Australia's new foreign investment regime increased fees and penalties but broadly the same rules
On 1 December 2015, the Australian Government rewrote its foreign investment laws and policy. The overall policy position on foreign investment in Australia has not changed materially although there have been a range of changes to modernise, harmonise and strengthen the regime.
Fees are now payable for all foreign investment approvals. Fees generally range from AUD 5,000 to AUD 100,000, depending on the type and value of transaction proposed. These fees are significant and foreign investors will now need to take account of these fees in their deal costs and structuring. From a structuring perspective, to keep fees to a minimum, it will be important to ensure that the foreign investor's commercial objectives can be met with one foreign investment application.
Criminal and civil penalties
The new regime also has a strong compliance focus with the introduction of a new set of criminal and civil penalties leading to maximum fines in the non-real estate context of AUD 675,000 and broader investigatory powers and surveillance from the Australian Taxation Office.
While the new fees and penalties regime is significant, it should be noted that the Treasurer also continues to have wide powers to unwind transactions determined to be contrary to the "national interest" that are not notified to, and approved by, the Treasurer beforehand.
Other noteworthy changes
Some other noteworthy changes include:
- The mandatory notification threshold has been increased from 15% to 20% which aligns it with the 20% threshold in the takeover provisions.
- The "foreign person" test has also been revised and the individual level of foreign ownership has been increased from 15% to 20% (although the aggregate 40% test remains the same). This may mean that an Australian company with an individual foreign investor holding between 15% and 19.9% may cease to be a foreign person.
- The previous foreign investment regime focussed on Australian urban land. The new regime applies to all land in Australia unless below a threshold, exempt or specific rules apply.
- The new regime, with some minor variations, also gives legislative force to requirements that were previously imposed under administrative policy, as follows:
- Foreign government investors are now included within the foreign investment regime, although the practical treatment of foreign government investors is likely to be largely the same. Subject to certain limited exceptions, many types of proposed investment in Australia by foreign government investors are now deemed to be "notifiable actions" which require prior foreign investment approval.
- Foreign investment in relation to agricultural land that results in a foreign person owning Australian agricultural land with a cumulative value of above AUD 15 million is now also subject to notification requirements under the new regime. Foreign investment in "agribusiness" is also now subject to mandatory notification and approval requirements (the government has forewarned of this change for some time).