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22 December 202069 minute read

Major reforms to Australia Foreign Investment and Critical Infrastructure Frameworks

Key takeaways

The Australian Federal Government has now enacted amendments to Australia's foreign investment regime targeted at ensuring Australia's foreign investment framework keeps pace with emerging national security risks and global developments.

The amendments come into effect on 1 January 2021 and, importantly, coincide with the reinstatement of the monetary notification screening thresholds under Australia's foreign investment regime which were reduced to zero in March this year as a result of the economic uncertainties associated with the COVID-19 pandemic.

The Australian Federal Government has also released proposed legislation to amend the Security of Critical Infrastructure Act to introduce an enhanced framework for the security and resilience of critical infrastructure in Australia. The proposed amendments to the Security of Critical Infrastructure Act are also expected to greatly expand the industries and asset classes which are covered by the framework.

The amendments to both regimes are comprehensive and will impact a broad range of foreign investors and industry sectors in which they invest.

In this article, we provide a high level overview of some of the key amendments of the foreign investment regime which are to take effect on 1 January 2021. Specifically, we consider the following key matters:

We also include a summary of the proposed amendments to the critical infrastructure regime, the including introduction of 'positive security obligations' and 'enhanced cyber security obligations'

Please contact any of the authors or your usual DLA Piper contact if you would like to discuss any of the amendments and how they could impact on foreign investment in Australia.

Status of the reforms

The Australian Federal Government has now enacted the Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 (Act), Foreign Investment Reform (Protecting Australia's National Security) Regulations 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 (together, the Regulations) which are to come into effect on 1 January 2021.

Reinstatement of the pre-COVID monetary thresholds

The FIRB monetary screening thresholds will be reinstated from 1 January 2021 and will be indexed at the rates they would have otherwise been had the COVID-19 amendments not been made.

The following table summarises the monetary thresholds that will apply in respect to common transactions for private foreign investors from 1 January 2021. The below table does not apply to foreign persons who are foreign government investors.

Action taken in relation to:

Action taken by:

Monetary threshold

entities and businesses

agreement country investor (not in respect to a sensitive business)

$1.192 billion

any foreign person in any other circumstance

$275 million


any foreign person

$60 million

developed commercial land (which is not low threshold land in respect of which a $60 million threshold applies)

foreign investors from Chile, New Zealand and USA

$1.192 billion

any foreign person in any other circumstance

$15 million (cumulative)

agricultural land (subject to limited exceptions)

agreement country investor

$1.192 billion

any foreign person in any other circumstance

$275 million

residential land (subject to limited exceptions), vacant commercial land mining or production tenements

a foreign person


Statutory review period

The Treasurer will be given the power to extend the 30 day statutory decision period by up to 90 days without requesting an extension from the applicant.

Streamlining for passive investments by funds

Previously, certain transactions undertaken by investments funds were notifiable on the basis that the fund was considered a 'foreign government investor' as a result of having a foreign government investor holding a 20+% interest in the investment fund or multiple foreign government investors together holding an aggregate 40+% interest in that investment fund.

The amended regime now provides that:

  • an entity that does not have a 20+% foreign government investor ownership from one country, but has 40+% foreign government ownership from multiple countries, will no longer be deemed to be foreign government investor provided that none of the foreign government investors have control or influence over the entity's investment and operational decisions; and
  • an entity that has 20+% ownership by a single foreign government (that has no influence or control over the entity) will still be deemed to be a foreign government investor but will be able to apply for a broader exemption certificate which could be granted for longer periods than are currently available.

Entities which qualify for this exemption will still be subject to screening at the thresholds for private foreign investors.

Moneylending exemption

The initial exposure draft of the Regulations removed the moneylending exemption in its entirety in respect to national security businesses and assets. Given the breadth of the application of the national security tests, this amendment would have possibly acted as a deterrent for foreign investors in loan syndication markets (amongst others).

Following the consultation period, the Australian Federal Government narrowed the scope of the amendments to the moneylending exemption for national security businesses and assets which mean that broadly the moneylending exemption will continue to apply. The only exception would be where an interest in a national security business is acquired on enforcement by means other than receivership – for example, in the somewhat rare circumstance where a mortgagee forecloses and acquires the business directly.

This obligation will apply to both private foreign investors and foreign government investors in respect of moneylending agreements entered into on or after 1 January 2021.

Australian media businesses

The Australian Federal Government has reconsidered how it defines Australian media business and in doing so, has broadened the definition in order to include online only media businesses. To fall within the definition, the Australian business must be one that publishes daily newspapers, broadcasts TV or radio, or operates an electronic services which wholly or partly service Australian audiences. A new threshold test has been introduced in order to avoid unintended media businesses falling within that definition. The average daily audience for the service must be reasonably expected to be more than 10,000 people.

Simpler fee framework

As part of the reforms, the Treasurer announced that the fee regime for assessing applications made under FATA would be amended to be:

  • fairer such that applicants bear FIRB's costs of assessing an application and fees are representative of the level of assessment involved in respect of a proposed transaction; and
  • simpler, to reduce the administrative burden of determining the fee that is payable for a notification.

The Regulations certainly shift the costs of assessing applications onto applicants, with maximum fees now being capped at $500,000 (up from a maximum fee of $107,100 under the current regime). Some fees are fixed while others increase where there is a higher consideration payable under the proposed transaction.

In terms of a simpler fee regime, the space afforded for this article does not permit us to explore all the fees and rules set out in the Regulations and it will take parties some time to familiarise themselves with the new fee regime. We highlight some of the fee changes for key actions below.

Broadly speaking, the fees payable for notifiable actions, notifiable security actions and (voluntarily notified) significant actions relating to entities and businesses are set out below.

Where consideration is:

Notifiable actions and notifiable security actions involving agricultural land

(Most) other notifiable actions and notification security actions as well as (voluntarily notified) significant actions relating to entities and businesses

Less than $75,000



Agricultural land: $2 million or less
Otherwise: $50 million or less



Agricultural land: more than $2 million
Otherwise: more than $50 million

Base fee is $13,200 plus an additional $13,200 for every further $2,000,001 of consideration payable under the proposed transaction, subject to a fee cap of $500,000

Base fee is $13,200 plus an additional $13,200 for every further $50,000,001 of consideration payable under the proposed transaction, subject to a fee cap of $500,000

Some fixed fees have increased while others have decreased. Examples are included in the table below.


Current Fee

New Fee

Foreign government investors starting an Australian business



Starting a national security business



Proposal to enter into or terminate certain agreements or alter constituent document (and which is neither a notifiable action nor notifiable national security action)



Variation to amend no objection notification or an exemption certificate where amendment is of an immaterial or minor nature – e.g. it is to correct a typographical error



Variation to amend no objection notification or an exemption certificate is not of an immaterial or minor nature – e.g. when the applicant wants to change or remove a condition imposed on them or to extend the validity period


Internal reorganisations (as that term is defined in the FATA)



Discounted fees are granted to reviewable national security actions and significant actions that are not notifiable or notifiable national security actions, that are voluntarily notified to the Treasurer or are called in by the Treasurer – see below for further details on this new national security regime. The discounted fee is 25% of the fee that would be calculated for the reviewable national security action's 'equivalent' notifiable action (for example fee relating to land, agricultural land or entity) or the fee that would have been payable had the significant action been notified.

In respect of exemption certificates, the applicable fee is 75% of the aggregate fees that would otherwise be payable for the actions the subject of the exemption certificate. There is a four step process to arrive at this figure which broadly speaking (i) bundles the actions into 'buckets' of 'action types'; (2) calculates the fee payable in respect of each bucket based on the aggregate consideration of the bucket; (3) takes the sum of the fees for each bucket; (4) calculates the fee as 75% of the notional figure calculated at step 3.

Rules for calculating fees where more than one action is covered by an agreement, for assessing dominant land holdings, where multiple exemption certificates applications are submitted and where lower fees may be applicable are also contained in the Regulations.

Register of foreign ownership

The Act introduces a new register of foreign ownership of Australian land, water, businesses and other assets to be administered by a Commonwealth body to be appointed by the Treasurer.

The new register builds on the existing register of foreign interests in agricultural land and water rights administered by the Australian Taxation Office.

The new register will record all foreign interests acquired in Australian land, water entitlements and contractual water rights and business acquisitions that require foreign investment approval, including acquisitions reviewed under the new national security test. Broadly, foreign persons will be required to notify the registrar if:

  • the foreign person begins to hold an interest in Australian land, water or an Australian entity or business;
  • the foreign person begins or ceases to be a foreign person while holding an interest in an Australian entity;
  • there is a change in the nature of the interest held by the foreign person; or
  • the foreign person ceases to hold the interest.
National security reviews and new call in and last resort powers

National security test

The Act introduces a new national security test into Australia's foreign investment regime which will sit alongside the current national interest test. It will be used to assess foreign investments into Australia on the basis of factors that may give rise to national security concerns.

The national security test is narrower than the existing national interest test focusing on whether a proposed foreign investment gives rise to matters related to Australia's defence, security, political, military and economic relations with foreign persons and international organisations or law enforcement interests.

In contrast, the current national interest test, in addition to national security considerations, also takes into account the character of the proposed investor, competition implications, impact on the Australian economy and community and other Government policies including tax.

New 'notifiable national security actions'

The Act introduces a new category of 'notifiable national security actions' which must be notified to FIRB for review regardless of the value of the investment, the nature of the investor (i.e. private, government or whether from a free trade agreement country) or whether those actions are otherwise significant or notifiable actions under the existing regime.

'Notifiable national security actions' involve a foreign person acquiring:

  • an interest in 'national security land'; or
  • a direct interest (being, generally, an interest of 10% or more or where it provides the investor with a position of control) in an existing 'national security business' or commencing such a business.

If a notifiable national security action is not otherwise required to be screened under the FATA (for example, because it is an action that is not a significant action), then it will be assessed by the Treasurer on national security grounds only and not national interest grounds.

The Regulations include detail and clarifications to the new definitions of 'national security land' and 'national security business'. Set out below are key considerations and implications arising from the new definitions:

  • 'National security land' includes Australian land in which an agency in the national intelligence community has, or will have, an interest if at the time of acquisition the foreign person could reasonably be expected to be aware of the agency's interest or prospective interest.
  • A 'national security business', will include a business, carried on wholly or partly in Australia, that:
    • is a responsible entity (within the meaning of the SOCI Act) for an asset (note the SOCI Act is subject to major reforms detailed below);
    • holds a direct interest (10%+) in relation to a critical infrastructure asset (within the meaning of the SOCI Act) for an asset (note the SOCI Act is subject to major reforms detailed below);
    • is a carrier or nominated carrier service provide to which the Telecommunications Act 1997 (Cth) applies;
    • stores or has access to information that has a security classification or other otherwise stores or maintains personal information collected by the Australian Defence Force, the Defence Department or an agency in the national intelligence community;
    • is a data centre businesses with government related customers are likely to be classified as a national security business given the definition includes any business that stores or has access to information that has a security classification;
    • develops, manufactures or supplies 'critical' goods, technology or services for (or intended for) a military end use by 'defence and intelligence personnel' or the defence force of another country in activities that may affect Australia's national security.

"Call in" Powers

The new call-in powers provide the Treasurer with the power to review certain 'reviewable national security actions' and significant actions (that are not notifiable actions or 'notifiable national security actions') which are not voluntarily notified if the Treasurer considers the action may pose a national security concern regardless whether they are proposed or already taken .

To provide foreign investors with additional certainty in respect to this 'call-in' power, the Regulations impose a time limit of 10 years for such power. Accordingly, the Treasurer will not be able to 'call-in' any significant action or reviewable national security action that was not notified to FIRB after the expiration of the 10 year time limit.

'Reviewable security actions' are actions that are expected to give foreign persons potential influence and rights, such as:

  • an acquisition of an interest of 10% or more by a foreign person in an Australian business,
  • the ability to influence or participate in the central management or policy of an entity or business, or
  • the right to occupy Australian land,

but are not otherwise a significant action, a notifiable action or a 'notifiable national security action'.

If an investor has previously received a no objection notification about an action (or an exemption certificate), the call-in power is not available to the Treasurer. The call-in power can only also be used by the Treasurer on actions that are taken or proposed to be taken on or after 1 January 2021.

"Last Resort" Powers

The 'last resort' powers give the Treasurer powers to impose conditions, vary existing conditions, or, as a last resort, force the divestment of any realised investment which the Treasurer has previously approved where national security concerns are subsequently identified.

The Explanatory Memorandum makes clear that the last resort power is restricted to situations where a new national security concern has arisen. The last resort power cannot be used to revisit concerns that could have been addressed at the initial notification or application stage unless additional information becomes available or circumstances change (either of the person or market where the action occurs, or more broadly in a way that materially affects national security considerations generally).

The Treasurer's last resort power is only available for actions that are notified to the Treasurer (or taken, if they were not notified) on or after 1 January 2021.

New exemptions for the mining and aged care sectors

Under the Regulations the following actions will no longer be subject to the Foreign Investment and Takeovers Act 1975 (Cth) (FATA) or the Foreign Investment and Takeovers Regulations 1975 (Cth) (FATR) and can therefore be undertaken without FIRB approval:

  • an interest being acquired as a consequence of an acquisition of revenue streams in relation to mining and production tenements (so long as the interest is not a proprietary right or a right to occupy or control the land);
  • an acquisition of an interest in an exploration tenement (regardless of the right to occupy) if the entity that holds that tenement is a foreign person (but not a foreign government investor) and the exploration tenement is not in respect of national security land; and
  • an acquisition of an interest in residential land used for residential care, retirement villages and certain forms of student accommodation.
Improving compliance and additional enforcement tools

The Act includes significant amendments to Australia's current foreign investment compliance framework. These changes include material increases in civil and criminal penalties which are intended to modernise the enforcement framework for a graduated and proportional response to compliance issues and to strengthen the overall effectiveness of the regime.

The EM makes clear that the amendments are intended to ensure that not only the Treasurer but also the Commissioner of Taxation is given appropriate powers to administer the FATA and to also supplement the power to give directions to foreign investors in order to prevent or address breaches of investment conditions.

The Treasurer has been given new "standard monitoring and investigative powers" – in line with those of other business regulators. These powers will include being given access to premises with consent or by warrant in order to gather information, improve the regulator's capability to monitor investor compliance and better enable the regulator to investigate potential non-compliance. In a similar vein, the Treasurer is also likely to be given the power to accept enforceable undertakings from foreign persons to manage compliance.

Consequently, foreign investors and their advisors should expect to see the Treasurer, through FIRB, taking a more proactive approach to assessing compliance with Australia's foreign investment laws and exercising investigatory and compliance powers of enforcement going forward. These developments are consistent with the approach, powers and activities of the Australian Taxation Office which now works hand in glove with FIRB in considering Australia's national interest in the context of foreign investment.

Reporting obligations have also been reconsidered in the Act in several important respects. Firstly, penalties will be reduced in the case of self-reporting potential breaches of FATA. Secondly, and most importantly, broadened reporting obligations have been introduced where a relevant action has occurred in relation to a proposed significant action which is the subject of a no objection notification.

Notification obligations will exist when there is a change of control of the entity or business to which the significant action relates or where a foreign person ceases to have a direct interest in the Australian entity or a part of their interest in Australian land. Failure to give such notices within 30 days of the relevant action occurring may attract significant civil liability penalties or an infringement notice.

Integrity amendments

The integrity amendments contemplated in the Act focus on closing certain gaps in the FATA, including screening gaps, so as to ensure that the foreign investment framework continues to be fit for purpose and captures acquisitions which should be within the remit of Australia's foreign investment regime but currently do not meet the conditions that apply to significant actions or notifiable actions under the FATA and the Regulations.

These reforms clarify the operation of the change in control test for significant actions which will no longer be a factor in determining if an action is a significant action once a foreign person controls an entity or business. In addition, proportional increases in a foreign person's interest in an Australian entity through share buybacks and selective capital reductions (be it as a result of participating or not participating in a share buyback) may now also be captured under the FATA where other conditions, including monetary screening thresholds are met.

It is to amend the regulations to clarify that acquisitions from a statutory body of the Commonwealth, a State or Territory are not significant or notifiable actions. However, acquisitions of interests in national security land or an Australian business that is a national security business from these government entities will continue to be covered by the revised FATA.

It is also to revise the regulations such that the tracing rules can be applied to unincorporated limited partnerships.

Proposed reforms to the critical infrastructure regime

The Security of Critical Infrastructure Bill (SOCI Bill) was introduced into the Australian parliament on 10 December 2020 which is proposed to give effect to major reforms to the Security of Critical Infrastructure Act 2018 (Cth) (SOCI Act).

Expanded application of the SOCI Act

The SOCI Act currently imposes regulatory obligations on specific entities in the electricity, gas, water and maritime ports sectors. However, the Australian Government is concerned with the evolving nature of the global security landscape and considers that the scope of the SOCI Act needs to be upgraded to manage risks across all critical infrastructure sectors.

The SOCI Bill seeks to expand the coverage of the SOCI Act to the following sectors

  • the financial services and markets sector;
  • the defence industry sector;
  • the higher education and research sector;
  • the food and grocery sector;
  • the health care and medical sector;
  • the space technology sector;
  • the transport sector;
  • the water and sewerage sector;
  • the communications sector;
  • the data storage and processing sector; and
  • the energy sector.

Introduction of new measures

In addition to expanding the scope of the SOCI Act, the SOCI Bill also seeks to introduce the following enhanced regulatory framework which builds on the existing requirements under the SOCI Act:

  • Positive Security Obligations: These obligations will require entities to manage the security and resilience of their critical infrastructure assets by embedding preparation, prevention and mitigation activities into the business as usual operation of critical infrastructure assets.

The SOCI rules, which are yet to be released, will determine which elements of the Positive Security Obligations are 'switched on' for particular types of critical infrastructure assets. Elements can be switched on in isolation to allow for tailored requirements that recognise existing arrangements.

The positive security obligations involve three aspects: (a) adopting and maintaining an all-hazards critical infrastructure risk management program; (b) mandatory reporting of serious cyber security incidents to the Australian Signals Directorate; and (c) where required, providing ownership and operational information to the Register of Critical Infrastructure Assets.

  • Enhanced Cyber Security Obligations: Entities responsible for assets designated as systems of national significance may be subject to enhanced cyber security obligations if they receive a written notice from the Secretary of Home Affairs.

The SOCI Bill sets out four obligations that may be imposed on systems of national significance by written notice: (a) Incident Response Plan, (b) Cyber Exercises, (c) Vulnerability Assessments and (d) Access to System Information. Presently, 'systems of national significance' will include a significantly smaller subset of critical infrastructure assets that are most crucial to the nation, by virtue of their interdependencies across sectors and potential for cascading consequences to other critical infrastructure assets and sectors if disrupted.

  • Government Assistance Regime: A government assistance regime to respond to serious cyber security incidents which apply to all critical infrastructure sector assets. The government assistance regime does this by setting out how the government could provide assistance immediately prior, during or following a significant cyber security incident to ensure the continued provision of essential services. This includes (a) information gathering directions, (b) action directions and (c) intervention requests.

We intend to provide more detailed guidance in relation to this very important piece of legislation and its accompanying rules as and when it comes into force.