The changes to Australia's Foreign Investment Monetary Thresholds

The foreign investment screening framework has recently been reformed to help boost Australia's growth as the global economy recovers.

The changes allow private foreign investment in Australian businesses below $219 million to now proceed without the need for review by the Foreign Investment Review Board (FIRB).

This article details the changes to the monetary thresholds, provides practical examples and considers the policy behind the changes.

The changes to Australia's Foreign Investment Monetary Thresholds

The Foreign Acquisitions and Takeovers Regulations 1989 were amended on 22 September 2009 to increase the monetary thresholds that exclude certain private foreign investments from the foreign investment screening regime.

The changes provide that government approval is no longer required for certain acquisitions involving Australian corporations or businesses which are valued below the new monetary threshold of $219 million in the 2009 calendar year. The amendments also provide that the monetary thresholds are indexed on 1 January of each year.

Previously, a non-United States (non-US) foreign investor acquiring an interest in Australian corporations, businesses or assets was required to notify the FIRB when this interest was greater than $100 million. Equally, a non-US foreign investor acquiring an interest in foreign corporations with substantial Australian subsidiaries or assets, that is, where the Australian assets represent 50% or more of global assets (Substantially Australian) was required to notify the FIRB when this interest was greater than $100 million. These thresholds have now been increased to $219 million.

The monetary threshold for 'offshore takeovers', that is, investments in foreign corporations where the Australian subsidiaries or assets represent less than 50% of global assets has also increased from $200 million to $219 million before government approval is required.

United States (US) investors, being prescribed foreign investors under the Foreign Acquisitions and Takeovers Act 1975 (Act), will now also find investment in prescribed sensitive sectors easier. Previously, a $110 million threshold applied to US investors investing in Australian corporations, businesses or Substantially Australian foreign corporations in the prescribed sensitive sectors. The following business activities make up the prescribed sensitive sectors:

  • media;
  • telecommunications;
  • transport (including airports, port facilities, rail infrastructure, international and domestic aviation and shipping services provided within, or to or from, Australia);
  • the supply of training or human resources, or the manufacture or supply of military goods or equipment or technology, to the Australian Defence Force or other defence forces;
  • the manufacture or supply of goods, equipment or technology able to be used for a military purpose;
  • the development, manufacture or supply of, or the provision of services relating to, encryption and security technologies and communications systems; and
  • the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of nuclear facilities.

With the amendments, the $110 million threshold has increased to $219 million for US investors investing in Australian corporations, businesses or Substantially Australian foreign corporations in the prescribed sensitive sectors.

The amendments have also abolished the requirement for non-US investors to notify the FIRB when establishing a new business in Australia valued over $10 million.

The monetary threshold of $953 million for US investors acquiring an interest in an Australian business outside of the prescribed sensitive sectors has been retained and has not been altered by the amendments.

Do I need to notify the FIRB about my acquisition?

We provide the following examples to highlight the general changes made.

We are a French company acquiring the assets, and subsequently the control, of an Australian construction business. The total value of the acquisition is $190 million. Do we need prior government approval?

Before the amendments, the French company would have been required to submit an application to the FIRB for approval. Now, as the value of the acquisition is below the new $219 million threshold, FIRB approval is not required.

We are a US company acquiring 60% of the shares in an Australian environmental consulting business. The total value of the acquisition is $450 million. Do we need prior government approval?

The US company does not need FIRB approval for this investment. The monetary threshold for US investment in business activities outside the prescribed sensitive sectors is $953 million. This figure has not been altered by the recent amendments.

We are a US company acquiring the assets, and control, of an Australian telecommunications corporation. The total value of the acquisition is $250 million. Do we need prior government approval?

The US company would require FIRB approval as the investment is deemed to be within a prescribed sensitive sector. Prior to the amendments the threshold for investment in the prescribed sensitive sectors was set at $110 million. This has been amended to $219 million.

The policy behind the changes

The benefits of foreign investment are undisputed. To name just a few benefits, foreign investment encourages employment, economic growth and competition while improving skills and making new technology accessible to Australia.

As foreign economies recover from the global financial crisis, policies that encourage, rather than stifle, foreign investment in Australia are vital to our own recovery. The new monetary thresholds seek to do just this.

As Treasurer Wayne Swan stated when announcing the policy reforms, the amendments are aimed at 'streamlining Australia's foreign investment regime, cutting red tape and compliance costs, and improving Australia's competitiveness as a place to invest'.

Exceptional Service Award Winner | 2007 BRW-St George Client Service Awards
Australasian Legal Business 2008 Fast 10 Law Firms
EOWA Employer of Choice for Women 2004 - 2008

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.