Under the Foreign Acquisitions and Takeovers Act 1975 (the "FATA"), foreign investors acquiring investments in Australia may require approval from the Foreign Investment Review Board ("FIRB"). The compliance requirements and potential delays are sometimes seen as disincentives to invest in Australia.

Earlier this week, the Treasurer announced changes that will relax the relevant exemption thresholds applicable to acquisitions of Australian businesses (including acquisition of shares). It is believed that these changes may increase capital in-flows into Australia.

Entities dealing with or advising on merger and acquisition transactions should take note of the proposed changes.

The proposed changes are set out in the table below:

Current Thresholds

Proposed Thresholds
  • Foreign Investor –Interest in an Australian business
    $100 million (not indexed).
  • The four lowest thresholds for private business investment will be replaced with a single threshold of 15 per cent in a business worth $219 million. This means private foreign investment in Australian businesses below $219 million can proceed without review.
  • The threshold will be indexed on 1 January each year.
  • Foreign Investor – Offshore Takeover
    $200 million (not indexed).
  • US investors only - Sensitive sector acquisition
    $110 million (indexed).
  • US Investors only – Offshore Takeover
    $219 million (indexed).
  • US Investors only – Interest in an Australian business
    $953 million (indexed).
  • A threshold of $953 million for investments in non-sensitive sectors will apply (indexed on 1 January each year).
  • Foreign Investor – establishing a new business
    $10 million (not indexed).
  • Abolished. This will hopefully expedite the establishment of new businesses in Australia to drive jobs and economic growth.

Please note that there are existing thresholds that apply to acquisitions of commercial non-residential real estate properties which will continue to apply. There are also existing restrictions applicable to acquisition of residential properties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.