Recently, I visited the US, talking to clients and members of Russell Kennedy’s international alliance of law firms, Ally Law.
One of the strongest messages I heard was that international clients are still eager to invest in Australia. Australia’s sound record of economic growth, strong regulatory system, business environment and quality of life make it an attractive, low-risk environment for international investors. At the end of 2015, the total value of foreign investment in Australia was $3.0 trillion.
Where does foreign investment come from?
The top 5 countries investing in Australia, as at the end of 2015, are:
- USA ($860.3 billion accumulated stock, or 28.4% of the total)
- United Kingdom ($499.9 billion or 16.5%)
- Belgium ($238.5 billion or 7.9%)
- Japan ($199.6 billion or 6.6%)
- Singapore ($98.6 million or 3.3%)
Source: Department of Foreign Affairs and Trade ‘ Which countries invest in Australia?’, 2015
Where do Australian investors look globally?
By contrast, it is also interesting to consider where Australian investors look globally. The total value of foreign investment from Australia was over $2.1 trillion by the end of 2015. The top 5 countries where Australia invests are:
- USA ($594.4 billion accumulated stock or 28.6% of the total)
- United Kingdom ($353.2 billion or 17%)
- New Zealand ($98.7 billion or 4.7%)
- Japan ($93.2 billion or 4.5%)
- China ($70.2 billion or 3.4%)
Source: Department of Foreign Affairs and Trade ‘ Where does Australia invest?’, 2015
National security and foreign investment: a tougher climate
Although Australia presents an attractive foreign investment option, national security concerns mean that foreign investors may soon face greater investment hurdles in some sectors. The federal government has flagged a possible clampdown of foreign investment in key infrastructure such as transport, ports and energy.
Additionally, a new federal body, the Critical Infrastructure Centre, overseen by the Attorney-General, may be given ‘last resort’ powers that could allow it to take control of privately owned communications, food and finance assets in emergency situations. Under these proposed changes, the Critical Infrastructure Centre would also decide in conjunction with the Foreign Investment Review Board which assets cannot be subject to foreign investment.
Budget 2017: foreign investment changes
In the recent budget, the federal government also made several announcements relevant to foreign investors.
- For property developers, there will be a new 50 per cent cap on the total number of dwellings that can be sold to foreign persons. This change will apply to applications made after 7.30pm 9 May 2017.
- There will be a new annual vacancy charge for foreign residential property owners where the property is not occupied or on the rental market for at least 6 months a year.
- The application fee for foreign purchase of residential property valued at less than $10 million will increase by 10 per cent. This revenue will fund the founding of the Critical Infrastructure Centre mentioned above.
- The government is also putting forward a further suite of amendments designed to streamline the approval process for multiple low risk transactions, and simplify the commercial fee framework.