Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) and its associated regulations (FATA), and is administered by the Federal Treasurer. Under the FATA, a “foreign person” may be required to notify and seek a "no objection" approval from the Treasurer (Approval) before undertaking certain activities in Australia. The review function for an Approval is delegated by the Treasurer to the Foreign Investment Review Board (FIRB).
The FATA outlines two categories of investments by foreign persons which may require FIRB Approval: those requiring mandatory notification (Notifiable Actions) and those for which voluntary notification can be made (Significant Actions). Investments in entities, businesses, or Australian land which are undertaken by foreign persons are often Notifiable Actions under the FATA. In each case, a monetary threshold previously applied in assessing those investments under the FATA.
Failure to notify a Notifiable Action can attract penalties (both criminal and civil) and may also result in the investment being unwound. Similarly, those same penalties can apply to Significant Actions for which no voluntary notification was made but where the Treasurer subsequently considers the transaction to be contrary to the national interest.
At 10:30 pm on (AEDT) 29 March 2020, the Treasurer announced changes to the monetary screening thresholds. With one exception noted below, in all cases, the monetary threshold is now $0. Further, to ensure sufficient time for screening applications, the minimum statutory review period of 30 days has now been extended by up to six months.
The Treasurer stated that FIRB will prioritise urgent applications for investments that directly protect and support Australian businesses and Australian jobs, taking account of any commercial deadlines related to those proposed investments.
Formal regulations were released on 17 April 2020 to implement the changes. FIRB subsequently released new Guidance Note 53 to clarify the practical impacts of the COVID-19 changes and the Treasury's policies. This Guidance Note has since been updated several times with further guidance and clarification.
While these rules are temporary, on 5 June 2020 the Federal Government announced there are further more comprehensive changes proposed to the FATA, including a new national security test, "call-in" rights and an introduction of new measures to streamline approval for passive investors and investments into non-sensitive businesses. The first part of the legislation was released on 31 July 2020, with the second part yet to be released. These changes are currently scheduled to commence 1 January 2021, with the exception of the proposed national register of foreign ownership, which may take a further 12 months to come into force.
On 4 September 2020, new regulations and guidance were published to provide some relief from the zero monetary thresholds with the re-instatement of the prior monetary thresholds for a foreign person renewing or varying a leasehold interest over developed (and non-sensitive) commercial land where they held that leasehold interest on 29 March 2020.
This piece was originally published 4 August 2020 and updated 11 September 2020 to reflect the latest regulations and guidance.
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