On 18 May 2015 Treasury released an options paper entitled “Australia’s Foreign Investment Framework: Modernisation Options” seeking comment as to modernisation options with respect to Australia’s Foreign Investment Policy (FIP) and the Foreign Acquisitions and Takeovers Act 1975 (Cth) (Act). This follows its 25 February 2015 options paper entitled “Strengthening Australia’s Foreign Investment Framework”. Comments on the new options paper are sought by 29 May 2015.
The proposed changes are perhaps the most ambitious changes to Australia’s foreign investment framework since the Act was first legislated in 1975 and represent a major gear shift from the February option paper.
The ambition is embedded in the following aspects of the options paper:
- the desire to integrate the FIP in the Act such that the FIP becomes more a guidance document rather than a document detailing substantive policy and law;
- the removal of anomalous provisions of the foreign investment framework including within the Act itself; and
- updating the legislation to reflect current administrative practices of the Foreign Investment Review Board (FIRB).
There are also a number of changes, which we welcome, which ought encourage investment in Australia through a more transparent regime with higher investment thresholds.
Key highlights of the options paper include:
- harmonisation with the 20% relevant interest takeovers threshold (the current substantial interest concept being 15%);
- incorporation of foreign government investor rules into the legislative framework;
- abolition of the heritage listed commercial developed property threshold (currently non indexed at $5 million);
- modernisation of the “moneylending exemption”;
- a new exemption for underwriting by foreign financial institutions;
- raising the threshold for non-sensitive developed commercial property from $55 million to $252 million; and
- adjusting the framework so that exemptions apply regardless of whether an investment is direct or indirect and irrespective of transaction structuring.
Despite the extraordinarily short consultation period, the changes, if implemented, will bolster the Federal Government’s pro investment “open for business” agenda.
However, given that the changes are largely legislative and potentially contentious, the Senate may have other ideas.
Please note the deadline for comment on these proposals is 29 May 2015 and we seek your input for our submission.
The options paper can be accessed here.