Australia’s Foreign Investment Laws - Major reforms in early 2021
In January 2021, we saw major reforms to Australia’s foreign investment framework.
In response to growing national security risks due to factors including technological advancement and international security tensions, changes have been introduced to strengthen and safeguard Australia’s national security and critical infrastructure.
Developers need be aware of these important changes to Australia’s foreign investment regime:
- a new mandatory notification and prior Foreign Investment Review Board (FIRB) approval requirement for certain investments including in ‘national security land’
- new ‘call in’ and ‘last resort’ powers
- a new fee framework and significantly higher penalties for contraventions of the FIRB regime.
Below, we provide a high level overview of the FIRB reforms that are most significant for developers.
Brief overview of the FIRB regime
In Australia, the FIRB regime regulates certain types of investments by ‘foreign persons’. This includes individuals not ordinarily resident in Australia and foreign corporations and trusts.
Foreign investment proposals require compulsory notification to FIRB in certain situations. In some circumstances, voluntary notification may be advisable to avoid the risk of ‘call in’ powers.
National security test
Significantly for developers, there is a new mandatory notification and FIRB approval requirement where there is a proposal to acquire an interest in ‘national security land’.
What is national security land?
National security land is:
- defence premises
- land in which a national intelligence agency (for example, ASIO, Austrac, Australian Police Force etc) has an interest that is publicly known.
Additionally, the Australian Government is currently undertaking further work to clearly define when interests in land in proximity to Australian Government facilities may also raise national security risks.
New ‘call in’ and ‘last resort’ powers
‘Call in’ power
The Treasurer has been granted a new ‘call in’ power to review particular actions they consider may pose a national security concern, including proposals to acquire an interest of any percentage in Australian land.
‘Last resort’ power
Additionally, where exceptional circumstances arise, the Treasurer has been granted a ‘new last’ resort power to review an action which has previously been given a ‘no objection notification’ or an ‘exemption certificate’.
Significantly higher penalties have been imposed for non-compliance by individuals and corporations with the FIRB regime.
For failing to notify FIRB of a notifiable action or notifiable national security action, the maximum criminal penalty is 10 years imprisonment or a fine of $3.33 million (15,000 penalty units) for an individual and $33.3 million (150,000 penalty units) for a corporation, or both.
For failing to notify FIRB of a notifiable action or notifiable national security action (other than residential land which is dealt with below), the maximum civil penalty is the lesser of the following:
- $555 million (2.5 million penalty units); or
- the greater of –
- $1.11 million (5,000 penalty units) for an individual or $11.1 million (50,000 penalty units) for a corporation;
- 75% of the value of the consideration for the acquisition or the market value of the interest (whichever is greater).
For failing to notify FIRB of a notifiable action or notifiable national security action in relation to residential land, the maximum civil penalty is the greatest of the following:
- the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land
- 25% of the consideration for the residential land acquisition, or
- 25% of the market value of the interest in the relevant residential land.
Changes to fees
The fees for each notice regarding an acquisition of land depends on the type and value of the land being acquired.
For acquisitions less than $75,000, the fee is $2,000.
For acquisitions of $75,000 or more, the fees range from $6,350 to $500,000.
We have summarised these fees in the table below.
|Type of land||Minimum fee||Maximum fee|
For acquisitions ≤ $1 million, the fee is $6,350.
For acquisitions > $1 million and < $2 million, the fee is $12,700.
For each additional $1 million, the fee increases by $12,700.
|Maximum fee of $500,000 for acquisitions of more than $40 million|
For acquisitions ≤ $2 million, the fee is $6,350.
For acquisitions > $2 million and < $4 million, the fee is $12,700.
For each additional $2 million, the fee increases by $12,700.
|Maximum fee of $500,000 for acquisitions of more than $80 million|
For acquisitions ≤ $50 million, the fee is $6,350.
For acquisitions > $50 million and < $100 million, the fee is $12,700.
For each additional $50 million, the fee increases by $12,700.
|Maximum fee of $500,000 for acquisitions of more than $2 billion|
The fee for a reviewable national security action, that is an acquisition of national security land (which is not otherwise notifiable), is 25% of the fee for the equivalent notifiable action.
Multiple types of land and actions
Separate FIRB rules apply to acquisitions of land which involve more than one:
- type of land (for example, agricultural and residential land), or
- action (for example, an acquisition of multiple land titles).
The FIRB reforms introduced earlier this year are significant for developers.
It is essential that developers understand their obligations under Australia’s foreign investment laws to ensure they avoid substantial criminal and/or civil penalties.
FIRB fees are complex. It’s imperative that developers are aware of potential fees in relation to the acquisitions of different types of land.
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