What the latest FIRB reforms mean for Australia’s infrastructure investment

Articles Written by Marcus Clark (Partner), Simon Haddy (Partner), Claudia Scardigno (Senior Associate)

The Federal Treasurer has announced reforms to Australia’s foreign investment framework which will come into effect on 1 January 2021. The reforms, which focus on safeguarding Australia’s national security, compliance and enforcement powers and a more streamlined screening process for less sensitive investments, will have particular significance for infrastructure investment in Australia.

The new regime will ensure foreign investments that raise national security concerns are screened irrespective of the value of the investment, the investor’s nationality or whether the acquirer is a private foreign investor or a foreign government investor (FGI).

An exposure draft of the legislation to give effect to the reforms was released on 31 July 2020 with comments due to The Treasury on 31 August 2020. However, we are still waiting for details on some other significant aspects of the reforms.

It is expected that the temporary measures in response to the COVID-19 pandemic will expire at the end of 2020 to ensure a smooth transition to the new framework. 

While there are a significant number of reforms being proposed, we will focus on those which are most likely to impact infrastructure investment in Australia.

National Security Test

The proposed national security test will enable the Treasurer to impose conditions or block investment by foreign persons in a ‘sensitive national security business’ or ‘national security land’ on national security grounds, regardless of the value of the investment.  This effectively extends the $0 screening threshold which previously only applied to FGIs and interests in some Australian land.    

‘Sensitive national security business’ is likely to capture the following business categories:

  1. businesses regulated under Australia’s existing critical infrastructure regime (i.e. critical electricity, gas, water, ports and other assets) and telecommunications legislation;
  2. businesses involved in the development, manufacture or supply of critical defence or national security-related goods, services and technologies; and
  3. businesses involved in sensitive data that has a security classification or comprising personal information of Australian national security and/or defence personnel or the disclosure of which could compromise Australia’s national security.

Non-sensitive investments above the existing monetary thresholds (typically, $275 million) will continue to be assessed against the broader ‘national interest’ test (which will remain unchanged), covering considerations such as national security, the character of the investor, impact on the economy and community, competition and tax matters.

Call in power

Investments that are not otherwise caught by the national interest or new national security mandatory notification processes, can be ‘called in’ for review under the national security test before, during or after the investment if the Treasurer considers the investment may pose a national security concern.

Investors will be able to voluntarily notify to receive investor certainty and avoid a subsequent ‘call in’ for a particular investment or apply for a time limited, investor specific exemption certificate.

Last resort review power

The Treasurer will be able to impose or vary conditions to approvals or, as a last resort, require divestment of investments where national security risks emerge after the investment has been approved. The last resort power will not be retrospective.

Streamlining less sensitive investments

Certain entities (typically, investment funds) will no longer be categorised as FGIs purely by virtue of passive upstream investors who are foreign government entities, and will instead be subject to the same monetary thresholds as other private foreign investors. This will be given effect in two ways:

  1. entities which have foreign government ownership over 40% in aggregate (without influence or control) but less than 20% from any single foreign government, will no longer be deemed FGIs; and
  2. entities which have a single foreign government with at least 20% ownership (without influence or control) will still be an FGI, but can apply for a time-limited exemption certificate to undertake investments subject to conditions.

In order to apply for the exemption certificate, the entity will need to demonstrate to FIRB the absence of FGI influence or control, including:

  1. that the investor has no management rights in the investment;
  2. investor typically does not know which and when particular investments will be made (but may know the broad nature of the investment strategy); and
  3. the investor has no influence or control (direct or indirect) and could not perceive to have any influence or control over the investment entity or strategy.

Stronger enforcement powers

Treasury will be given stronger and more flexible enforcement options, including increased monitoring and investigative powers, directions orders, higher civil and criminal penalties, infringement notices and enforceable undertakings.

Secured finance

The ‘moneylending exemption’ from FIRB approval, ordinarily available to foreign lenders taking security over Australian assets in the ordinary course of a moneylending business, will no longer apply where foreign lenders are obtaining security over interests in a ‘sensitive national security business’.

In other words, foreign lenders taking security over a ‘sensitive national security business’ will always need FIRB approval, irrespective of the value of the secured property. The introduction of new foreign lenders into an existing finance syndicate will also require FIRB approval.

Fees and timing for FIRB applications

It has been proposed that a ‘fairer and simpler’ fee structure will be adopted and that fees will be reviewed to ensure that they continue to cover the costs of administering the system.  The updated fee structure will reflect the increased roles and responsibilities of FIRB and increasing administrative costs of the review process.  

Investors are entitled to express some scepticism here, given that – according to the Productivity Commission – in the 2017/2018 financial year FIRB collected $114 million in fee revenue, while its operational costs were less than $15 million.

FIRB will be given new powers to extend the 30-day statutory deadline by up to 90 days when considering complex and sensitive applications. When coupled with the Treasurer’s existing interim orders power, the Treasurer will have the ability to extend the statutory deadline for over 180 days.

Key observations for the infrastructure sector

Arguably, the new national security test, which aims to better protect Australia’s national interests, reflects a more global trend of governments expanding their powers to scrutinise foreign investment, particularly in sensitive sectors. 

While it appears that FGIs and private foreign investors will be subject to the same approval thresholds, the reality is that FGIs (especially those from more sensitive jurisdictions) will continue to face greater scrutiny from FIRB and other government agencies when seeking approval to invest in sensitive sectors.

From a practical perspective, investors will need to tread carefully in respect of transactions (including material alterations or variations to existing transactions) to be entered into before 1 January 2021.  Transitional arrangements for the introduction of the new regime focus on the following events:

  • the date an agreement was entered into (or materially altered or amended);
  • the date an action was taken or notified; and
  • the date a no objection notification was given or an exemption certificate was granted.

The impact of these events can be summarised as follows.


Status as at 31-Dec-20


Call-in power over ‘reviewable national security actions’.

Agreement has been entered into and is binding (whether or not completed).

Not applicable, unless agreement materially altered or varied on or after 01-Jan-2021.

Agreement has been entered into but is not binding pending satisfaction of conditions.

Not applicable, unless agreement materially altered or varied on or after 01-Jan-2021.

Agreement not entered into.


Prohibition orders on national security grounds.

Notification has been lodged (only possible if the proposed action is a significant action).

Not applicable.

Notification not lodged (or has been lodged but withdrawn). Agreement entered into and is binding (whether or not completed).

Not applicable.

Notification not lodged (or has been lodged but withdrawn). Agreement has been entered into but is not binding pending satisfaction of conditions.


Notification not lodged (or has been lodged but withdrawn). Agreement not entered into.


Last resort powers

Notification has been lodged (only possible if the proposed action is a significant action).

Not applicable provided the notification is not withdrawn.

Action to be taken under an existing exemption certificate.

Not applicable even if action taken on or after 01-Jan-2021.



Note: This analysis is based on a review of an exposure draft of the amending legislation as at 31 July 2020, and is subject to change.

Additionally, ordinary course financiers may need to tread carefully if they are proposing a secured transaction over a sensitive national security business and it is not clear whether their deal will occur before or after 1 January 2020.

More substantially, however, investors would be well advised to ensure that any FIRB applications regarding investment in sensitive sectors thoroughly address any national security concerns, even in the period leading up to 1 January 2021.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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