Foreign investment reforms

The Federal Government has announced comprehensive changes to the foreign investment rules.

Draft legislation will be released for consultation in July 2020.

The changes follow temporary changes made to the foreign investment rules on 29 March 2020, in response to the COVID-19 pandemic, which have been extended to 1 January 2021.

If passed, the new legislation will commence on 1 January 2021 with the objectives of protecting Australia’s national security and ensuring compliance with FIRB approval conditions.

The Australian Treasury has issued a document that provides the new legislation will:

‘Sensitive national security business’

  • introduce a ‘sensitive national security business’ definition, which will include any business dealing with sensitive data concerning Australia’s national security and/or defence and businesses and land near installations that hold such information.


  • restore the temporary $0 thresholds to pre-29 March 2020 levels; and
  • introduce the ability for the Federal Treasurer to review any investment by a foreign person in a ‘sensitive national security business’ via the new ‘national security test’ even where the value of the investment falls below the monetary thresholds.

‘National security test’

  • introduce a ‘national security test’, which will empower the Federal Treasurer to:
    • impose conditions on, or block, any investment by a foreign person on national security grounds, regardless of the value of investment;
    • require mandatory pre-acquisition notification of any direct investment (being 10% or in a position of control) by a foreign person in a ‘sensitive national security business’, regardless of the value of the investment;
    • require mandatory pre-starting notification where a business or entity owned by a foreign person starts carrying on the activities of a ‘sensitive national security business’, regardless of the value of the investment;
    • allow any investment that would not ordinarily require notification to be “called in” (before, during or after acquisition) for time-based screening on national security grounds;
    • allow investors to voluntarily notify to receive investor certainty from “call in” for a particular investment or apply for an investor-specific time-limited exemption certificate; and
    • impose new or further conditions, vary existing conditions, or, as a last resort, require the divestment of any realised approved investment where national security risks emerge.

Exempt certain non-sensitive investments

  • exempt certain investments made by entities currently classified as ‘Foreign Government Investors’ (FGIs) where no FGI has, or could have, influence or control over the investment, operational decisions of the entity or any of its underlying assets.

New powers

  • enact new powers, including:
    • monitoring and investigative powers (similar to those used by other regulators), including access to premises and information gathering;
    • give directions to investors with respect to non-compliance with FIRB conditions or breaches of the foreign investment rules;
    • increased civil and criminal penalties;
    • expanding the infringement notices regime;
    • with respect to an investment that was originally made in breach of the foreign investment rules, where the interest has subsequently been transferred to another foreign person by will or by operation of law; and
    • accept enforceable undertakings from a foreign person to manage non-compliance, or to give weight to commitments a foreign person made at the time of applying, for a no objection notification or a time-limited exemption certificate.

Specific changes to the current foreign investment framework

  • make the following specific changes to the current foreign investment framework:
    • a foreign person will need to seek further approval where they want to increase an actual or proportional holding (above that previously approved) – for example, through a share buyback;
    • the current moneylending exemption will not apply where a foreign money lender obtains any interest in a ‘sensitive national security business’ under a moneylending agreement;
    • a foreign person will need to seek approval for any acquisition of an interest from Commonwealth, State or Territory governments or local government bodies to perform government services or functions associated with privatisation programs that may raise national security risks;
    • extend the beneficial ownership tracing rules for companies and trusts to unincorporated limited partnerships; and
    • a foreign person, who is a parent or spouse of an Australian resident, will need to seek foreign investment approval prior to the purchase of Australian land where they provide money to their Australian family member for the purchase, other than by way of a gift.

Information sharing

  • create a new Register of Foreign Ownership and allow the Federal Government to share foreign investment information across government agencies, and internationally where national security considerations are present.

Fees and other amendments

  • ensure the fees charged continue to cover the costs of administering the foreign investment system;
  • streamline and enhance the investor experience; and
  • improve the readability of existing provisions, rectify inconsistencies and unintended consequences, and address feedback from investors seeking greater certainty.


  • increase the criminal penalties:
    • for individuals, the current penalty of $157,000 will increase to $3.15 million and the prison term will increase from 3 years to 10 years; and
    • for corporations, the current penalty of $787,500 will increase to $31.5 million.

We await the draft legislation for review during the consultation period.  It is hoped the new legislation will strike a balance between meeting the stated objectives of the new legislation and maintaining an appropriate level of foreign investment in Australia.

If you have any queries or would like further information about this article, please contact:

Daniel Morgan
M: 0438 436 968

Hugh McCracken
Senior Associate
T: (03) 6235 5128

Published: 18 June 2020

Copyright © 2023 Page Seager. Privacy Statement Privacy Policy Page Seager Commitments and Policies