In our March article, we outlined the Government’s proposed changes to Australia’s Foreign Investment Policy with the aim of strengthening the integrity of the foreign investment framework. These proposed changes related to application fees and penalties.
On 2 May 2015 the Government confirmed these changes will be made, and they will take effect from 1 December 2015.
The Government has also proposed a new definition of ‘agribusiness’ and ‘agricultural land’ which will likely be introduced at a later date.
The current policy framework has remained largely remain unchanged. The following changes will be made to improve compliance, enforcement, administration and data collection.
Application Fees
Currently there is no fee applicable for applications to the Foreign Investment Review Board (FIRB). From 1 December 2015, application fees will be introduced for all foreign investment applications. The applicable fee will depend on the proposed acquisition. We have set out a table below for ease of reference.
Residential Real Estate
| Proposed Acquisition | Application Fee payable |
| Property valued at $1 million or less | $5,000 |
| Property valued at greater than $1 million | $10,000 plus an additional $10,000 per additional million in property value |
Business, Commercial Real Estate and Agriculture
|
Proposed Acquisition |
Application Fee payable |
| Developed commercial property (incl heritage listed property) | $25,000 |
|
Vacant commercial land |
$10,000 |
|
Business acquisitions valued at $1 billion or less |
$25,000 |
|
Business acquisitions valued at greater than $1 billion |
$100,000 |
|
Rural land valued at less than $1 million |
$5,000 |
| Rural land valued at $1 million or greater |
$10,000 plus an additional $10,000 per additional million in property value (capped at $100,000) |
|
Agribusiness acquisitions valued at $1 billion or less |
$25,000 |
|
Agribusiness acquisitions valued at greater than $1 billion |
$100,000 |
Fees are payable before the application is processed. Application fees will be indexed by the CPI on 1 July annually.
Penalties for Breaching the Act
From 1 December 2015 existing criminal penalties will be increased, divestiture orders will be supplemented with civil penalties. The Treasurer noted that companies and individuals are under investigation for possible breaches of the foreign investment rules.
Third Party Penalties
There will be civil and criminal penalties introduced for breaches of the foreign investment rules by third parties who assist foreign investors to breach the rules – ie. real estate agents, accountants, solicitors, associated entities. A company could be liable for a civil penalty of up to $212,500 and an individual, up to $42,500. It could also constitute a breach under Section 11.2 of the Criminal Code Act 1995 (Cth).
Reduced Penalty Period
The Government has announced a reduced penalty period for foreign investors who voluntarily disclose possible breaches of the foreign investment rules for residential real estate. This disclosure period is only until 30 November 2015. Voluntary disclosure will receive the benefit of reduced penalties. For example, you may receive a longer divestiture order of 12 months, and may not be subjected to criminal prosecution.
Agribusiness
From 1 December 2015, a $55 million threshold (based on the value of the investment) for investments in agribusiness will be introduced.
The proposed definition of agribusiness will include:
- Primary production businesses (generally those within Division A of the Australian and New Zealand Standard Industrial Classification Codes); and
- Certain first stage downstream manufacturing businesses (including meat, poultry, seafood, dairy, fruit and vegetable processing and sugar, grain and oil and fat manufacturing).
Agricultural Land
The lower $15 million cumulative screening threshold for agricultural land was implemented on 1 March 2015. Currently, agricultural land has the same meaning as “rural land”.
The Government will introduce a clearer definition that better captures ‘productive’ agricultural land. Agricultural land will be defined as: land used, or that could be reasonably used, for a primary production business. (Primary production business is defined under the Income Tax Assessment Act 1997.
The effect of this broader definition will be that more rural properties are captured, and will be subjected to the new lower threshold of $15 million (cumulative).
Key Outcomes for You
If you or your Company is a foreign investor (as defined by the Act), you should consider whether FIRB approval is required at an early stage of any proposed transaction, and factor in costs and timeframes. All purchase agreements should contain a condition that the contract is subject to FIRB approval.
If you are involved at any stage in the assistance of a foreign investor acquiring an Australian property or business, you should ensure that the investor is complying with Australian foreign investment policies and legislation.
If you are a foreign investor in the Australian agricultural sector, you should ensure you familiarise yourself and key employers with the new thresholds for agribusiness and rural land, as well as the proposed new definition of “agricultural land”.
Katrina Palmer of our office advises on foreign investment in Australia. If you would like advice on whether your proposed acquisition requires FIRB approval or on making the application itself, please contact Katrina on (08) 9324 8590 or This email address is being protected from spambots. You need JavaScript enabled to view it..