Certain types of foreign investment proposals need to be notified to a division of the Australian Treasury known as the Foreign Investment Review Board (FIRB) for prior approval in accordance with the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).

Proposed foreign investment in industry sectors that are commonly associated with the national interest – such as media, transport and telecommunications – are generally the subject of greater scrutiny. There is also specific legislation in each of these areas that affects permissible levels of foreign ownership.

Typical transactions where an application for FIRB approval needs to be lodged include:

  1. acquisitions of "substantial interests" (as defined below) in an Australian business where the value of its gross assets is, or the proposal values it, above:
    1. A$244 million for investments in prescribed sensitive sectors; and
    2. A$1,062 million in any other case.

    These monetary thresholds are subject to annual indexation. For US (and, at a date to be announced, New Zealand) investors, higher thresholds apply.

  1. direct investments by foreign governments and their agencies, including proposals to establish new businesses, irrespective of size;
  2. portfolio investments in the media of 5% or more, and all non-portfolio investments, irrespective of size;
  3. takeovers of offshore companies whose Australian subsidiaries or gross Australian assets have a value in excess of A$244 million. For US (and, at a date to be announced, New Zealand) investors, a threshold of A$1,062 million applies, except for offshore takeovers involving prescribed sensitive sectors where the A$244 million threshold applies;
  4. acquisitions of interests in Australian urban land (including interests that arise via leases, financing and profit sharing arrangements) that involve:
    1. developed non-residential commercial real estate, where the property is:
      1. subject to heritage listing, valued at $5 million or more and the acquirer is not a US investor;
      2. is not subject to heritage listing, valued at A$53 million or more, or A$1,062 million or more for US investors;
    1. vacant non-residential land, irrespective of value;
    2. residential real estate, irrespective of value; or
    3. shares or units in Australian urban land corporations or trust estates, irrespective of value; and
  1. proposals where any doubt exists as to whether they are notifiable. (Funding arrangements that include debt instruments having quasi-equity characteristics will be treated as direct foreign investment.)

Investors should be aware that "urban land" (referred to in paragraph 5 above) has a very wide definition. It includes all land situated in Australia other than land that is used wholly and exclusively for carrying on a business of primary production.

A "substantial interest" occurs when a single foreigner (and any associates) has 15% or more, or when several foreigners (and any associates) have 40% or more, in aggregate, of the ownership of a corporation, business or trust.

For the purposes of the above requirements, a "US investor" is a national or permanent resident of the United States of America, a US enterprise or a branch of an entity located in the United States of America and carrying on business activities there.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.