On 5 June 2020, the Federal Government announced that they will shortly be presenting draft legislation which will include “the most comprehensive reforms to Australia’s foreign investment review framework since the introduction of the Foreign Acquisitions and Takeovers Act 1975.” These reforms will bring new considerations for foreign investors.
We summarise some of the key implications of the proposed reforms as follows:-
- the introduction of a new “national security” test, which foreign investments will be assessed against – this will allow the Government to assess an investment in relation to factors that give rise to national security concerns (such as threats of espionage, sabotage, politically motivated violence, attacks on Australia’s defence system, acts of foreign interference or threats to Australia’s territory and border);
- streamlining of less sensitive investments – this will mean that certain entities currently classified as “Foreign Government Investors” will no longer be treated as this type of investor;
- stronger penalties, compliance and enforcement powers – to allow the Treasury and the ATO to issue infringement notices in respect of all types of breaches, increase civil and criminal penalties and increase the enforcement powers of the Treasury and the ATO;
- an increase of the integrity of the foreign investment review framework – this will involve a number of changes to the approvals, exemptions and the tracing process;
- clarity on required approvals for increase of foreign holdings – this reform will clarify that foreign persons are required to seek further approval for any increase in any holdings, above the holding amount previously approved (including increases as a result of creep acquisitions and proportional increases through share buybacks and capital reductions);
- a more coordinated information gathering and sharing process – to allow better data sharing between Government agencies and international counterparts (as required);
- a fairer and simpler framework for foreign investment fees – to allow the Government to ensure the fees imposed cover the true costs of administering the approval process; and
- a timely, consistent and reliable investor experience – these reforms are intended to allow the Government to work better with investors to meet commercial deadlines.
Draft legislation will be released in July 2020 with a proposed commencement date of 1 January 2021. As always, Hickey Lawyers are committed to ensuring that we can assist all investors and that we are up-to-date with all of the proposed changes and reforms.
We will release a further publication shortly, with a more in-depth overview of the specific implications that the proposed changes will have on foreign investors and our clients.
For the time being, the temporary changes to the Australian foreign investment which commenced on 29 March 2020 remain in place.
Hickey Lawyers have a strong track record of assisting foreign investors to navigate the foreign investment regime, in both the local and domestic market. If you are concerned that you may be affected by the proposed reforms or require assistance with the existing Australian foreign investment rules, please contact Hickey Lawyers on (07) 5556 7400 and we will be happy to help.