Doing business in Australia: Part 4 – Foreign investment

Emily Shoemark

29 Aug 2019


  • Business Law
  • Meritas

Australian members of Meritas, the premiere global alliance of independent law firms, have joined together to publish Australia: A legal guide for business investment and expansion. This guide provides practical information for foreign investors and businesses wanting to operate in Australia.

In part 4 of this series of articles, which presents different sections of the guide, we look at rules governing foreign investment in Australia.

Foreign investment

One of the first matters a foreign investor must consider when planning to invest in Australia is the impact of Australia’s foreign investment policy.

Foreign investment in Australia is principally governed by the Foreign Acquisitions and Takeovers Act and is administered by the Foreign Investment Review Board (FIRB).

The FIRB is a division of the Federal Treasury. Its function is purely advisory, and its primary role is to review foreign investment proposals and to make recommendations to the Federal Treasurer. The Treasurer will then make a decision, based on these recommendations, which will either permit or prevent the proposed foreign investment in Australia. This decision is commonly referred to as FIRB approval.

Any monetary thresholds referred to below are in Australian dollars and are current as at the date of publication. In most cases, thresholds are indexed annually on 1 January.

1. Foreign interest

Foreign investment regulation applies to investment proposals in Australia by a foreign person. The term ‘foreign person’ is
defined to include:

  • an individual that is not ordinarily a resident in Australia, or a foreign government or foreign government investor; or
  • a corporation, trustee of a trust or general partner of a limited partnership where an individual not ordinarily resident in Australia, foreign corporation or foreign government holds a substantial interest of at least 20%; or
  • a corporation, trustee of a trust or general partner of limited partnership in which two or more foreign persons hold an aggregate substantial interest of at least 40%.

If you fall within one of these categories, and are proposing to make any of the types of investment described below,  it’s likely that you will need to apply for FIRB approval.

2. Categories of foreign investment

Business investments

  1. Subject to certain minimum limits, a foreign interest must obtain FIRB approval prior to entering into a transaction when it’s proposing to acquire, increase or alter a ‘substantial interest’ (at least 20%) in an Australian company when that company is valued at over $261 million.
  2. For investors from countries that have free trade agreements (FTAs) with Australia (agreement country investors) – Chile, China, Japan, Korea, Malaysia, New Zealand, Singapore, Thailand and United States – higher foreign investment thresholds apply. The current notification threshold is $1,154 million, except for investments in certain sectors referred to as ‘sensitive businesses’ to which the standard $266 million threshold applies. Sensitive businesses include media; telecommunications; transport; defence- and military-related industries and activities; encryption and securities technologies and communications systems; and the extraction of uranium or plutonium; or the operation of nuclear facilities.
  3. For agribusinesses, foreign persons must get FIRB approval before acquiring a direct interest where the investment is more than $58 million. A higher threshold of $1,154 million applies to Chilean, New Zealand and United States investors under Australia’s FTA commitments.
  4. In relation to media business, all foreign persons must get FIRB approval before making investment of at least 5%, regardless of the value of the investment.

New business proposals

Proposals by private investors to establish new businesses do not require notification or approval under the Act or the policy. Direct investments by foreign governments and their agencies, including proposals to establish new businesses, require approval.

Offshore takeovers

Takeovers by a non-prescribed investor in an offshore company that holds Australian assets or conducts business in Australia are subject to FIRB approval where the proposal exceeds $252 million. Takeovers must comply with the Corporations Act.

Acquisition of real estate

Prior FIRB approval is required for foreign acquisitions of interests in Australian land as follows:

  1. Agricultural land – where the cumulative value of agricultural land owned by the foreign person and any associates is more than $15 million. Reduced thresholds apply under FTAs for Chilean, New Zealand and United States investors ($1,154 million) and Thai investors ($50 million).
  2. Vacant commercial land – all interests regardless of the value.
  3. Developed commercial land – where the value of the interest is likely to exceed $266 million, with some exceptions applicable for certain types of developments. Agreement country investors only need to apply for approval were the value of the interest is more than $1,154 million.
  4. Residential real estate – all interests, regardless of value. The rules for approval differ depending on whether the person is a temporary resident or non-resident in Australia.


Foreign persons must get approval to acquire an interest in a mining or production tenement, regardless of value. Chilean, New Zealand and United States investors only need to apply for approval where the value of the interest is more than $1,134 million.

Foreign government investments

All foreign government investors must get approval before:

  1. Acquiring a direct interest in Australia, starting a new business or acquiring an interest in Australian land regardless of the value of the investment.
  2. Acquiring a legal or equitable interest in a tenement or an interest of at least 10% in securities in a mining, production or exploration entity.

Other legislation

All foreign government investors must get approval before:

  1. Acquiring a direct interest in Australia, starting a new business or acquiring an interest in Australian land regardless of the value of the investment.
  2. Acquiring a legal or equitable interest in a tenement or an interest of at least 10% in securities in a mining, production or exploration entity.

3. Exemptions

Foreign persons can be exempt from needing to seek foreign investment approval in certain circumstances, including when interests are bequeathed in a will and certain types of acquisitions.

4. Application process

The FIRB’s review process of investment proposals is generally prompt. Forwarding an investment proposal to the FIRB and paying the associated fee activates a ‘time clock’ so that, if action is not taken within 30 days (or an extended time period as notified by the FIRB), the FIRB cannot withhold its approval.

In most cases a decision is made within the 30-day period and FIRB approval is normally granted unless the proposal is judged to be contrary to the national interest. This judgment may be made in consultation with other government departments, such as the Australian Taxation Office. Generally, the FIRB is required to satisfy itself that the investment is for a legitimate purpose benefiting Australia. If an investment proposal is on a large scale, political considerations may become important.

In some cases, the FIRB’s approval may be subject to the foreign interest meeting certain conditions. If the FIRB’s approval is conditional, the foreign interest must comply with the conditions. For example, in real estate investments such conditions may include obtaining feasibility studies and environmental impact reports and providing evidence that the foreign interest has planned for the long-term management of the development.

5. Penalties

There are heavy penalties for failure to comply with the Foreign Acquisitions and Takeovers Act or with conditions imposed by the FIRB, including fines or an order requiring the foreign entity to sell its interest. We strongly recommend that you always seek legal advice before structuring or submitting a proposal to the FIRB to make an investment in Australia to determine which rules apply to your circumstances, and if any exemptions may apply.

How can we help?

You can find out more about our involvement with Meritas here, and for assistance with any business legal needs please contact our Business Law team on 02 6285 8000 or by email.

To read previous articles in this series, click on the titles below: