• This is the fifth edition of McCullough Robertson's six part Commercial Law Masterclass series.


  • Whether you are seeking investment from overseas, or you are a foreign investor looking to acquire an interest in Australian land, assets, shares or units, an understanding of the Foreign Investment Review Board (FIRB) notification and approval requirements is vital. In this article, we discuss what triggers the need to obtain FIRB approval and how FIRB approval requirements can affect transactions and your business.


  • We'll wrap up the series with a Masterclass in Brisbane in early 2019 where you can ask our expert panel any questions.


  • Our next article in this series will focus on M&A strategy and how to ensure your deal runs smoothly and achieves your strategic goals.

Foreign investment in Australia is governed by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and is administered by the Foreign Investment Review Board (FIRB). FIRB determines whether or not to allow certain foreign acquisitions of interests in Australian land, assets, companies, businesses or trusts. Acquisitions will be prohibited if they are found to be contrary to Australia's national interest. Following significant reforms in 2015, navigating the FIRB regime can be complex and time consuming.

In this edition of the Commercial Law Masterclass series, we discuss briefly what triggers the need to obtain FIRB approval and how FIRB approval requirements can affect transactions and your business.

Whether you operate a local business and are seeking investment from overseas, or you are a foreign investor looking to acquire an interest in Australian land, assets, shares or units, an understanding of the FIRB notification and approval requirements under the FATA is vital.

Failure to obtain FIRB approval when required could have significant consequences for investors, as well as the company or business in which the investment is made.

FIRB in a flash

Australian foreign investment proposals

As a general rule, the Australian Government, through FIRB, must be notified of all proposed foreign investment activity unless the value of the proposed investment is below the prescribed notification threshold applicable to that specific type of investment, or a specific exemption applies. The types of activities by foreign investors that may require notification to FIRB include certain acquisitions of:

  • Australian land (including agricultural land, commercial land, residential land and mining or production tenements);
  • Australian assets;
  • Australian businesses;
  • shares in an Australian company;
  • units in an Australian trust; and
  • certain interests in offshore entities that hold direct or indirect interests in sensitive Australian assets (such as land).

The thresholds that trigger the requirement for notification differ according to the type of interest an investor is proposing to acquire and whether the investor is from a country with which Australia has a Free Trade Agreement, or is a foreign government investor.

Notification of the proposed investment is made through FIRB and must be supported by appropriate documentation detailing the nature and scope of the proposed transaction (including the type of investment) and details of the investor, including ultimate ownership and control. It must also address the national interest considerations including national security, competition, Australian government policies (including tax), impact on the Australian economy and community and the character of the investor.

Acquiring Australian land

The acquisition of an interest in 'Australian land' will require prior FIRB approval if that acquisition meets the prescribed monetary threshold for the relevant category of land proposed to be acquired. An acquisition of land includes, for example, the purchase of freehold land, the purchase of mining or production tenements or entry into certain leases and profit sharing arrangements. It also includes the acquisition of shares in an Australian land corporation or units in an Australian land trust, which is defined in the FATA as a corporation or trust in which the value of Australian land assets is more than 50% of the value of its total assets.

Australian land is split into four categories: 'agricultural land', 'commercial land', 'residential land', and 'mining or production tenements'. Each category has its own rules and monetary thresholds.

Acquiring an Australian company or business

If a foreign investor acquires a substantial interest in an Australian company, trust or business valued in excess of the prescribed monetary threshold (generally $261 million – indexed annually) FIRB approval may also be required. A substantial interest is taken to be acquired where, following the transaction, the foreign investor (together with any associates) holds an interest of 20% or more in the company, trust or business.

Taking security

Generally, taking a security interest over an Australian asset (for example, a mortgage over Australian land) will also be subject to FIRB approval if the value of the interest exceeds the relevant monetary thresholds. However, the FATA provides a broad exemption for foreign financiers taking security over certain assets, where the security is solely for the purpose of securing repayment obligations under a genuine moneylending agreement.

Under the FATA, moneylending agreements are defined as agreements entered into in good faith, on ordinary commercial terms and in the course of carrying on a business of lending or providing financial accommodation. It should however be noted that the exemption criteria are a lot more restrictive where the secured property is residential land.

Internal reorganisations

There is no exemption under the FATA for acquisitions resulting from internal reorganisations. Therefore, any intragroup transfers above the applicable thresholds will require FIRB approval which is something businesses should be aware of when implementing the steps to get their organisation (house) in order as considered in our first article ' Don't live in a glass house! Practical tips to get your house in order'

While there is no exemption from the FIRB notification requirements, FIRB application fees for internal reorganisations will be capped at $10,100.

The price of doing business

One of the major reforms to the FIRB regime in 2015 was the introduction of application fees. FIRB will not begin assessing an application until the correct fee has been paid in full.

The fee payable by foreign investors differs according to the type of interest that is proposed to be acquired under a transaction. As the application fees can be significant it is important to be aware of the necessary outlay as early as possible.

Don't get caught out

Ongoing FIRB assessment

It is not unheard of or even uncommon for potential buyers to only discover they are foreign part way through a transaction. It is therefore important for buyers to closely monitor their foreign ownership on a regular basis, as an entity can become foreign without there necessarily being a large change in its ownership structure.

Record keeping

There are now requirements under the FATA to make and keep records of every act, transaction, event or circumstance relating to the following:

Act, transaction, event or circumstance Length of time for record keeping
Significant actions, notifiable actions and actions specified in exemption certificates 5 years after the action is taken by the person
Compliance with conditions in a no objection notification and an exemption certificate 2 years after the condition ceases to apply to the person
The disposal of an interest in residential land if the acquisition of the interest by the person was a significant action or notifiable action, or would have been a significant or notifiable action if the action had not been specified in an exemption certificate 5 years after the interest is disposed of by the person

It is an offence under the FATA for such records not to be maintained.

Managing FIRB – its everyone's job

Although now more complex, the FIRB approval process is still, in the overwhelming majority of cases, one which results in approval. FIRB approval requirements should however be considered carefully at the outset of each transaction.

The time cost

Essential to most transactions is timing. Where a seller is running a competitive bid process or is interested in a speedy completion, the presence of a FIRB condition and time frame for processing an application for FIRB approval is a material consideration and can have a significant impact on the priority of bidders.

When assessing competitive bids, sellers and buyers should each be keenly aware of the applicable FIRB requirements and how they are expected to be managed.

Upon the submission of a foreign investment application, the Treasurer, through FIRB, is generally required to make a decision on an application within 30 days of receipt of the application and respond to the applicant within a further 10 days. However if FIRB needs additional time to consider an application, they can seek the applicant's consent to an extension of time. If the extension is not agreed to, FIRB has the power to issue an 'interim order' preventing the investment for a period of up to 90 days while it further considers the application. Interim orders are published in the government gazette, so it is common for investors to agree to extensions of the relevant time frame if requested by FIRB. Such delays will obviously affect both the buyer and the seller, as the transaction cannot proceed until the approval has been granted.

Given the possibility of extended time frames, a minimum of 60 days should be allowed for FIRB approval to be obtained.

It is also important to note that if foreign investment approval is obtained for a specific transaction and that transaction does not undertaken in a timely manner (usually 12 months) or the parties enter into new arrangements, further approval will need to be sought for the transaction.

Commercial sensitivities

FIRB recognises the commercial-in-confidence sensitivity of all applications and will extend appropriate security to information provided to it. It is best to lodge an application or consult with FIRB before a public statement relating to the proposed transaction is made. Where FIRB approval is required, any transaction documentation should be made conditional on obtaining FIRB approval and the transaction should not complete until that approval is obtained.

Early engagement with FIRB is key to ensuring transaction timetables are met. FIRB has consistently shown a willingness and, indeed, desire to engage early on transactions to help expedite the approval process. This is especially the case where the transaction is large, of public interest, or is politically sensitive as these transactions are likely to be scrutinised in more detail when assessing national interest considerations.

Stakeholder engagement

As part of the approval process FIRB will also engage with key stakeholders including the Australian Tax Office (ATO) to assess whether a proposed investment is contrary to the national interest. The ATO regularly enquires as to the funding structure of the buyer group, debt structure and general tax and transfer pricing compliance. Failing to respond to these requests for information could potentially result in applications being rejected or even the ATO commencing their own investigations independent of FIRB.

Careful consideration

The Treasurer has significant powers to prosecute non-compliance or breaches of the FATA and to prevent or unwind transactions. The penalties may include both criminal prosecution and civil penalty orders, and in certain circumstances, a forced divestiture of assets. These penalties are obviously directed at the investor who has breached the rules (and its directors, officers, or others who were knowingly involved in the contravention) but it can also have a serious impact on the other parties to the transaction. If your joint venture partner is forced to sell their interest because of FIRB non-compliance, your ongoing business might be severely impacted.

Therefore all foreign investors looking at investments which involve Australian land, assets, companies, businesses or trusts in any way (including indirectly), as well as Australian's looking for foreign investment into their operations, should carefully consider the foreign investment notification and approval requirements.


While the FIRB approval process was once considered the buyer's problem and largely a simple process, with the combination of fees, potential delays and scrutiny from additional government departments, it is now important for all parties to a transaction to be involved in the FIRB approval process to ensure transactions can proceed in a timely manner.
Our expertise and current experience means we understand these issues and will be able to ensure your application has the best chance of success. Foreign government investors face even more strenuous FIRB notification and approval requirements. We also have extensive experience advising and assisting these investors through the process to achieve the most advantageous results within the existing legal and policy framework.

We continue to stay at the forefront of developments and government policy so that we can advise our clients on the current law and policy, as well as the prospects for change that may impact on proposed investments.

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.