Australian Government increases scrutiny on foreign investment as part of response to COVID-19

COVID-19 Alert


Key Takeaways

  • Monetary screening threshold reduced to $0 for all foreign investments under the FATA 
  • Timetables for new and existing applications to be extended up to 6 months
  • Priority will be given to applications for investments that support Australian business and jobs so, where applicable, this should be highlighted in applications to FIRB
  • Transactions signed prior to 10:30pm on Sunday, 29 March not impacted by changes


On Sunday 29 March 2020, the Australian Treasurer announced immediate changes to Australia’s foreign investment regulation seeking to safeguard Australia’s national interest as the coronavirus outbreak continues to build pressure on the Australian economy and Australian businesses.

The two key changes announced by the Treasurer, and which will be subject to new regulations to be released shortly, are:

  • Effective from 10:30pm (AEDT) on 29 March 2020, all proposed foreign investments which are subject to the Foreign Acquisitions and Takeovers Act 1975 (FATA) will require approval by the Treasurer, regardless of the value or the nature of the foreign investment. This change is to be achieved by reducing to $0 the monetary screening thresholds for all foreign investments under the FATA. 
  • The Australian Foreign Investment Review Board (FIRB), the body within the Australian Treasury established to advise the Treasurer and the Australian Government on Australia's Foreign Investment Policy and its administration, will be working with all existing and new applicants for foreign investment approvals to extend the review and approval timeframes from the current statutory 30 day period to up to 6 months.

The Treasurer indicated that the new measures are temporary only and are intended to last only for the duration of the coronavirus outbreak – however long that may be. The Treasurer has also stressed that “This is not an investment freeze. Australia is open for business and recognises investment at this time can be beneficial if in the national interest.

However, the amendments have sweeping consequences for all current and proposed foreign investments into Australia and will require detailed consideration by foreign investors to ensure that the increased scope of Australian’s foreign investment approval requirements can be efficiently navigated without causing adverse commercial and timing implications for their investment objectives and those of their Australian counterparties.

The Treasurer has announced that the Government will prioritise urgent applications for investments that protect and support Australian business and Australian jobs. While there will inevitably be increased regulatory hurdles for foreign investors under these new changes, we expect to see FIRB and the Australian Treasurer being pragmatic and taking timely action to approve investments in Australian business and projects which stimulate jobs and growth in the Australian economy or for urgent capital raisings to support distressed Australian businesses.

The significant increased scrutiny on all foreign investment into Australia

The changes to the Australian foreign investment regime, which will be effective from 10:30pm (AEDT) on 29 March 2020, mean that all actions which are “notifiable actions” under the FATA will now require FIRB approval regardless of the value of the foreign investment.

A “notifiable action” under the FATA includes a broad set of actions relating to foreign investments into Australia, including any acquisition of a substantial interest (being, an interest of at least 20%) in an Australian entity or business by a foreign person, a direct interest acquired by a foreign person in an Australian land company or Australian land trust, and any interest acquired by a foreign person as lessee or licensee in a lease or licence giving rights to occupy Australian land where the term of the lease or licence (including any extension or renewal) is reasonably likely to exceed 5 years

Historically, the requirement to notify FIRB and seek the Treasurer’s prior approval before undertaking a “notifiable action” was (in most cases) subject to the relevant action exceeding a particular monetary threshold. For example, acquisitions by foreign persons of substantial interests in Australian companies would only require FIRB approval if a monetary threshold of circa $1.2 billion (for investors from certain Free Trade Agreement partner countries with Australia) or $275 million (for most other foreign investors) was exceeded. Special requirements and significantly lower thresholds applied for foreign government investors and sensitive businesses.

The changes to the FIRB regime mean that all acquisitions of substantial interests in Australian companies and all acquisitions of freehold or long term interests in Australian land (whether directly or through Australian land companies or trusts) will need to be notified to FIRB and the prior approval of the Australian Treasurer sought. Unless further guidance is provided by FIRB, the changes will also capture internal corporate restructures where a corporate group which is ultimately foreign owned seeks to transfer or restructure its Australian operations and such restructure includes a transaction which is a “notifiable action” under the FATA.

Given the breadth of activities which will be captured by these changes, foreign persons seeking to invest in Australia should give careful consideration to the application of Australia’s foreign investment regime to their proposed investment. A large subset of transactions which were once permitted without approval will now need to seek approval from the Australian Treasurer prior to completion occurring.

Increased processing timeframes to be expected

As noted above, FIRB will be working with all existing and new applicants for foreign investment approvals to extend the review and approval timeframes from the current statutory 30 day period to up to 6 months. This does not necessarily mean that FIRB will take the full 6 months to consider all applications. FIRB will prioritise urgent applications for investments that directly protect and support Australian businesses and Australian jobs and will have regard to any commercial deadlines related to those proposed investments.  

Practical implications for FIRB notifications

It’s clear that the changes to the FIRB regime will result in a significant increase in the number of applications made to FIRB and have a significant impact on FIRB’s processing times.

For current applications, case officers will start to contact applicants to discuss the expected time frame for processing their applications, taking account of any commercial deadlines related to those proposed investments. For current and new applications, if your investment supports Australian jobs and businesses, you should ensure that your application specifically addresses how the proposed investment will help secure Australian jobs and support Australia’s economic recovery as priority will be given to processing these applications. For current applicants, this may require you to make a supplementary submission to FIRB.

As these temporary measures will remain in place for the duration of the coronavirus crisis, foreign investors should ensure that they adequately consider the commercial and timing implications for their investment objectives and those of their Australian counterparties during this time.

Implications for committed investments into Australia

The Treasurer’s announcement initially caused concern that the changes would have unintended consequences for foreign investment committed under transactions signed prior to 10:30pm (AEDT) on 29 March 2020 but which had not yet completed or closed. For example, by creating a new approval requirement for the foreign investor which would not have otherwise been required at the time of entry into its binding agreement.

FIRB has helpfully confirmed that the regulations to be enacted to give effect to the proposed changes will specify that the new approval requirements do not apply to agreements entered into prior to 10:30pm (AEDT) on 29 March 2020, including in relation to acquisitions that have not yet occurred and regardless of whether all conditions under the relevant were fully satisfied by that time.

Increased vigilance and enforcement

FIRB has indicated that in these uncertain times compliance with Australian’s foreign investment regime will be a priority for the Australian Government to ensure that foreign investment is not contrary to the national interest. Any foreign investor who attempts to proceed with an investment into Australia without the required approvals could be subject to a disposal order, civil penalty orders and/or criminal prosecutions.


DLA Piper is regularly liaising with FIRB regarding the impact and application of these changes for foreign investment across various industry sectors in Australia. Please contact Chris Mitchell, Shane Bilardi or your usual DLA Piper contact if you would like to discuss the implications of the changes for any current or proposed investment.