The Australian Taxation Office (ATO) has been given sweeping powers to determine if foreign investment is in the national interest, in what some see as an effort to block or discourage politically sensitive deals from state-backed companies in China.
The Financial Review has been told the ATO is using its powers to demand greater disclosure from Chinese State Owned Enterprises, before providing certainty around the tax treatment of an investment.
The source said an adequately funded local vehicle was previously an appropriate counter-party for the ATO, but the agency is now wishing to deal with the ultimate shareholder, which could be a senior government figure in Beijing.
“The level of the probing is new and it’s far more extensive than it has ever been,” the source said.
He said while the same demands were placed on other foreign investors, the conditions were more difficult for a Chinese SOE to fulfil.
A spokesperson for Treasurer Scott Morrison confirmed the ATO had been given new powers.
“The government has introduced new requirements that will ensure the foreign investment application process takes into account a foreign investor’s engagement with the ATO where that is necessary to ensure an acquisition is not contrary to the national interest,” said the spokesman.
The issue is unlikely to prevent State Grid buying Ausgrid, as the assets it owns are independently regulated and the ACCC therefore believes it does not present a competition issue.