On 8 March 2017 the Australian Government released a consultation paper seeking views on proposed changes to Australia's Foreign Investment Framework.
Certain of the potential changes relating to the lower monetary threshold for land under "prescribed airspace" and special exemptions for foreign government investors (FGIs) will be of particular interest to investors potentially seeking to acquire commercial property and FGIs.
Many of the potential changes, in particular the potential changes to the application fee regime, will also be of more general interest to foreign investors.
We set out below, some of the key proposed changes explored in the Consultation Paper.
Land under prescribed airspace
- Certain (non-vacant, commercial) land is considered particularly sensitive, and therefore subject to a lower AUD 55 million monetary threshold (versus the general AUD 252 million threshold).
- Unfortunately, land under prescribed airspace captures disproportionately large areas of land, particularly in our capital cities. The Consultation Paper states, for example, that "land under prescribed airspace in Sydney stretches from Newcastle to Wollongong."
- One option the Consultation Paper explores is that land under prescribed airspace be removed from the definition of land that is considered particularly sensitive. Another option is to remove the lower AUD 55 million threshold altogether.
- The Consultation Paper acknowledges that the "broad net" of notifiable actions "results in a higher than desirable regulatory impost on business proposals that are of low sensitivity and have to be notified." This is particularly true in the case of FGIs, for which no monetary threshold applies in respect of their investments.
- The Consultation Paper considers a number of proposals, which FGIs, will find particularly interesting, including the introduction of a FGI specific exemption certificate (exempting the holder from the FGI specific requirements of the foreign investment framework, subject to conditions to be agreed with FIRB) and an exemption in respect of transactions involving acquisitions of securities where the consideration is AUD 100 million or less.
Reform of application fee regime
- The Consultation Paper acknowledges the complexity of the current application fee regime, and that certain disparities can sometimes arise between the fees that apply in only slightly differing circumstances.
- The Consultation Paper suggests a number of alternative fee regimes, such as a flat fee structure, or tiered fees based on the value of the consideration (possibly calculated as a percentage of the consideration).
- Certain of the alternatives may be welcomed by FGIs to whom, under the current regime, the monetary thresholds do not apply (potentially resulting disproportionately high application fees, as against the value of a transaction).
The proposed changes set out in the Consultation Paper show the Government's willingness to refine and improve the foreign investment framework in consultation with relevant stakeholders, following its complete revamp in 2015, and is no doubt welcome news for foreign investors generally, and particularly for foreign commercial real estate investors and FGIs.
The closing date for submissions in relation to the Consultation Paper is 29 March 2017.