Our readers may have already read our "Doing Business in Australia" series of articles posted before. Recently quite a few relevant facts and policies have been updated. Hence we have produced a new version. You will be able to receive the updated articles about "Doing Business in Australia" in the coming weeks.

Foreign Investment

The Australian Government’s foreign investment policy is implemented through Commonwealth legislation, namely the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).

Under the FATA, the Foreign Investment Review Board (FIRB) assesses proposals and provides advice to the Federal Treasurer who is responsible for administering the regulations and approving foreign investments that fall within the jurisdiction of the FATA.

The FATA applies to investment proposals by foreign interests. A foreign interest includes a natural person not ordinarily resident in Australia and a corporation in which either a natural person not ordinarily resident in Australia, or a foreign corporation, has a controlling (substantial) interest.

A substantial foreign interest in an Australian corporation, business or trust is recognised as a holding of 15% or more by a single foreign interest and any associates, or holdings of 40% or more in aggregate by two or more foreign interests and any of their associates (whether or not connected to each other). Substantial interests are traced so that if a substantial interest is held in another corporation or trust, then that second corporation or trust is also deemed to be a foreign interest. Section 5 of FATA also sets out other relationships which will be regarded as being associated.

Whether an investment by a foreign interest must be notified to FIRB depends on the nationality of the investor, the industry sector in which the investment is to be made and the value of the investment. Examples of these thresholds as at March 2015 are as follows:

• acquisition of a substantial interest of an existing Australian entity that is valued at A$252 million. For non-government US, Chilean, Japanese, Korean and New Zealand investors, the value threshold is A$1,094 million or A$252 million for making an investment in a prescribed “sensitive sector”, which includes:

- media

- telecommunications

- transport

- training or human resources

- military or defence force goods, equipment or technology

- encryption and security technologies and communications systems

- uranium, plutonium or nuclear facilities.

• takeovers of offshore companies whose Australian subsidiaries or gross assets are valued at more than A$252 million

• all direct investments by foreign governments or their agencies, irrespective of size (which includes all state-owned enterprises or SOEs)

• acquisitions of interests in urban land (including interests that arise via leases, financing and profit sharing arrangements and the acquisition of interests in urban land corporations and trusts) that involve acquisition of:

- developed non-residential commercial real estate where the property is valued at A$55 million or more (or A$1,094 million for US, Chilean, Japanese, Korean and New Zealand investors) or if subject to a heritage listing, valued at A$5 million or more

- accommodation facilities, valued at A$55 million or more (or A$1,094 million for US, Chilean, Japanese, Korean and New Zealand investors)

- vacant real estate, irrespective of value

- residential real estate, irrespective of value

- shares or units in Australian urban land corporations or trust estates, irrespective of value.

• acquisitions from 1 March 2015 of Australian agricultural land valued at more than A$15 million – down from A$252 million previously (Nb. At the date of publication, these changes have been proposed but not yet implemented and so it remains unclear if an ‘acquisition’ means a 100% acquisition, or acquisition of a controlling interest, or something less. It is also not clear if this revised threshold will relate only to freehold title or will also include leasehold and other proprietary interests).

Funding arrangements that include debt instruments having quasi-equity characteristics will be treated as direct foreign investment.

In August 2014, negotiations for a historical free trade agreement between China and Australia (ChAFTA) were concluded. The ChAFTA, which is expected to be signed in 2015, generally provides Chinese investors with greater access to Australian assets and projects (whereby private Chinese investors will have the standard FIRB notification and approval threshold increased from A$248 million to A$1,087 million, in line with Australia’s free trade agreements with the US, Japan, South Korea and New Zealand. Agricultural land over A$15 million will face foreign investment review scrutiny, as will agribusinesses over A$53 million and all investment proposals by state owned enterprises.

Foreign investment applications may be conducted through the online Foreign Investment Notification System. Some acquisitions involve lodging a statutory form together with certain additional information. A 30 day examination period as well as a 10 day notification period applies to applications once they are formally lodged with FIRB. FIRB loses its ability under FATA to block or impose conditions on a transaction once this time period has elapsed. However for more complex proposals, the examination period can be extended for up to 90 days.

Generally, approval is granted unless the proposal is judged to be contrary to the national interest. An approval is valid for 12 months from the date it is granted.

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To view our previous news for Chinese investors and various articles in relation with the topic ‘Doing business in Australia’, please click the button on the upper-right hand corner on our WeChat platform, and choose ‘view history’. The contents include:

• Business set up in Australia, business structures,company administration, etc.

• Background information of Australia, including Australian government, legal system, and business structures, etc.

• Laws and regulations in various common areas, including protection of technology and intellectual property, anti-trust and consumer law, contract law, business migration, real property, public takeovers, and electronic commerce etc.