This week has seen new developments in the regulation of foreign investment in Australia. The Foreign Investment Review Board (FIRB) has released an updated Foreign Investment Policy which now includes the rules for acquiring rural land in Australia. In addition, the Department of Treasury recently released an options paper titled “Strengthening Australia’s Foreign Investment Framework” which sets out, amongst other things, proposals by the Government to amend foreign investment laws to introduce application fees and strengthen the penalties provisions. 

In this alert, Senior Associate Lea Fua looks at some of the key points arising from this development. Lea also spoke with Board Room Radio about the proposed changes. The interview can be heard here.  

Updated FIRB Foreign Investment Policy 

The new rule recently announced by FIRB in relation to investments in rural land requires foreign investors to seek prior FIRB approval for the acquisition of an interest in rural land where the cumulative value of the rural land held by the foreign investor, including prior acquisitions, will exceed $15 million. The new rule provides that an interest in rural land includes a direct interest, or an interest indirectly held, for example, where a foreign person acquires a substantial interest in a company in which more than 50% of the assets are made up of rural land. 

The threshold regarding the acquisition of interests in rural land is contained in FIRB’s Foreign Investment Policy which was updated on Monday 1 March 2015. While the Foreign Investment Policy does not have the force of law, FIRB expects that foreign investors will comply with the policy and indeed this is what happens in practice. 

The rule change regarding foreign investment in rural land in the Foreign Investment Policy will likely be in place until the relevant amendments to the Foreign Acquisitions and Takeovers Act1975 (Act) are introduced by the Government. This has been flagged in the Options Paper  released by the Treasury Department at the end of February, in which it is indicated that the Government is looking to introduce into the Act a definition for the terms ‘agricultural land’ and ‘agribusiness’, which are currently not defined.

Proposed changes to Australia’s foreign investment framework 

The Department of Treasury released an Options Paper titled “Strengthening Australia’s Foreign Investment Framework” at the end of February, 2015. This is a consultation paper seeking stakeholder input on a number of changes that the Government is proposing to the Act. 

These changes, which have received significant media attention since the release of the paper, include proposals to introduce FIRB application fees and strengthen the penalties against breaches of the Act. In addition, the Government is also proposing to:

  • Create a dedicated compliance and enforcement unit to be located within the Australian Taxation Office to monitor and detect non-compliance with Australia’s foreign investment rules;
  • Change the rules around advanced off-the-plan certificates granted to property developers by limiting the value of all apartments that can be bought by a single foreign investor to $3 million in any single development. Foreign investors who wish to purchase apartments above this value will need to seek separate approval from FIRB and will not be able to rely on the advance off-the-plan certificate granted to the developer; and
  • Introduce changes to foreign investment rules to create a separate requirement to seek approval for the acquisition of agricultural land and agribusinesses. This will also involve the creation of a foreign ownership register that will collect information on existing foreign ownership and subsequent transactions of all interest in agricultural land from 1 July 2015. 

Introduction of application fees 

Currently, FIRB does not charge any fee to assess an application from foreign investors. The Government is proposing to change this and charge application fees for all foreign investment applications, including:

  • For rural and residential land acquisitions – the Government is proposing a fee of $5,000 for properties valued at less than $1 million, and $10,000 for properties valued at more than $1 million plus a further $10,000 for each additional $1 million in value; and
  • For business acquisitions – the Government is proposing a fee of $25,000 to acquire commercial real estate or to acquire a business in non-sensitive sectors, and $100,000 for business including agribusiness acquisitions where the value of the target’s assets is in excess of $1 billion. 

Stronger penalties for non-compliance 

The Government is looking to introduce tougher pecuniary and criminal penalties into the Act to deter non-compliance. Foreign investors who acquire a residential property without approval and come forward voluntarily will be liable to a penalty of $2,040 for individuals and $10,200 for companies. Foreign investors who are identified through the Government’s compliance activities will be liable to pay $10,200 for individuals and $51,000 for companies. Non-compliant foreign investors will also have to pay the application fee and it is not yet clear whether this will attract any interest. 

Third parties who assist a foreign investor to breach the rules, such as advisors and real estate agents, will also attract penalties which will include a civil penalty of $42,000 for individuals and five times that amount for companies. The penalty in Australia for knowingly assisting a person to commit a criminal offence will be an $85,000 fine, 2 years imprisonment, or both. 


The Government’s rationale for the introduction of the fees stated in the Options Paper is that the cost of administering Australia’s foreign investment framework should not be borne by the taxpayer, and the fees introduced will be used to fund screening, compliance, enforcement and improved data collection. However, there has been swift criticism, particularly in relation to the likely impact of the fees on the property market. The Property Council of Australia has already publicly stated that while it does not object to the introduction of application fees, they believe that the level of the fees being proposed is excessive and could have an adverse impact on the property market. There is also concern at the impact of the changes on property auctions if foreign investors need to get approval for any auction they bid at.  The Government has indicated that they are looking into how to minimise the impact of the changes in this regard. 

The proposed fees are set at a level that may impact on the investment decisions of foreign investors. For example, a foreign investor wishing to acquire a business in Australia will need to factor into its costs the $25,000 fee to FIRB regardless of the value of the business, unless the assets are worth more than $1 billion, in which case the foreign investor would be looking at the higher fee of $100,000. 

The new civil and criminal penalties are significant enough that they are likely to have a positive impact on compliance. It is also significant that third parties such as advisors will also be liable for penalties where they have knowingly assisted in the breach by the foreign person. 

The Government is seeking public submissions on the proposed changes to the foreign investment rules and submissions are due by 20 March 2015. HopgoodGanim will be assessing the proposed changes and its potential impact on its clients. We will keep you informed on the progress of these proposals and the final proposed amendments once the public consultation process has been completed.