If you are a “foreign person” investing in Australia, be that real estate, businesses or other assets, you should be aware of the existing framework of approvals required from the Australian Government, and in particular the Foreign Investment Review Board (FIRB), prior to the acquisition of these assets.
Currently, the Foreign Acquisition and Takeovers Act 1975 (the Act) sets out a number of transactions for which a “foreign person” is required to obtain approval, including:
- the purchase of a new residential dwelling;
- the purchase of vacant commercial land;
- the purchaser of developed commercial land if the value is more than $275 million, or $60 million if the proposed acquisition is considered “sensitive”;
- the acquisition of more than 20% of a business valued at over $275 million;
- the purchase of agricultural land valued over $15 million; and
- the acquisition of leasehold interests in land where the term of the lease is more than five years, including any option to renew.
Due to the high monetary threshold on the bulk of these transactions, it is quite possible that “foreign persons” may not have needed to declare or seek approval for a number of their acquisitions.
However, from 29 March 2020, it is now a requirement for all foreign investments, regardless of their nature or value, to be subject to FIRB Approval.
What is a “foreign person” or “foreign investor” for the purposes of the Act?
For the purposes of the Act, you are a “foreign person” if you are:
a) an individual who is not ordinarily a resident in Australia;
b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest;
c) a corporation where 2 or more individuals not ordinarily resident in Australia, foreign corporations or foreign governments hold an aggregate substantial interest; or
d) a trustee of a trust who is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government.
You are ordinarily resident in Australia if you have been in Australia for 200 or more days in the preceding 12 months and your time in Australia is not subject to any limitation as to time, for example a limited VISA.
What are the changes?
Recent COVID-19 developments have placed the Australian economy under further strain from foreign investment, particularly due to the pressure that Australian businesses are under in these uncertain times. As a result, the Australian Government is concerned that otherwise viable Australian businesses may be sold to foreign persons and has therefore imposed a variety of measures to ensure government oversight of these transactions.
The main measure introduced is the implementation of a $0 value threshold for all foreign investments under the Act. Any foreign investors in Australian real estate or businesses must now obtain FIRB approval, regardless of the value or nature of the investment or of the actual investor.
Even if approved, foreign persons should still be mindful it is within the discretion of the FIRB Board to impose any conditions they see fit on a case to case basis. For example, in today’s economic circumstances, it is likely that any business acquisition will have conditions relating to the impact on employment and on the community in general.
Foreign investors must also be aware of the increased timeframe for processing. In normal circumstances, applications are processed in around 30 days. However, the FIRB has now indicated that they will work with all existing and new applicants to extend timeframes for up to 6 months, prioritising those applications which may support Australian businesses and jobs.
When do these changes apply?
These amended measures are in place from 10.30pm on 29 March 2020 and operate indefinitely, to be reviewed at such a time as the coronavirus crisis ceases. Therefore, any action to acquire an interest in Australian property after this time is subject to the new provisions.
If you have any questions about how these changes may affect you, please contact Benjamin Wong on firstname.lastname@example.org or our Property department to discuss.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.