Australia operates a dual track process for regulating foreign investments in Australian shares, assets or land:
- mandatory filing where certain valuation thresholds are met (notifiable actions); and
- voluntary filing where a transaction does not meet the valuation thresholds but raises “national interest” concerns (significant actions).
In response to the Covid-19 crisis, on 29 March 2020 the Australian Government announced, as a temporary measure, that all transactions which occur after this date are subject to a A$0 valuation threshold and that review periods are extended from 30 days to six months. In light of these measures, if a transaction involves a foreign buyer acquiring Australian shares, assets or land, FIRB approval is very likely to be required unless it can benefit from an exemption (e.g. acquisition of less than 20% stake in a company in a non-sensitive sector by an ordinary investor).
A foreign investment filing with the Foreign Investment Review Board (FIRB) is required for notifiable actions. Filing thresholds are separated according to whether a transaction involves the acquisition of Australian shares or assets on the one hand or an interest in Australian land on the other. In general, the thresholds vary by acquirer type – principally whether an acquirer is from a country that has a free trade agreement with Australia or not (higher valuation thresholds for free trade countries) – and for sensitive sectors. Foreign government investors (including State-Owned Enterprises) also have separate thresholds. However, in response to the Covid-19 crisis, on 29 March 2020 the Australian Government announced, as a temporary measure, that all transactions which occur after this date are subject to a A$0 valuation threshold.
For significant actions, parties must self-assess whether a transaction raises “national interest” concerns and FIRB approval should therefore be sought voluntarily. This is not defined, however typically includes considerations regarding national security, competition, other Australian government policies (e.g. tax), the impact on the economy and the character of the investor.
In June 2020, the Government proposed some further changes to the FIRB regime. If passed, among other things, the changes will impose a permanent $0 threshold for all foreign investments in sensitive national security businesses, whilst the current temporary A$0 threshold for all other foreign investments will revert to the pre-29 March 2020 thresholds.
Transactions covered by the rules
A 20% interest is deemed to grant control for foreign investment purposes. However, lower thresholds apply for foreign government investors and certain sensitive sectors.
Key sensitive sectors
Sensitive sectors include: Media, telecommunications, transport, defence, land, military-related industries, nuclear-related activities.