Acquisitions and Takeovers Act 1975 (FATA) along with the Foreign Acquisitions and
Takeovers Regulations 1989 (the
Regulations) provides legislative support for the Government’s foreign
investment policy and the associated screening regime.
The FATA empowers the Treasurer to examine proposals by
foreign entities to:
acquire, or to increase, a substantial interest in, or acquire a
controlling interest in the assets of, a prescribed Australian corporation
valued above the relevant thresholds or
acquire an interest in Australian urban land.
The Treasurer can block proposals that are contrary to the
national interest or apply conditions to the way proposals are implemented to
ensure they are not contrary to the national interest. When making such
decisions, the Treasurer relies on advice from the Foreign Investment Review
The Act also gives the Treasurer power in certain
circumstances to make an order prohibiting a proposed transaction and, where a
transaction has already been completed, to direct a foreign person to dispose
of shares or terminate arrangements.
In addition, Australia’s
Foreign Investment Policy (AFIP) provides
for further notification and approval requirements for foreign investors specific
to a particular application. The policy sets out a roadmap as to what factors
the Treasurer will consider in determining if a proposed investment is contrary
to Australia’s national interest.
Background to the reform measures
Currently applications from private foreign investors over a
specified monetary threshold need an approval from the Foreign Investment
Review Board (FIRB). Acquisitions of Australian business and land by foreign
government entities, however, attract FIRB scrutiny irrespective of the value
of the assets.
There are two opposing views of foreign investment in
Australia. There is a body of opinion that
accepts the importance of high levels of foreign investment in order to drive
employment, productivity growth, and innovation. On the other hand,
there is widespread community anxiety about the control of Australian assets by
foreign entities, particularly in agriculture and mining sectors.
Political anxieties about foreign investment appear to rise
around the surge in new sources of foreign investment, historically from the
United States, Japan and recently from China. Each wave of foreign investment
has attracted a measure of political resistance. ...Concerns in recent years
about the impact of foreign investment on Australia created a momentum that has
seen political commentary that is antagonistic towards foreign investment and
led to a number of parliamentary committees inquiring into different aspects of
the foreign investment regime.
Recently the Senate Rural and Regional Affairs and Transport
Committee (the Committee) held an inquiry into ‘Foreign
Investment and the National Interest’. The Committee released its final
report on 26 June 2013.
Major findings of the Committee
Information gap–there is a significant lack of detailed and
accurate information regarding foreign investment in the Australian
The transparency and scrutiny of the national interest test–while
some submitters and witnesses supported the current FIRB arrangements, there
were significant shortcomings in the transparency of the FIRB process and in
the scrutiny of the national interest test.
- The FIRB review investment threshold–the current investment
threshold that triggers a FIRB review of proposed private foreign investments
in the agriculture industry is far too high.
Definitional issues: rural land, urban land, and direct investment–the
definitions of key terms in the FATA and the AFIP were inappropriate or
inadequate for managing current foreign investment challenges in agriculture.
Summary of recent changes
Following the recommendations of the Committee, on 25
February 2015, the Government released a discussion paper entitled ‘Strengthening
Australia’s Foreign Investment Framework’. The paper proposed a series
of new policy positions regarding acquisitions of real estate property, farm
land and businesses by foreigners.
After a series of consultations, the Government announced a
revised foreign investment framework on 2 May 2015.
One change that has already taken effect from 1 March 2015 is
that a reduced cumulative monetary threshold of $15 million (from the existing
$252 million in 2015) will apply for acquisitions of rural land to all foreign private
investors except those from the Australia’s free trade agreement (FTA) partners.
Private investors from FTA partner countries will have differentiated
thresholds according to the terms of agreements.
Other changes that are proposed to take effect from 1 July
fees for FIRB applications (up to 1 per cent of the investment
value for certain land acquisitions)
greater information gathering, review and audit powers for the relevant
government agencies to ensure compliance
greater penalties for non-compliance by foreign investors
a new threshold, likely to be much lower than the existing
threshold of $252 million in 2015, for acquisitions of Australian
agribusinesses—this threshold will also vary for private investors from the FTA
partner countries, and has been announced as $50 million for Thailand and
Singapore, and $1,094 million for the United States, New Zealand and Chile
restrictions to advance ‘off the plan’ approvals for developers
changes to the different categories of land with consequent
changes to the notification requirements for investment in those land
A revenue gain of $735.0
million over the forward estimates period is estimated after the introduction
of application fees on all real estate, business and agricultural foreign
investment proposals from 1 December 2015. The Treasury would
receive $19.7 million and the ATO $47.5 million to enforce the changes.
The Treasury will
receive a further allocation of $15.8 million over four years to establish an office
in Sydney, which is expected to provide greater engagement with private sector
including foreign investors.
Under the new
arrangements, increased criminal penalties and a new civil pecuniary penalties
regime will be introduced for breaches of the Foreign Acquisitions and
Takeovers Act 1975 (FATA). A reduced penalty period for foreign
investors that have previously breached the foreign investment rules in
relation to residential real estate has been provided until 30 November 2015.
These investors may avoid prosecution, but will be required to divest the
There has not been much comment on the foreign investment
measures in the wake of the budget announcement, but one commentator described
the changes as ‘mere populism’.
The Government will introduce legislation into Parliament in
the Spring Sittings to ensure that the reforms will commence on 1 December
Acquisitions and Takeovers Act 1975, Act No. 92 of 1975 as
amended taking into account amendments up to Personal Liability for Corporate
Fault Reform Act 2012.
Acquisitions and Takeovers Regulations 1989, SR 1989 No. 177
Regulations as amended, taking into account amendments up to Trade Agreements
Legislation Amendment Regulation 2014.
. Foreign Investment Review Board (FIRB), 2009–10
Annual Report, Chapter 3, p.39.
Foreign Investment Policy, 2015, website.
East Asian Bureau of Economic Research, Submission,
Strengthening Australia’s Foreign Investment Framework, Consultations, 26 March
Senate Rural and Regional Affairs and Transport Committee, ‘Foreign
Investment and the National Interest’, Executive Summary, 26 June
2013, pp. xxii–xxiii.
J Hockey (Treasurer), Government
strengthens the foreign investment framework, Joint media release with the
Prime Minister, 2 May 2015.
FIRB, Australia’s Foreign Investment Policy 2015, op. cit., p.10.
Government strengthens the foreign investment framework, op. cit.
Australian Government, Budget
measures: budget paper no. 2: 2015-16, p.
D Uren, ‘Putting
the squeeze on foreign investors’, The Australian, 21 May 2015, p. 12.
All online articles accessed May 2015.
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