Australia: The foreign investment reforms in Australia

Last Updated: 11 November 2015
Article by Malcolm Brennan and Intan Eow

The Foreign Investment Regime continues to be the centre of attention. The reform package is currently before the Federal Parliament and is expected to commence 1 December. The package is very much about the Good, the Bad and the Ugly.


A lot of the publicity has been about strengthening the regime with fees and penalties, however, the reform package does provide a range of practical benefits and delivers some fixes to longstanding issues.

Most welcome is the increase in the substantial interest threshold from 15% to 20% across the board. The definitions of foreign person and foreign government investor are impacted with the result that fewer entities will be captured by the regime. The change in the substantial interest threshold sensibly (and finally) matches up with the Corporations Act takeovers threshold.

The accidental foreigner fix will be deployed which will resolve the difficulties faced by otherwise Australian entities being caught by the regime as foreign persons. When ascertaining if they meet the aggregate 40% foreign person threshold, Australian listed entities will be able to disregard interests held by less than 5% holders (unassociated). This will remove the burden of the regime from several Australian entities.

A pro rata exception for interests in trusts will be introduced to match the pro rata exception that has always been available for corporations. The draft regulations need some work in this regard, but the intent is welcome.

An underwriter's exemption will also be available on application, which is a sensible reduction in red tape that will assist underwritten proposals.

One area that has been a source of great confusion for foreign investors has been the way in which Australia's Foreign Investment Policy has operated in addition to the legislation. The Policy requirements will now be brought into the Foreign Acquisitions and Takeovers Act 1975 and the regulations.

The current frustrating and confusing process of withdrawal and lodgement of fresh notices engaged in when a decision appears unlikely to issue in the 30 day statutory time frame will become a thing of the past. A more sensible approach will be undertaken under the new regime with a negotiated timeframe to be set with the FIRB officers.

It appears that a range of exemption certificates will also be available from 1 December 2015 and will provide broader flexibility for multiple transactions over varying periods.


Whilst there are some real positives in the package, there are some failures.

The ongoing sensitivity to foreign government investment in the agricultural sector has resulted in a difficult approach to ascertaining whether an acquisition is notifiable.

Whilst the general substantial interest threshold goes to 20%, the proportionate threshold for agribusiness investment drops to 10% (and lower in some cases e.g. where there is control or influence). The Government is giving foreign persons that invest in agribusiness the same sensitivity as that given to foreign government investors. This is difficult to justify when the Government has been very keen to attract investment to the sector.

Whilst there is finally a definition of "agribusiness", an operation need only have 25% of its assets or earnings before interest and tax made up of primary production activities (defined with respect to the Australian and New Zealand Industrial Classification Codes) to be an agribusiness. There will be practical difficulties when ascertaining whether this threshold is met – most businesses do not report such a break up of activities. With agribusiness having a lower threshold (currently $55 million) and with the higher penalties for non-compliance, investors will need to be careful when making acquisitions in targets that have agri sector connections.

A surprising change in the legislation that has not been addressed satisfactorily in the regulations is the association of foreign government investors from a single country. Whilst the regulations remove associations through limited partnerships, there is no change to the requirement under the Act that foreign government investors will be regarded as associated if they are from the same country. This will be particularly difficult for investors in listed entities that will have no knowledge of interests held by others. As foreign government investors have a 10% threshold it will unfortunately be all too easy for them to unwittingly breach the notification requirements of the Act.

The deemed association applies not only to wholly state owned enterprises but also to entities in which only a 20% interest is held by a foreign government investor. Whilst FIRB may assess proposals on the basis that foreign government investors from the same country are associated, it is a very different proposition to now require applications be lodged on the basis of an association. This could potentially have a chilling effect on otherwise good investment in to Australia. (We are issuing a separate alert discussing this important change and its potential impact.)


The ugly of course are the fees that must be paid from 1 December 2015. No surprises here, as these have been foreshadowed for some time. Whilst there have been calls for fees to be limited to residential property applications, fees will be introduced across the board including for business applications, ranging from $5,000 to $100,000. The fee for most commercial deals will be $25,000. Investors will need to be mindful, particularly in competitive bids, that the fee will be required to be paid up front before the FIRB review process commences. The fees will have an impact on the timing for investors going to FIRB.

So far, the regulations have been disappointing in providing relief from fees and at this stage no effective assistance for complex transactions has been proposed. FIRB is expected to produce guidance notes to assist with understanding the fee to be paid on a transaction.

The new Act and its regulations are quite simply ugly. The legislation is overly complex and difficult to navigate. Many provisions use double negatives and are not drafted in a way that make it easier to comprehend the law or the process. The intent was to modernise and clarify the regime, but unfortunately that has not been achieved. The new regulations give some assistance, however, extensive guidance notes will be required to explain the process; a clear indication that what has been developed is too complex.

This is a missed opportunity to make more significant changes to ensure that the regulatory regime incentivises foreign investments. While a lot of effort has been put into the drafting of the new Act, many of the basic concepts have remained the same and have simply been re-named. For example, transactions that are compulsorily notifiable under the existing Act are called notifiable actions under the new Act; transactions that are voluntarily notifiable under the existing Act are called significant actions under the new Act.


In times of fierce competition for foreign capital, Australia must ensure that it remains competitive. The foreign investment regime needs to balance the need for scrutiny with the need for investment. The good changes are welcome, however the bad and ugly changes need to be managed carefully to ensure that foreign investment is not forced to look to other countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.