Foreign investment review framework
This chapter provides an overview of the foreign investment review framework,
including recent legislative and regulatory changes, and considers the Government's
Foreign Investment Policy. It also examines the responsibilities of FIRB.
The foreign investment review framework comprises the Foreign
Acquisitions and Takeovers Act 1975 (the Act), its associated regulations
and Australia's Foreign Investment Policy. In addition, two further Acts inform
the way in which FIRB administers the review process:
The Foreign Acquisitions and Takeovers Fees Impositions Act
Register of Foreign Ownership of Agricultural Land Act 2015.
Foreign Investment Review Board
As a non-statutory agency tasked with advising the Treasurer and the
Government, FIRB was established in 1976 under the Foreign Acquisitions and
Takeovers Act 1975 (the Act).
FIRB's primary responsibility is to examine proposals for foreign
investment in Australia that are subject to the Act. It is also responsible for
providing the Treasurer with advice on the operation of, and compliance with,
the requirements set out in the Act. Since it is not a statutory agency, however,
FIRB is only empowered to provide advice to the Government of the day, with the
Treasurer exercising final responsibility for making a determination on all
proposals for foreign investment that fall under the Act.
In order to provide a framework for the implementation of the Act and
its associated regulations, the Commonwealth Government produced a Foreign
Investment Policy, which guides the Government's decision-making process in
relation to proposals for foreign investment. FIRB has responsibility for
providing advice to the Treasurer in relation to the policy and its effective
FIRB consists of five part-time members, including a Chairman, Mr Brian
Wilson, who was appointed to the position in 2012. In addition to the part-time
members, FIRB also includes a full-time Executive Member, Mr Robert Donelly,
who currently heads the Foreign Investment and Trade Policy Division within the
Treasury. The division provides secretariat support to FIRB, a responsibility
that includes the day-to-day administration of the Government's Foreign
Since its commencement in 1975, the Act has been amended on four
occasions, beginning in 1976. It was further amended in 1989 (Foreign
Takeovers Amendment Act 1989); in 2010 (Foreign Takeovers Amendment Act
2010); and, most recently, in 2015 (Foreign Acquisitions and Takeovers
Legislation Amendment Act 2015).
The most recent review of the Act was requested by the Government on 6
October 2015. The Committee was unable to establish the Government's reasons
for requesting a review at this time, but notes that its timing coincides with
FIRB's advice that the Port of Darwin sale was not subject to review, as it
fell under the exemptions listed in Section 12(7)(a) of the Act.
The most recently amended version of the Act entered into force on 1
December 2015. This introduced a number of changes to the operation of
Australia's foreign investment review framework, including, for example,
lowering the threshold for foreign investments in agribusinesses to $55 million.
Exemption of Commonwealth, state and territory businesses and land
The 2015 Amendment Act removed Section 12A(7)(a)(b), which explicitly
exempted from Government scrutiny any acquisition of Australian land that was
owned by the Commonwealth, a State or a Territory or local governing body, or
by a corporation that was constituted for a public purpose by a law of the
Commonwealth, a State or a Territory.
Despite the removal of Section 12A(7)(a)(b) from the Act, however, an
equivalent provision has been included in the Foreign Acquisitions and
Takeovers Regulation 2015.
Regulation 31 explicitly exempts from FIRB's scrutiny any acquisition of
land that is owned by the Commonwealth, a State, a Territory or a local
governing body. Regulation 31 also places beyond FIRB's competence the
acquisition of an Australian business that is carried on (whether alone or
together with one or more other persons) by the Commonwealth, a State, a
Territory or local governing body.
These exemptions apply to foreign-owned entities and foreign persons,
but do not come into force if the land is acquired by a foreign government. In
the case of a proposed investment by a foreign government, regardless of the
value or type of that investment, assessment by FIRB is still triggered by
default. In effect, this means that a monetary threshold of $0 applies to any
proposed investment by a foreign government.
In evidence at the committee's hearing on 15 December 2015, Mr Robert
Donelly, FIRB's Executive Member, explained that the provision in the
regulations is equivalent to the previous Section 12A(7)(a)(b) in the Act:
For all intents and purposes, it acts in the same way. The
provision in the regs, regulation 31, might be a little difficult to follow
because this is not a stand-alone section, but it says the excluded provisions
do not apply in relation to an Australian business that is carried on—I am
paraphrasing—or the acquisition of an interest in Australian urban [sic] land
from any one of the following persons: the Commonwealth, a state, a territory
or a local governing body, or an entity wholly owned by the Commonwealth, a
state, a territory or a local governing body.
Thresholds for FIRB consideration
The Act and its associated regulations provide the basis for the
Australian Government's policy on the assessment of proposals for foreign
investment. The policy document, which is publically available on FIRB's website,
sets out the thresholds, both financial and jurisdictional, that determine
whether an investment proposal must be considered by FIRB.
It also provides an overview of the assessment process that is undertaken by
FIRB in the event that a proposed investment requires Government approval.
On the basis of the current policy, which was released in December
2015 and reflects recent changes to the Act and the regulations, all proposals
for foreign investment are subject to a financial threshold test. The level of
the threshold is dependent on the sector of the economy in which a foreign
individual or entity proposes to make an investment. For example, a general
business acquisition is exempt from Government scrutiny if the total value of
the purchase or investment is $252 million or less.
The policy also provides for further exemptions in specific sectors if
the potential investor is from a country with which Australia has signed a Free
Trade Agreement (FTA). At the time of writing, Chile, China, Korea, Japan, New
Zealand and the United States are able to acquire an Australian business in a
non-sensitive sector without Government review, up to a threshold of $1.094
Investors from these nations are accorded the status of 'agreement country investors'.
However, where a business is classified as 'sensitive', the lower
threshold of $252 million applies,
even if the investor is from an agreement country. According to the policy,
'sensitive' businesses include:
media and telecommunications;
defence and military related industries and activities;
encryption and securities technologies and communication systems;
the extraction of uranium or plutonium; and
the acquisition of nuclear facilities.
Further, if a foreign investor proposes to acquire more than a five per
cent stake in any Australian media enterprise, then that proposal, regardless
of the investor's status or the overall value of the investment, will require
Government authorisation through the review process.
The general threshold of $252 million does not apply if an investor from
a non-agreement country applies to acquire a stake in land that has been
defined as 'sensitive'. In these cases, assessment by FIRB is triggered at the lower
threshold of $55 million. Developed commercial land can be designated as
'sensitive' if one or more of the following criteria apply to it at the time
that an investor seeks to acquire an interest in that land:
the land will be leased to the Commonwealth, a State, a Territory
or a Commonwealth, State or Territory body;
the land will be fitted out specifically for a business of the
the storage of bulk data;
the supply of training or human resources to the Australian
Defence Force or other defence forces;
the manufacture or supply of military goods, 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 to, encryption and security technologies and communications systems;
the extraction of, or the holding of rights to extract, uranium
or plutonium or the operation of nuclear facilities.
land that will be fitted out to store, handle or dispose of
biological agents on the List of Security-sensitive Biological Agents (within
the meaning of the National Health Security Act 2007);
where an authorisation under law of the Commonwealth, a State or
a Territory will allow materials that are regulated under that law to be
produced or stored on the land;
the land will be under prescribed airspace (within the meaning of
section 81 of the Airports Act 1996);
a mine, oil, gas well, quarry or similar operation will operate
on the land;
a stored communication (within the meaning of the Telecommunications
(Interception and Access) Act 1979) will be stored on the land;
the failure of part of a telecommunications network unit (within
the meaning of the Telecommunications Act 1997) on the land would result
in telephone or internet services not being provided on other land;
servers critical to an Authorised Deposit-taking Institution
(within the meaning of the Banking Act 1959) or a stock exchange in
Australia will be stored on the land; or
land used for public infrastructure (defined as an airport or
airport site; a port; infrastructure for public transport (whether or not the
infrastructure is operated or owned by a Commonwealth, State or Territory body)
or a system or facility that is used to provide various services to the public,
including the generation, transmission distribution or supply of electricity;
the supply of gas; the storage, treatment or distribution of water; or the
treatment of sewerage.
As a result of recent changes, foreign investors who do not possess
'agreement country' status must apply for authorisation if they wish to invest
in agricultural land and the cumulative value of the investment – including the
portion for which they are seeking authorisation – is greater than $15 million.
Investors from Chile, the United States and New Zealand, in accordance with
Australia's FTA obligations, have access to the higher exemption threshold of
The threshold for foreign investment in agribusinesses has been lowered
to $55 million, regardless of the overall value of the business. This threshold
applies if a foreign investor stands to gain a direct or controlling interest
in an agribusiness, which the policy defines as a stake in the company of at
least 10 per cent or the 'ability to influence, participate in or control' the
Consistent with Australia's FTA commitments, an exemption threshold of $1.094
billion applies to investors from the United States, New Zealand and Chile.
Investors from China, Japan and Korea, though having agreement country
status for general business acquisitions, are subject to lower limits for
agricultural land and agribusiness acquisitions.
The foreign investment review framework, as a tool for assessment, is
based on a national interest test which is applied irrespective of the nature
of the proposed investment and the threshold that applies to it. The review
framework is designed to further Australia's national interest by ensuring that
a proper balance is struck between the need to encourage significant foreign
investment – across a range of sectors of the economy – and the equally
important need to ensure that the nation's strategic and national security
interests are advanced and protected.
The Act confers upon the Treasurer the power to decide in each case
whether a particular investment would be contrary to the national interest.
However, as the Act, associated regulations and policy document do not provide
a definition of the 'national interest', this remains a matter that is open to
The legislation empowers the Treasurer with a significant degree of
discretion in interpreting and applying the requirements of the Act and the
regulations. According to the policy, the discretion of the Treasurer to decide
in each case whether a particular investment would be contrary to the national
interest provides flexibility to maximise investment flows while 'protecting
Navigation: Previous Page | Contents | Next Page