Major FIRB changes - all foreign purchaser transactions now require FIRB approval

On 29 March 2020, the Treasurer announced a temporary policy change towards foreign investment in Australia. 

For any transaction entered into on or after 10:30pm Sunday, 29 March 2020 and involving a foreign person (see definition below) the purchaser must get Foreign Investment Review Board (FIRB) approval – regardless of monetary value.

For those experienced with FIRB, the application process is time consuming and expensive. The application fee is commensurate with the value of the transaction. While the Government has announced that commercial deadlines will be taken into account when assessing applications, they have already extended the statutory deadline to six months and no announcement has been made in respect to application fees.

One implication is in respect to leasing. Under the Foreign Acquisition and Takeover Act 1975 (Cth) (FATA), an acquisition in land includes the grant of a lease for longer than five years, but with the previous monetary thresholds the majority of long term commercial leases did not require FIRB approval. As yet, no announcement has been made in respect to leases, however given the policy reasons behind these temporary changes it would be no surprise if leases will require FIRB approval.

That said, the situation is changing rapidly, so please ensure you keep up to date with the latest information.

If you require further information or advice, please contact a member of our Real Estate team.

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Definitions 

Under the Foreign Acquisition and Takeover Act 1975 (Cth) (FATA) a foreign person is defined as:

a) an individual not ordinarily resident in Australia; or

b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

f) a foreign government; or

g) any other person, or any other person that meets the conditions, prescribed by the regulations.

The previous monetary thresholds (see table below) will apply to any transaction entering into prior to 10:30pm 29 March 2020.