Following the Treasury's public consultation on proposed reforms to the FIRB framework in October last year, the Government has now announced an overview of the package of legislative, policy and practice reforms (FIRB Reforms) proposed to be implemented as part of its 2026-2027 Budget.
A summary of the FIRB Reforms is set out below:
Low-Risk Transactions Decided within 30 Days
Treasury will implement a new performance target of deciding all 'low-risk' transactions within 30 days (to be implemented from 1 January 2027).
'Low-risk' transactions will include the following characteristics:
- the applicant:
- has received FIRB approval in the past 24 months;
- is not subject to extrajudicial decision; and
- has no record of non-compliance or character concerns; and
- the proposed action:
- is not in a sensitive sector or business;
- has no national interest sensitivities; and
- has a straight-forward and transparent corporate transaction structure.
We note that the proposed 30-day decision period is in fact for FIRB to (i) make a decision OR (ii) to inform the investor 'why further assessment is required'. In reality, this means that the 30-day "decision" period may not be universally applied such that decisions are actually made in this period, and therefore the overall effectiveness of this policy directive will be subject to how it plays out in practice.
Exemptions from the Operation of FATA
The Treasurer will be granted with the ability to issue broader exemption certificates to 'switch-off' or 'adjust' the operation of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) for certain investors, including to amend their 'foreign government investor' (FGI) status, foreign personhood, the tracing rules, the associate definition and reporting obligations. This may mean that it will become easier for investors with a purely passive FGI status or foreign investors generally to be granted an exemption from being deemed an FGI or from being considered a foreign person, respectively, for the purposes of FATA. For an FGI investor, this means, amongst other things, that it would not be routinely subject to the lower A$0 threshold on all transactions.
New exemptions will be introduced that will result in foreign investors no longer being required to seek mandatory FIRB approval for a range of low-risk transactions, including (amongst others):
- exempting small percentage increases in existing holdings (currently even a 1% increase can trigger mandatory FIRB approval);
- increasing the base monetary threshold (currently A$347 million) for non-free trade agreement, non-FGI investors in non-sensitive sectors; and
- exempting land subdivisions or amalgamation where ownership does not change.
Sensitive Sectors, Control and Influence
Sensitive sectors and businesses:
The Government proposes to enable the Treasurer to more quickly adjust mandatory notification requirements for investments in sensitive sectors in response to emerging or changing risks through a 'new legislative tool'. It is unclear what this will entail; however, the Government has noted that the new powers will include clear safeguards to ensure clarity for investors about screening requirements in sensitive sectors. Currently, the relevant definition of a 'sensitive business' and associated definitions and thresholds are embedded in FATA or the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) and therefore are less flexible to ongoing change.
The Government will also expand mandatory notification requirements for certain investments in current and emerging sensitive sectors of the Australian economy, and to certain mining tenement acquisitions, some of which currently fall outside the requirement for mandatory FIRB approval.
Offtake agreements and lending arrangements:
The Government is also proposing reforms to enable the oversight and review of commercial arrangements that could pose national security risks through foreign control without ownership, such as offtake agreements and lending agreements. The Treasurer would be able to call-in for review, in limited circumstances, non-ownership commercial arrangements that could be used to exert foreign control. This may affect a number of our clients, in particular in offtake arrangements and debt and debt-like arrangements (it is unclear yet how this works alongside the current moneylending exemption); noting, however, that the Government does suggest "this power would be used rarely and would not be intended to interfere with the ordinary course of business".
Tracing rules and associates
Tracing rules:
The Government proposes to amend the 'tracing rules' to focus screening on circumstances where upstream entities may have material interests or control (rather than entities that have minor influence and economic interest). This also means that where an upstream entity materially increases its level of control or influence by acquiring interests despite earlier FIRB approval or screening, further screening and FIRB approval may be required.
Associates:
The Government will also expand the definition of associate relationships to include additional roles capable of exercising influence (including direct interest holders or persons with debt arrangements that allow the exercise of influence).
Default NON Period
The Government is going to increase the default validity period for a 'no-objections notice' (NON) from 12 to 24 months, with flexibility to vary this period on a case-by-case period.
Reporting to the ATO Register
Reporting to the Register of Foreign Ownership of Australian Assets (the ATO Register) will be revised, such that investors will no longer be required to report acquisitions of interests in commercial land, businesses or entities to the ATO Register. Rather, investors will be required to register such acquisitions that were approved by FIRB via the FIRB Portal.
Existing reporting requirements, such as the reporting of acquisitions of water interests, agricultural land and residential land will still need to be made to the ATO Register.
Helpfully, the Government has recognised the complications with the reporting process to the ATO Register and has noted that the ATO will strengthen its administrative support for foreign investors to assist them in meeting their registration and reporting obligations, including improved support with associated identity and access requirements.
FIRB Conditions
The Government will enable the Treasurer to impose new conditions that may require an investor to do or not to do something before, when, or after an investment is made, with requirements tailored to the risks and the circumstances of proposed medium- or high-risk transactions. The Treasurer will also be able to accept statutory undertakings from applicants and third parties to mitigate identified risks as a supplement to the use of the strengthened conditions power.
The Government will also enable the Treasurer to incorporate non-legislative standards into NONs and Exemption Certificates, such as those issued by Standards Australia, with a view that this will ensure the requirements imposed on investors through conditions do not become outdated over time.
Enforcement, Compliance and Avoidance
The Government will:
Disposal and prohibition orders:
Grant the Treasurer with the ability to issue more targeted and flexible orders and directions, including disposal orders that specifically exclude particular entities from acquiring the disposed interests, and prohibition orders that take effect quickly in high-risk situations.
Call-in powers:
Extend the call-in power to cover notifiable actions, such that the Treasurer can assess these actions, and if required, impose conditions or require disposal. The overview does not discuss how this will work in practice if a notifiable action has already obtained FIRB approval (unlike how the call-in power currently operates such that it applies to significant or reviewable national security actions which have not otherwise been screened by FIRB previously).
Infringement notices:
Enhance the flexibility of the infringement notice regime by allowing a single notice to cover multiple alleged breaches, and expanding the range of contraventions to which infringement notices can be applied
Anti-avoidance prohibition:
Amend the anti-avoidance prohibition to better deter investors, advisers, agents and vendors from avoidance behaviour. Currently, avoidant behaviour under FATA is subject to the relatively high 'sole or dominant purpose' test. The Government is proposing reforms to 'level the playing field' for all foreign investors by strengthening responses to attempts to avoid Australia's foreign investment laws. It is unclear at this stage what these legislative changes will be.
Sharing of protected information:
Reduce limitations on circumstances where otherwise protected information collected in the assessment of FIRB applications can be shared, including with non-government third parties for compliance or investigation purposes, such as financial institutions and legal advisers. The FIRB Reforms will also permit limited public sharing of narrowly defined subsets of protected information for targeted education or deterrence purposes (subject to appropriate safeguards).
Timeline
The Government has suggested that Treasury will develop the details of the legislative reforms outlined in the package of FIRB Reforms, having regard to policy, legal and implementation considerations. As such, the timing of the legislative amendments necessary to implement the reforms is "…a matter for Government".
Stakeholders will, however, have an opportunity to comment on the details of the legislative reforms through consultation on exposure draft legislation in due course.
Khyanne D'Sylva (Paralegal, White & Case, Melbourne) co-authored this publication.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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