The Morrison Government has today announced the most significant reforms to Australia’s foreign investment review framework since the introduction of the Foreign Acquisitions and Takeovers Act 1975 (Cth). The comprehensive changes announced today include measures to strengthen the existing framework with:
In recent years, as Australia remains one of the world’s most attractive destinations for foreign investment, risks to Australia’s national interest, particularly national security, have increased as a result of a confluence of developments – including rapid technological change and changes in the international security environment. Due to such risks, many countries have now updated their foreign investment regimes and Australia’s reforms aim to respond to these shared challenges and keep pace with the emerging risks and global developments.
Currently, foreign persons must seek government approval for investments above certain thresholds that are dependent on the sector and country of the investor. While foreign government investors already face a zero-dollar screening threshold, most private investments under $275 million (or $1,192 million for our Free Trade Agreement partners) are not screened. The presence of monetary thresholds mean investments in some of our most sensitive sectors are not screened – even where an investment raises national security concerns.
As such, to address risks arising from foreign ownership, a new national security test will be introduced for investments that raise national security concerns and which fall below existing monetary thresholds.
The Government will also introduce a standard suite of provisions in relation to monitoring and investigation powers. These provisions will allow the Government to access premises with consent or by warrant to gather information on foreign investors which will improve the regulators’ capability to monitor investor compliance and/or investigate potential non-compliance. The Government will also have powers to give directions to investors in order to prevent or address suspected breaches of conditions of their approval or the foreign investment laws.
However, the Government remains committed to delivering a timely and efficient foreign investment regime which does not unnecessarily impede the operation of foreign investors or markets. The Government will continue to work with stakeholders to identify ways to streamline and enhance the investor experience as Australia continues to welcome foreign investment for the significant economic benefits it provides.
The announcement of the reform package does not immediately affect the temporary changes that the Government introduced to protect the national interest during the COVID-19 crisis. Those changes have temporarily reduced the monetary screening thresholds for all foreign investments the subject of the Foreign Acquisitions and Takeovers Act 1975 (Cth) to $0.00 and such temporary thresholds will remain in place for the duration of the crisis.
It is expected that the Government will shortly release exposure draft legislation for consultation on the reforms prior to its introduction into Parliament, and provide further guidance for investors on implementation with the reforms scheduled to commence on 1 January 2021. We will continue to watch this space for any further developments.
Authors: Vanya Lozzi & Christopher Colevski
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