As Australia and the economy begins to recover from COVID-19, we have seen yet another important change relating to the FIRB regulations. The changes which were introduced as a reaction to COVID-19, these changes have now been superseded and it is critical for foreign property investors and owners to understand the regime, below is a summary to assist with this.
One of the most important changes that we saw in 2020 was that companies that ordinarily would not need to seek FIRB approval were forced to, when all acquisitions were made subject to a monetary screening threshold of $0. However, the new reforms effective 1 January 2021 have reinstated the pre-COVID-19 monetary screening threshold. The monetary threshold is dependant on the type of acquisition however, we can expect to see a drop in the number of companies requiring FIRB approval.
Notifiable National Security Action
In the context of commercial property transactions, in addition to foreign persons undertaking a notifiable action and a significant action, the new reforms have introduced a notifiable national security action which is triggered by acquiring an interest in national security land.
So, what does this mean?
National security land is where there is a defence premises or where a national intelligence agency has an interest in the land.
It is important to know what this means because a notifiable national security action carries a monetary threshold of $0 and the new reforms have increased penalties for non-compliance.
There are both criminal and civil penalties for not complying with the FIRB reforms including but not limited to:
- providing false or misleading information;
- failing to give notice of an action; and,
- for taking an action prior to receiving FIRB approval.
Treasurer's power to unwind a transaction
The reforms give the Treasurer a new ‘last resort' power which gives them the ability to make divestiture orders and impose new or vary conditions after a FIRB approval has been granted.
Change to foreign government investors
There is now relief for those entities in which foreign government investors hold a passive interest in. Previously, if the foreign government investor held an interest of 40% or more, they would fall within the definition. However, if they operate a passive investment fund scheme where individual investors in the fund are not able to influence investment decisions or the management of the investments, they will meet the exemption.
Property industry gives a big sigh of relief
Having lived through the turmoil of 2020, and in particular the complexity that a $0 threshold placed upon routine transactions such as leasing of commercial, industrial and retail premises, it is such a relief that the status quo has returned. Whilst I understand what the government is trying to achieve through the $0 threshold, it meant that leasing transactions in particular took longer to finalise then they needed to and added an additional level of cost which had the potential to place additional burdens on business at a time where they were under a great deal of pressure.
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.