which have an annual turnover above a specified threshold. Acquisitions of interests in Australian companies by foreign government entities or in respect of Australian companies that conduct “sensitive business”, such as media, telecommunications, transport, military related industries and activities and securities technologies, are subject to a very strict foreign investment approval process. The relevant monetary thresholds which trigger the requirement of foreign investors to notify the FIRB and/or seek FIRB approval vary significantly depending on the characteristics of the target entity or business, and generally apply to businesses or companies which are valued at more than $310 million AUD. Importantly, there have been significant changes to Australia’s foreign investment framework as a result of and since the COVID- 19 pandemic. These include the introduction of a new ‘Register of Foreign Ownership of Australian Assets’ and related reporting obligations on foreign persons in respect of their Australian assets. Any person or entity seeking to invest in Australian land or companies should seek legal advice regarding the relevant FIRB approvals which must be obtained. The overarching policy objective behind the FIRB’s regulation of foreign investment into Australian companies and businesses is to ensure that any proposed foreign acquisitions are not contrary to Australia’s national interest. Capitalization Obligations In Australia, “thin capitalization” rules apply to:

“Inward investing entities” – which are foreign entities with certain investments in Australia, regardless of whether they hold the investments directly or through Australian entities.

One of the key objectives of the thin capitalization rules is to ensure that inward and outward investing entities fund their Australian operations with a sufficient amount of equity capital. This is achieved by limiting the debt deductions that inward and outward investing entities are able to claim in their annual tax returns, which would otherwise have the effect of minimizing their Australian taxation liabilities. The thin capitalization rules can change from year to year and will only apply when an entity’s debt -to-equity ratio exceeds the allowable limits. Foreign entities which conduct business operations in Australia should seek independent taxation advice in respect of the thin capitalization rules. Business or Investment Visas Migration to Australia is primarily governed by the Migration Act 1958 (Cth) ( Migration Act ) and the Migration Regulations 1958 (Cth) ( Migration Regulations ). Non-Australian persons generally have a right to travel to, enter, and remain in Australia provided that they obtain an appropriate class of visa and complete the immigration clearance process. There are a broad range of visas that are available for foreign persons who wish to seek employment or commence business operations in Australia. These visa classes include:

Subclass 188 - Business Innovation and Investment (Provisional) visas A Subclass 188 Visa allows foreign persons to own, manage and conduct businesses and to conduct investment or entrepreneurial activities in Australia. A Subclass 188 Visa is generally valid for up

“Outward investing entities” – being Australian entities with specified overseas investments; and

ILN Corporate Group – Establishing a Business Entity Series

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