Australia is to make permanent some of the tighter restrictions around foreign investment that it initially introduced on a temporary basis because of the coronavirus pandemic.
In what it has billed as the “most comprehensive reforms” to Australia’s foreign investment rules since they were introduced in 1975, the federal government said that it will introduce legislation to create a new national security test to assess all investments regardless of value in sensitive sectors.
The sensitive sectors that will be captured by this test include several infrastructure asset classes such as energy generation, ports, telecommunications and data centres.
Current regulations assess more broadly whether foreign investments are in the national interest, which includes considerations around national security. The new test will be applied to investments that specifically raise national security concerns, or for investments in sensitive sectors that would fall below existing monetary thresholds for assessment.
Different value thresholds previously applied depending on the sector and the nature of the investor, while a A$0 threshold applied to any entity classed as a foreign government investor, such as public pension funds or sovereign wealth funds.
For acquisitions in sensitive businesses, which include infrastructure assets such as telecommunications and transport, the threshold previously stood at A$275 million ($191 million; €169 million).
This threshold will now be lowered to A$0 in sensitive sectors such as those covered by the new rules, with all bids to be screened by Federal Investment Review Board.
The screening process will apply to existing businesses with foreign ownership interests that move into areas of national security concern.
The treasurer will also have new powers to call in any investment, either before, during or after the investment process, if FIRB was not previously notified and the treasurer considers that it raises national security concerns.
“To ensure investors have certainty, the use of this ‘call in’ power will be time-limited and public guidance will be issued on the type of investment where the ‘call in’ power could be used. This will provide investors with greater certainty and will further inform their decision whether to voluntarily notify,” Treasury said.
The government will also introduce a “national security last resort review power” allowing it to reassess approved foreign investments where subsequent national security risks emerge. This would allow the treasurer to impose conditions, vary existing conditions, or as a last resort require divestment of foreign interests in a business, entity or land. This power will not be retroactive and will only be able to be applied to investments made after the legislation of the new rules.
The government said it will publish draft legislation outlining the new rules in July, after which will follow a six-week consultation period. It then intends to introduce a bill to Parliament with commencement of the rules scheduled for 1 January 2021.
In March this year, the government introduced temporary rules to review all proposed foreign investments into the country, regardless of their value or investor type. Investments in non-sensitive sectors like agriculture will revert to regulations that existed before the temporary rules were introduced.
In a statement, FIRB chairman David Irvine said: “The Foreign Investment Review Board fully supports the changes to the foreign investment review framework announced today by the Treasurer, having been closely engaged in their development over a long period.
“This is a significant package of reforms that will put Australia’s foreign investment review framework on a stronger and more sustainable footing. The package appropriately addresses increasing risks to the national interest whilst ensuring Australia remains welcoming and open to foreign investment.”