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December 16, 2020
Australia: Major reform of foreign investment regime to take effect from 1 January 2021
On 10 December 2020, two significant changes to Australia’s foreign investment regime received Royal Assent – the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020 (Cth) and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Act 2020 (Cth). The new legislation (Major Reform) will commence on 1 January 2021 and aims to ensure that Australia’s foreign investment framework keeps pace with emerging risks and global developments.
The key provisions of the Major Reform include:
$0 monetary thresholds
$0 thresholds will continue apply to the following types of investors/acquisitions:
Monetary screening thresholds which were $0 prior to the introduction of the COVID-19 temporary measures
New $0 monetary screening threshold which will be introduced as part of the reforms on 1 January 2021
Guidance Note updates
The Foreign Investment Review Board (FIRB) is currently preparing updated Guidance Notes on the impact of the Major Reform.
Processing timeframes to be confirmed
FIRB has yet to confirm whether the statutory timeframe for consideration of an application and notification to the applicant of its decision will revert to the pre-COVID-19 period of 40 days or remain at the temporary up to six-month time period.
Foreign Interference legislation
Also receiving Royal Assent on 10 December 2020 was new “foreign interference” legislation designed to protect Australia against foreign interference and deter any attempts to undermine Australia’s national interests. The Foreign Relations (State and Territory Arrangements) Act 2020 (Cth) establishes a legislative mechanism for the Commonwealth, to assess and manage the effect of arrangements between State or Territory governments and foreign governments, and their associated entities. This includes Australia’s universities’ arrangements.
National Security Business definitions to be extended
Additional changes to Australia’s definition of “national security business” have also been set forth in legislation that was tabled in Parliament on 10 December 2020 to amend the Security of Critical Infrastructure Act 2019 (Cth). The following industries are likely to be considered a “national security business”: communication, financial services and markets, data storage and processing, food and grocery, transport, defense industry, higher education and research, energy, healthcare and medical, space technology and water and sewerage. Transactions involving a national security business will require FIRB approval, regardless of the value.
These changes are part of Australia’s Cyber Security Strategy released on 6 August 2020.
No corporate reorganization relief and additional budget allocation
Investors should also note that:
These new laws, and specifically the Major Reform are complex and often involve interaction between various Australian government departments including the Treasury and the Australian Taxation Office.
1. Currency references in this Alert are to the AU$.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Australia), EY Law, Sydney
Ernst & Young LLP (United States), Australian Tax Desk, New York
Ernst & Young LLP (United Kingdom), Australian Tax Desk, London