Foreign investment issues

Investment restrictions

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

There are significant and complex restrictions on foreign ownership of Australian companies or assets, including mining and petroleum tenements and land. Approval from the Foreign Investment Review Board (FIRB) is required for a wide range of transactions. If approval is not granted and the transaction proceeds, the Treasurer has powers to impose penalties or to make an order that the transaction be unwound or that the asset be disposed of. Whether FIRB approval is required for a transaction can be a technical question, and applying for an approval will often incur significant fees.

However, there is a broad exemption for financiers. The restrictions do not apply to acquisitions of entities and land for the purposes of securing payment obligations under a moneylending agreement, or on enforcement of that security. Additional rules apply in respect of security over residential land: the financier must be registered as an authorised deposit-taking institution (ie, a bank) in Australia or licensed outside Australia as a financial institution, and be listed on a stock exchange or have at least 100 holders of its securities. There are also limits on how long a security holder who is a foreign government investor can hold an interest post-enforcement of security.

The FIRB regime has different thresholds for classes of transaction. Acquisitions under these thresholds may not require FIRB approval. For ‘agreement countries’, these thresholds are higher and so capture a wider spread of transactions. Current agreement countries are Canada, Chile, China, Japan, Korea, Mexico, New Zealand, Singapore, the United States and - if the Trans-Pacific Partnership comes in force - Vietnam. There is no need for any particular registration for investors from these countries to take advantage of the higher thresholds. However, the increased thresholds do not apply where the acquisition is made by a subsidiary incorporated elsewhere, the acquirer is a foreign government investor or the target of the acquisition is in a sensitive sector. These assessments are complex and should be made on a case-by-case basis.

Insurance restrictions

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

Any person wishing to carry on an insurance business in Australia must be authorised by the Australian Prudential Regulation Authority whether conducting business directly or through an insurance agent or broker, and regardless of whether the person or company holds an authorisation in an overseas jurisdiction. There is a limited exemption to enable insurance business that cannot be appropriately placed in Australia to be provided by an unauthorised foreign insurer. Products for managing financial risk may be subject to financial services regulation and licensing requirements.

Non-resident insurers with no principal office or branch in Australia may be taxed on a deemed taxable income based on gross premium derived under an insurance contract from the insurance of property situated in Australia or the insurance of an event that can only happen in Australia. In certain circumstances, the insured person and any person in Australia acting on behalf of the insurer can become personally liable to pay this tax.

Worker restrictions

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

There are a number of restrictions on bringing in foreign workers to work on Australian projects. Foreign workers must hold a valid and appropriate visa to work in Australia (including on offshore resources projects), and are subject to Australian employment laws. Employers can sponsor foreign workers for either temporary or permanent visas. Significant recent changes have occurred in the temporary visas space. The Temporary Skill Shortage (TSS) visa was introduced in March 2018 and abolished the commonly used 457 visa.

There are two main streams available under the new TSS visa programme:

  • Short-term stream - this is for employers to source genuine temporary overseas skilled workers in occupations included on the Short-term Skilled Occupation List for a maximum of two years (or up to four years if an international trade obligation applies).
  • Medium-term stream - this is for employers to source genuinely temporary overseas skilled workers in occupations included on the Medium and Long-term Strategic Skills List or the Regional Occupation List for a maximum of four years, with eligibility to apply for permanent residence after three years.

Temporary visas are available only to workers in a specified list of occupations (there are currently 508 occupations eligible). In addition, employers may first be required to demonstrate they have sought to employ an Australian citizen in the role. Labour market testing will apply to all occupations nominated under the TSS visa programme unless an exemption applies under Australia’s international obligations.

Visa applicants must be under the age of 45 (unless an exemption applies), clear a criminal records check, demonstrate English language proficiency, and demonstrate at least two years of relevant work experience. Under the TSS programme, employers will be subject to undertake a ‘non-discriminatory workforce test’ to ensure that Australian workers are not being actively discriminated against, pay minimum Australian market salary rate and contribute more towards training Australian workers.

Equipment restrictions

What restrictions exist on the importation of project equipment?

Australia offers a straightforward and undemanding platform for importation to the country. There is no general requirement for an importing entity to hold a licence for importation. The import of certain goods may be prohibited or restricted, but this is unlikely to be relevant to project equipment.

The Australian Border Force must clear all goods imported into Australia whether they are imported by air, sea or post. All goods imported with a value of more than A$1,000 must be cleared by submitting a completed import declaration form and paying any duty, goods and services tax and other taxes and charges that may apply. Goods with a value equal to or less than A$1,000 generally do not attract duty or tax.

Any equipment to be used in Australia must also comply with Australian standards and relevant codes of practice.

Nationalisation laws

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

Australia is a low-risk jurisdiction for nationalisation or expropriation of project companies and assets. All levels of government in Australia may compulsorily acquire land where necessary for certain public purposes. They are obliged to pay compensation for the land, generally based on the value of the land acquired. There has been no nationalisation of project companies in Australia in recent history.