Economic recovery drives amendments to Australia's Foreign Investment Policy

To help further boost Australia's economic growth, review by the Foreign Investment Review Board (FIRB) is no longer required for certain private foreign investment in Australian businesses valued below $219 million.

This article summarises the changes to the monetary thresholds and the policy behind those changes. It also provides practical examples.

 

The changes to Australia's Foreign Investment Monetary Thresholds

On 22 September 2009, the law changed to increase the monetary thresholds that exclude certain private foreign investments from the foreign investment screening regime.[1]

The changes provide that government approval is no longer required for certain acquisitions involving Australian corporations or businesses which are valued below the new monetary threshold of $219 million in the 2009 calendar year. The amendments also provide that on 1 January of each year the monetary thresholds will be adjusted to reflect inflation.

The changes impact United States (US) investors and non-United States (non-US) investors differently. For US investors the investments to which the change applies are in "prescribed sensitive sectors". They include: media, telecommunications, transport, supply to the Australian Defence Force, encryption and security technologies, communications systems and uranium or plutonium extraction.

US Investors

Activity

Previous Threshold

New Threshold

Acquiring an Australian business in a prescribed sensitive sector (see above)

$110 million

$219 million

Acquiring an Australian business not in a prescribed sensitive sector

$953 million

No change

Offshore takeovers (of overseas companies whose Australian assets are less than 50% of their total assets)

$219 million

No change

For Non-US Investors the changes are as follows:

Non-US Investors

Activity

Previous Threshold

New Threshold

Acquiring an Australian business

$100 million

$219 million

Establishing a new business

$10 million

No approval is required

Offshore takeovers (of overseas companies whose Australian assets are less than 50% of their total assets)

$200 million

$219 million

Do I need to notify the FIRB about my acquisition?

These examples highlight the general changes made.

Example 1 We are a US company acquiring 60% of the shares in an Australian environmental consulting business. The total value of the acquisition is $450 million. Do we need government approval?

The US company does not need FIRB approval for this investment. The monetary threshold for US investment in business activities outside the prescribed sensitive sectors is $953 million. This figure has not been altered by the recent amendments.

Example 2 We are a US company acquiring the assets, and control, of an Australian telecommunications corporation. The total value of the acquisition is $250 million. Do we need government approval?

The US company requires FIRB approval as:

  • the investment is within a prescribed sensitive sector; and
  • the threshold for investment in the prescribed sensitive sectors has been changed to $219 million.

Example 3 We are a French company acquiring the assets, and later the control, of an Australian construction business. The total value of the acquisition is $190 million. Do we need government approval?

Before the amendments, the French company was required to submit an application to the FIRB for approval. Now, as the value of the acquisition is below the new $219 million threshold, FIRB approval is not required.

The policy behind the changes

The benefits of foreign investment are widely acknowledged. They include the facts that foreign investment:

  • encourages employment, economic growth and competition;
  • improves skills; and
  • helps make new technology accessible to Australia.

As foreign economies recover from the global financial crisis, Australian policies need to encourage, rather than stifle, foreign investment. As Treasurer Wayne Swan stated when announcing the policy reforms, the amendments are aimed at: 'streamlining Australia's foreign investment regime, cutting red tape and compliance costs, and improving Australia's competitiveness as a place to invest'.

More information from Maddocks

We recommend you seek legal advice for any private foreign investments in Australia. Maddocks can advise you on:

  • whether the investment satisfies the new monetary thresholds; and
  • whether the investment attracts the attention of any other provisions of the Act.

For more information please call Maddocks in Melbourne on 03 9288 0666 or Sydney 02 8223 4100 and ask for a member of the Maddocks Commercial Team.


[1] Foreign Acquisitions and Takeovers Regulations 1989