What has happened?
Following broad consultation and the announcement of changes to Australia's foreign investment framework on budget night, the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) was amended with effect from 1 July 2017 to introduce improvements to the regulation of foreign investment into Australia.
There are a number of changes which will assist investors navigating Australia's foreign investment framework and are intended to simplify the rules. However, there remains some complexity for investors to work through when considering particular acquisitions.
What are the changes?
The changes cover:
- a new form of exemption certificate for business acquisitions to facilitate investment programs
- a streamlined fee structure to reduce complexity in fee submissions
- clarification on the treatment of the characterisation of retirement villages, aged care units, student accommodation, solar farms and wind farms
- removal of the 'prescribed airspace' test when determining whether land is considered 'sensitive land'
- narrowing the list of government tenants that would make land 'sensitive land'
- expansion of the 'de minimis' exemption for foreign government investors
- foreign government investors no longer requiring FIRB clearance to acquire their interest in a consortium structure
- reinstatement of the 'custodian holdings' exemption.
What does this mean for investors?
The changes are welcome and sensible relief for investors who have had to navigate a more complex foreign investment framework since 1 December 2015. As a result of the changes, which were implemented following consultation with industry, a number of routine or low sensitivity transactions will no longer be subject to the foreign investment framework.
By way of example, one of the broadest tests that applied to determining whether land is 'sensitive land' has been removed. This is a positive step and while intended to make the process simpler, investors will still need to consider whether any other tests for 'sensitive land' are triggered. For example, if there are certain government tenants in the building including Medicare, Centrelink and the Australian Taxation Office.
In addition, investors looking to undertake a general program of investments in Australia now have the same opportunity as property investors, who have long had a form of exemption certificate available to them.
The business exemption certificate will make the FIRB process easier for investors who:
- have an existing presence in Australia;
- have a specific and known program of investments; and
- intend to invest in 'low sensitivity' businesses.
There is some guidance in relation to the appropriate sectors for investment, however, there remains significant scope for interpretation in categorising 'low sensitivity' businesses. FIRB has indicated that it is willing to engage with investors prior to business exemption certificate applications being lodged, which will assist investors in deciding whether the exemption certificate option is realistic for a proposed program of investments.
The MinterEllison Foreign Investment Advisory Team can assist investors who are considering seeking an exemption certificate to formulate the appropriate strategy in the context of the investor's investment mandate or proposed acquisitions, engaging with FIRB and relevant consult agencies including the Australian Taxation Office, the Australian Competition and Consumer Commission and the Critical Infrastructure Centre, amongst others.
Author(s) David Moore and Mellissa Lai