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COVID-19: Australia’s foreign investment framework changes

Australia’s foreign investment framework changes

The Foreign Investment Review Board’s (FIRB) monetary screening thresholds have been reduced to A$zero.

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Key points

  • FIRB monetary screening thresholds have been reduced to A$zero.
  • FIRB decision period to be extended from current 30 day period to up to six months for both new and also existing applications.
  • Urgent applications for approval that relate to investments that directly protect and support Australian businesses and Australian jobs will be prioritised.

Overview of changes

In response to the current environment that is materially impacting the financial position of Australian businesses, the Australian Government has announced new foreign investment measures to take immediate effect that are designed to help protect the interests of Australia and Australian businesses.

The Treasurer, Mr Frydenberg, announced on Sunday 29 March 2020 that, effective from 10.30pm AEDT on 29 March 2020, all proposed foreign investment proposals that are subject to the Foreign Acquisitions and Takeovers Act 1975 (the Act) will require approval regardless of the value of the proposed transaction or the identity of the foreign investor. This new requirement is intended to remain in place for the duration of the Coronavirus crisis.

The change will be achieved by reducing the monetary screening thresholds for Foreign Investment Review Board (FIRB) approval to A$zero for all actions taken by foreign investors and which otherwise satisfy the tests under the Act requiring an application for approval to be made.

This will apply to all proposals for acquisitions of, and investment of funds into, Australian agribusinesses, businesses, companies, unit trusts, commercial real estate and agricultural land that previously had monetary screening thresholds ranging from A$1,192 million to A$15 million and A$zero. Proposals that currently have a A$zero threshold (media sector, vacant land, residential land, mining and production tenements and all proposals by foreign government investors) will remain unchanged and will continue to require approval.

Approval timeframes

In addition, and in anticipation of the number of additional applications that FIRB and the Treasurer will now have to consider and determine under the new regime, the Treasurer’s announcement addressed the timeframes for approval. The pre-announcement statutory timeframe was 30 days from the date the application fee payable by the foreign investor was received by FIRB. The announcement states that FIRB will now contact and work with existing and new applicants to extend the screening timeframe from 30 days to a period of up to 6 months. This change will not only impact new applications but also existing applications that have been lodged before the date of the Treasurer’s announcement.

FIRB has indicated that the extension of the timeframe to six months does not mean that all applications will take the full 6 months to process. The Treasurer and FIRB have indicated that they will prioritise the review of applications which relate to investments that directly protect and support Australian businesses and Australian jobs, having regard to commercial deadlines relating to those proposed investments.

The Treasurer’s announcement also foreshadows that applications will continue to be reviewed and determined on a case-by-case basis and, where appropriate, approvals will be granted subject to conditions designed to address identified national interest risks (which may include matters such as national security, data security, funding and protection of jobs) on a proportionate and non-discriminatory basis.

The administrative details as to how the announcement will be given effect will be published by FIRB in due course.

This article was first published to KPMG Tax Now.

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