Jurisdiction - Australia
Reports and Analysis
Australia – Overview Of Foreign Investment Policy.

28 December 2012


Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance


Under the Foreign Acquisitions and Takeovers Act 1975 (the Act), certain acquisitions of Australian assets by foreign entities require notification to the Treasurer and/or the Treasurer’s approval. FIRB is responsible for administering the Act. FIRB will assess relevant foreign investment applications and provide a recommendation to the Treasurer. The ultimate decision to approve or reject an application will rest with the Treasurer, who does not have to accept FIRB’s recommendation.


A foreign investment proposal would be rejected if the Treasurer considers the proposal is not in Australia’s ‘national interest’. To determine whether a foreign investment proposal is in Australia’s national interest, it will be assessed against the National Interest Considerations which are set out in the Foreign Investment Policy. (The National Interest Considerations include: national security, competition, other Australian Government policies (including Tax), the impact on the economy and the community and the character of the investor). The National Interest Considerations are:


  • national security;
  • competition; 
  • other Australian Government policies (including tax and environmental regulation); 
  • the impact on the economy and the community; and 
  • the character of the investor.


A foreign investor should consider the National Interest Considerations carefully when preparing an application for approval. The application should include information that addresses each of the considerations. An investor should also be prepared to discuss and consider conditions or undertakings which may be proposed by FIRB based on the considerations.


Investment thresholds


Under Australia’s foreign investment framework, certain foreign investment proposals require approval irrespective of the value of the investment. For example, all direct investment in Australia by foreign governments and their related entities, including state owned enterprises and sovereign wealth funds, require the Treasurer’s approval. A ‘direct investment’ is any investment which has the objective of establishing a lasting interest in, and a strategic long term relationship with, the target.


Acquisitions by private investors which are valued at or above the relevant monetary thresholds outlined in the Policy and Act also require approval. The table below sets out the relevant thresholds for non-US investors for 2012. (Different thresholds apply in certain sensitive sections (e.g. media, defence).


Amount  Acquisition
$5 Million
  • developed non-residential commercial real estate, where the property is subject to heritage listing
$53 Million
  • developed non-residential commercial real estate, where the property is not subject to heritage listing.
$244 Million
  • an interest in an Australian business; or an interest in an Australian company which holds Australian assets or conducts business in Australia, 
  • and the Australian assets or businesses of the company are valued above the threshold.


FIRB approvals and rejections – some statistics


A significant majority of all foreign investment applications each year have received approval. During 2010-11, 10,865 foreign investment applications were considered, and only 43 proposals were rejected, representing less than 0.4% of all proposals considered. (All figures are sourced from the Foreign Investment Review Board Annual Report 2010-2011.)  There is an increasing trend towards imposing conditions or undertakings as part of the approval – approximately 55% (5,687)of the applications in 2010-11 were approved with conditions.


Approved investments in the mineral exploration and development sector represent the largest share by value (31% of total approval by value in 2010-11), and foreign investment activities in this sector are expected to remain strong. Approved investments in the agriculture, forestry and fishing sector is a small percentage of total approved foreign investments by value (0.79% of total approval by value in 2010-11). (All figures are sourced from the Foreign Investment Review Board Annual Report 2010-2011.)  However, as noted in other articles in this foreign investment review, the Australian Government is paying closer attention to foreign investment in this sector as foreign interest in this area increases.

We have also seen an increasing trend towards closer scrutiny on investments by foreign government and related entities.


Foreign investment by foreign government and related entities

Policy issues


With respect to investments by foreign government and related entities (For the purpose of foreign investment review, an entity is considered to be related to a foreign government if that government directly or indirectly holds more than 15% interest in the entity, or controls that entity.) , the focus of the Australian Government’s scrutiny will be on whether the investment is made on a commercial basis, and not as an extension of the policy, political or economic agenda of a foreign government. The concern is that, unlike private companies, an investor related to a foreign government may have the incentives to change market dynamics (e.g. market pricing) in a manner which is outside normal commercial considerations. 


Factors taken into account


All foreign investment applications are assessed against Australia’s national interest. The Australian Government will look at a proposed acquisition by a foreign government related entity in a holistic manner, and will consider mitigation factors in determining whether such proposal is contrary to the national interest. These factors include:


  • whether the investor’s potential corporate governance arrangements could result in the actual or potential control by a foreign government;
  • the existence of external partners or shareholders in the proposed investment such as domestic joint venture partners;
  • the level of non-foreign government/entity associated ownership interests;
  • ongoing arrangements to protect Australian interests from non-commercial dealings; 
  • whether the target will be, or remain, listed on the Australian Securities Exchange or another recognised exchange; and
  • the size, importance and potential impact of the potential investment to the economic climate within Australia.


Generally, proposals by foreign government related entities to acquire and operate an Australian business or asset on an arms length and commercial basis are less likely to raise national interest concerns.




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