14 December 2020
On 10 December 2020, the Australian Parliament passed various changes to Australia’s foreign investment laws, which will come into effect on and from 1 January 2021. The changes, which were initially announced in June 2020 and are primarily focused on protecting Australia’s national security, mean foreign investors, and their advisers, will need to navigate a broader range of issues and considerations than ever before.
We set out a short summary of some of the key changes to Australia’s foreign investment laws, effective 1 January 2021, below.
Reinstatement of monetary screening thresholds
The temporary broad-based AUD0 monetary screening thresholds for all investments, which were introduced earlier this year as a result of COVID-19 concerns, will be removed and the prior tiered monetary screening threshold regime will be reinstated.
An AUD0 monetary screening threshold will still apply to investments made by foreign government investors and will also now apply to investments which are ‘notifiable national security actions’.
Notifiable national security actions
It will be mandatory for a foreign person to notify the Foreign Investment Review Board (FIRB) if it proposes to acquire a direct interest in a national security business, start a national security business or acquire an interest in national security land.
A national security business will include those which own or operate critical infrastructure, telecommunications businesses and provide critical military-use goods, technology or services to Australia’s defence or intelligence communities. National security land broadly includes defence premises, land in which a national intelligence agency has an interest and land which the Treasurer declares to be national security land.
Foreign investors and their advisers will need to carefully consider the scope of what constitutes a national security business and national security land under the new foreign investment laws given the AUD0 threshold. Consideration will also need to be given to whether a ‘direct interest’ is being acquired (which can be an interest of 10% or less in certain circumstances).
Call-in and last resort powers
Investments which do not require mandatory notification and have not already been the subject of assessment by the Treasurer (e.g. by way of voluntary notification) can be ‘called-in’ for review on national security grounds.
The Treasurer will have an additional ‘last resort’ power to re-consider matters which have already been assessed if national security concerns arise.
Concessions to certain foreign government investors
Entities with more than 40% ownership by foreign governments, but with less than 20% ownership by a single foreign government, will no longer be classified as a foreign government investors, provided that no foreign government has access to non-financial sensitive information and cannot influence individual investment decisions or investee entities. This concession is targeted at reducing FIRB notification requirements for privately managed investment funds with passive foreign government investors.
Register of Foreign Ownership of Australian Assets
The existing water, agricultural land and residential land registers will be merged and expanded so that all acquisitions which are notified to FIRB will also need to be recorded on the new ‘Register of Foreign Ownership of Australian Assets’. Foreign investors will also need to update the register when their interests in relevant assets change or cease.
Report on the impact of new foreign investment laws
A last minute amendment to the proposed new laws was made by the Senate to require a report to be provided to the Treasurer by the end of 2021, which addresses the impact that the foreign investment reforms and their implementation have had on foreign investment in Australia and the broader Australian economy and whether the right balance has been struck between welcoming foreign investment and protecting Australia’s national interests.