focus on the areas that clients want most: legal know-how, enabling
processes and efficient service delivery. We can offer our clients cost conscious legal services options through
our managed Legal Process Outsourcing (LPO) arrangements with our LPO panel. Our Legal Project
Management (LPM) Program provides project management expertise on clients’ matters and so greater value for
money and predictability and certainty on costs.
Our reputation:
King & Wood Mallesons Presented by King & Wood Mallesons Presented by
CSR Firm of the Year
2009-2013
Australian Deal of the Year
2011-2013
Law Firm of the Year
2012-2013
Law firm of the Year
2010, 2012
Australian Law Firm of the
Year
2012
Law Firm of the Year
2007-2013
ALB Australasian
Law Awards
ALB Australasian
Law Awards
AB+F Awards
INSTO Distinction
Awards
Chambers Asia
Pacific
National Law Firm of the Year
(Australia)
2011-2013
Regional Law Firm of the Year
2012-2013
Australian Law Firm of the Year
2011-2012
International Law Firm of the
Year
2012
International Law Firm of the
Year
2012
KangaNews Best provider rated by the C-
Suite
2011, 2013
IFLR Asia
Awards
IFLR Asia
Awards
Who’s Who
Legal Awards
Legal Business
Awards
The Lawyer
BRW Client
Choice Awards
© King & Wood Mallesons 96

KING & WOOD
MALLESONS’ OFFICES
& CONTACTS
Our Offices are located throughout Asia and across the globe.
For further information, please see our website www.kwm.com or contact:
Ros Anderson, Partner,
T +61 2 9296 2230
ros.anderson@au.kwm.com
Jillian Kearns, Senior Associate,
T +61 2 9296 2529
jillian.kearns@au.kwm.com
For publications enquiries, please contact:
Elle Lowe, Senior Manager, Corporate Affairs
T +61 2 9296 3730
elle.lowe@au.kwm.com
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Guide to doing business in Australia / kwm.com 97