Complying with Australia's Foreign Investment Framework
Corporate and transactional partner, Phil Vickery, explains Australia's foreign investment framework and how to ensure you comply with the applicable legislation before investing.
One of the first things a foreign investor needs to think about when contemplating any investment involving Australia is Australia's foreign investment framework to make sure you comply with the applicable legislation.
Why is foreign investment approval important?
Foreign persons or entities contemplating a transaction involving an investment in Australia should consider whether it is necessary or prudent to make a notification to the Foreign Investment Review Board (referred to as FIRB) before proceeding with that transaction. Failure to make required notifications can result in financial penalties and even an order requiring disposal.
Does Australia want foreign investment?
The Australian Government genuinely welcomes foreign investment and Australia does not have local shareholder requirements. Certain kinds of transactions are prohibited though - particularly where the Treasurer determines those transactions would be contrary to the national interest - or may only proceed subject to relevant conditions (including tax conditions).
What kind of transactions do I need to seek foreign investment approval for?
A broad range of transactions involving shares, businesses and interests in Australian land may be caught (even certain offshore share transactions), depending on matters including the kind of transaction involved, the country of origin of the foreign investor and whether the transaction is above any applicable monetary threshold value. Different rules apply to foreign government investors (which may include, for example, state owned enterprises, sovereign wealth funds and government pension funds) which involve more extensive notification obligations than those applicable to private investors.
How do I seek foreign investment approval and what are the implications for my transaction?
FIRB applications are made online, fees are payable and there is a statutory timeframe of 30 days for the making of decisions but this can be extended. Where foreign investment approval is required, relevant contracts should provide that the transaction is conditional upon that approval. Foreign investors should contact FIRB or seek advice if there any concerns about whether a transaction should be notified.