Recent changes to Australia’s foreign investment regime

As announced in the 2017/18 Federal Budget, a number of changes to Australia’s foreign investment regime came into force on 1 July 2017. The changes are intended to streamline and simplify a number of the new foreign investment laws that came into effect on 1 December 2015 and to remove some unintended consequences, particularly in relation to transactions that FIRB regards as low risk.

For foreign investors considering transactions in Australia, the key changes are:

• Fees: Simplifying and in some cases reducing the fees payable for certain commercial transactions. In particular, most notifiable acquisitions of an Australian business, securities or land where the consideration is A$10 million or less will be subject to a flat fee of A$2,000. This is a positive development for large investment funds who are regarded as foreign government investors due to interests held by foreign government sovereign wealth or pension funds, where their Australian investments represent only a small part of their portfolio. Please click here to view a summary of the new fee regime. These fees are subject to indexation annually.
• Business exemption certificates: It is now possible for exemption certificates to be sought for acquisitions of interests in Australian businesses or securities. Please click here for more information on these certificates.
• Foreign custodian holdings: The rules under the previous legislation relating to foreign custodian holdings have been re-introduced. Prior to 1 July, a number of Australian listed companies were regarded as foreign persons due to holdings of 20% or more by foreign custodians. The changes mean that foreign custodian holdings are now ignored for the purposes of determining whether a company is regarded as a foreign person for FIRB purposes.
• Offshore acquisitions: An acquisition by a foreign government investor of an interest in a foreign entity that has an interest in an Australian company will now only require notification if the Australian business is valued at more than A$55 million or the total asset value of the Australian business comprises more than 5% of the total asset value of the combined foreign business. Previously, these thresholds were A$10 million and 1% respectively.