By Toby Eggleston and Graeme Cooper

Treasury has released a Consultation Paper outlining a second attempt to establish a publicly-accessible register recording the beneficial ownership of certain types of legal entity formed in Australia. About 3 million unlisted companies and unlisted registered managed investment schemes are expected to be affected by the measure, Listed entities do not escape unscathed – they will be affected by accompanying changes to existing provisions in the Corporations Act. The scope of the measure is expected to increase over time.


During the last 20 years, the inability of regulators to identify the ultimate (human) owners of legal entities operating in their jurisdiction has become an increasing focus for different international organisations and domestic legislators. Not surprisingly, each organisation and each regulatory regime has approached the same topic but from its own perspective:

  • laundering the proceeds of crime: the Financial Action Task Force on Money Laundering, established in 1989, has key recommendations for members (Australia is a member) to collect information on the beneficial ownership of corporate vehicles and tax-transparent arrangements such as trusts and to make it available to “the competent authorities” and possibly the public more generally. The FATF recommendations were subsequently adopted by the G8 countries (2013) and the G20 countries (2014) and the European Union (particularly in the 4th Anti-Money Laundering Directive in 2016);
  • financing terrorism: the FATF work has extended to trying to control the flow of funds, via opaque intermediaries, to organisations and individuals engaged in terrorism;
  • bribery and corruption: the work of the World Bank, UN and the OECD against bribery and corruption (for example, the United Nations Convention against Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions) has emphasised the need for locating beneficial ownership as part of international efforts to control corruption, and retrieve the proceeds of corrupt activity;
  • scrutinising foreign investment: in Australia, there has been a greater focus on identifying the ultimate owners of significant investments in local assets, especially in sensitive sectors of the economy (such as natural resource projects, residential land and agricultural land) through the revisions to the Foreign Investments Review Board;
  • capital market integrity: corporate regulators have been concerned for some time to have systems in place which identify the ownership and movement of sizeable parcels of shares in listed entities which might be used to disguise market activity;
  • insolvency: regulators have long been concerned to have systems in place which minimise the ability of debtors to use opaque entities to hide the ownership of assets from creditors;
  • tax integrity: the OECD has been concerned about identifying beneficial ownership to prevent the abuse of tax treaty networks, to improve the exchange of information process in bilateral tax treaties, information exchange treaties and the Multilateral Convention on Mutual Assistance (through the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes), to prevent base erosion (Action 6 of the BEPS Action Plan in 2015) and to uncover tax evasion practices which rely on secrecy.

While the inability to see behind the corporate veil (or the interposed trustee) is a pervasive problem, and one addressed by multiple different regulatory regimes already, Treasury’s Consultation Paper [“the Paper”] is driven entirely by tax concerns and utilises little of the existing regulatory framework.

It is clear, Treasury views existing information collection regimes as inadequate.  Existing tax law gives the ATO extensive powers to request information from taxpayers, but this information is reported to the ATO and does not become public, and it must be specifically requested by the ATO rather than routinely supplied by taxpayers.  And it seems existing corporate law settings are similarly seen as inadequate. Existing corporate law requires:

  • companies and managed investment schemes to maintain a register of members, a register which can be inspected by outsiders, though subject to restrictions;
  • companies and managed investment schemes to notify ASIC of the identity of the original members and changes to their identity, with ASIC registers accessible to outsiders;
  • entities with a “substantial holding” (5%) in a listed company or managed investment scheme to notify the entity and the market of their interest and perceptible changes in the size of the interest (1% or more) (so-called, substantial holding notices); and
  • a member of a listed company or managed investment scheme, if requested, to report to the entity or ASIC details of the entities who have a relevant stake in it (so-called, tracing notices).

The current regimes are only relevant for listed entities, the information they generate is not always easily accessible to the public, and the level of detail they collect less than is proposed in the Paper.

The Paper says the measure is, “a key element of the Government’s commitment to ensuring multinational enterprises pay a fairer share of tax.” But the effects of the Paper will be visited almost exclusively on small entities, many of which will have no foreign operations. According to the Paper, the proposal will require disclosures from an additional 3 million entities, all of them unlisted.

As mentioned above, Treasury consulted on a similar proposal in 2017 but the project was not completed.  Perhaps for this reason, the 2022 Paper proposes a staged approach:

  • initially, only a few types of entities (principally, unlisted companies) will be required to identify their owners; the second phase may extend the regime to require trustees to disclose the beneficiaries of trusts;
  • in the first phase, entities will keep their own registers of owners, rather than reporting to a central repository.

The register

The Paper says the onus will be on “ultimate beneficial owners” to provide relevant information to entities, but there will also be an obligation on entities “to verify the identity of their beneficial owners …” and there is a long discussion about what steps the entity will need to take to verify the identity of members. Consequently, the Paper proposes offences for both the ultimate owners (for example, failure to notify) and the regulated entities (for example, failure to verify identities or failure to keep and update the register).

The model in the Paper is for a bifurcated system: listed entities will remain subject to the ownership recording regimes in the Corporations Act just outlined – the share register, ASIC membership records, substantial holding notices and tracing notices. But there are likely to be changes affecting listed entities.  There is a discussion in the Paper about whether the requirements of the substantial holding notice and tracing notice regimes should be aligned, and the extent of the information collected under these notices increased.  Members in listed entities will also be affected by the proposal to give ASIC powers to make orders restraining the disposal, acquisition, and exercise of rights attached to interests in listed companies or listed MISs, “where satisfied a person has, without reasonable excuse, failed to comply with the substantial holding notice or tracing notice regimes.”

For unlisted entities, the Paper proposes, at least initially, that “[all] regulated entities [would] maintain registers of their beneficial ownership as [a] step towards a future central registry…”  The Paper concedes this means, “identifying the ultimate beneficial owners of a particular regulated entity may require examining the registers of multiple regulated entities and public filings of listed entities.”

The level of detail which companies will be required to collect, update and store (and hopefully, protect) is potentially extensive and so the Paper proposes that, while some information will be accessible to the public, some of the more granular detail will be available only to regulators.

Apparently, Treasury has not yet settled on how this information would be made public, with the Paper contemplating:

  • allowing interested parties to request a copy of the register from the entity; or
  • requiring the entity to publish its register on a website.

Entities covered

The types of Australian entities covered will be:

  • unlisted companies (whether public, proprietary or corporate collective investment vehicle), if “regulated under the Corporations Act”; and
  • unlisted registered managed investment schemes.

but it will not (yet) affect:

  • listed public companies and MIS;
  • bodies corporate regulated under other Acts such as incorporated limited partnerships, State-owned corporations, trade unions, associations, co-operatives, and so on;
  • non-MIS trusts, such as superannuation funds, standard Div 6 trusts, discretionary trusts, resulting trusts, constructive trusts and trusts arising under deceased estates; and
  • entities formed under foreign law: using the test, “regulated under the Corporations Act”, suggests Treasury is proposing that the regime will not apply to entities formed under foreign law even if they are registered under the Corporations Act and carrying on business in Australia.


The register will record the identity of:

  • natural persons who satisfy any of the definitions of being the beneficial owner; and
  • any company, registered MIS or CCIV that would be an owner if it were a natural person.

Tracing and blocking. A key difficulty with these kinds of measures is always in the rules about tracing through intermediaries: if Human A is a beneficiary holding 50% of the units of Trust B, which then owns 50% of the shares in Company C, what information must Company C collect and record? Must Company C trace through Trust B or is Trust B a blocker? And what happens if Trust B is instead Company B?

The Paper proposes that some entities will be blockers – Company C does not need to trace through:

  • Trust B, if Trust B is a listed or unlisted MIS or a registrable superannuation entity;
  • Company B, if Company B is a listed or unlisted company. This should mean that the (unlisted) subsidiaries of listed companies need not look through their immediate shareholder when applying some of the ownership tests.

But if Trust A is any other kind of trust, the Paper proposes an odd position: while Trust A is not obliged to keep a register of its members, Company A is required to “to take reasonable steps to identify all of [Trust A’s] beneficiaries, and to record these on its beneficial ownership register.”

Just how Company A is meant to trace through discretionary trusts or foreign pension funds or mutual companies or corporate limited partnerships is not explained in the Paper.

Measuring “ownership”

The definition of ownership uses concepts relevant to both ownership and control, and it looks to both formal legal rights and the substance of day-to-day operations:

  • holding 20% of the shares or units in the entity;
  • holding 20% of the voting rights in the entity;
  • holding a “right” to appoint or remove a majority of the board of directors, or the responsible entity of a MIS, or the corporate director of a CCIV;
  • holding “the right to exercise … significant influence or control over the regulated entity”; or
  • actually exercising “significant influence or control over the regulated entity”.

The Paper suggests the test of “significant influence or control” is directed to matters such as powers to direct the entity’s business or arranging finance for the entity whether as debt or equity, including “share-based incentive schemes.” If so, the test could be met by creditors depending on the terms of the financing arrangement, and possibly liquidators, receivers and administrators.  It would also be met by the entity’s directors who, by definition, have the right, and do, “exercise, significant influence or control over the regulated entity.”  It remains to be seen whether the unlisted subsidiary of a listed entity would need to record the head entity of the group because of its “significant influence” over the subsidiary.

The tests can be met “directly or indirectly” which raises the tracing issue again: Human A has rights “indirectly” if the trustee of Trust B holds the shares “directly”.  It also raises a double-counting problem: Human A is an indirect owner and Trustee B is a direct owner so does Company C record only one, and if so which, or both?  References in the Paper to finding the “Ultimate owner” imply that only Human A will need to be counted, but this is not made explicit.

But the Paper does not address the double-counting dilemma more generally, and it seems inevitable a company will have many more “owners” to record than its share register will disclose.

It is also not clear from the Paper whether indirect holdings become diluted through a chain of entities: is Human A’s level of ownership only 10% if she holds 50% of Trust B which in turn holds 20% of Company C?

Next steps

The 2017 consultation quietly disappeared because establishing a publicly-accessible register of beneficial ownership turns out not to be a simple matter.  Hopefully the consultation on this Paper will remove some of the more onerous aspects of the current proposal.

The Paper is open for submissions until 16 December 2022.


Key Contacts

Toby Eggleston
Toby Eggleston
+61 3 9288 1454
Nick Heggart
Nick Heggart
+61 8 9211 7593
Ryan Leslie
Ryan Leslie
+61 3 9288 1411
Graeme Cooper
Graeme Cooper
+61 2 9322 4081