Investing in Australia? Here’s what you need to know about Australian FDI in 2024

What does the new FIRB world look like? 

The new year brings another evolution of the FIRB landscape.

It is well known that the FIRB landscape is constantly shifting in open and not so open ways.  A lot has changed even since last year’s commencement of the flawed Register of Foreign Ownership of Australian Assets (Register).  

Before we get into the detail of the recent changes in the FIRB world, the key takeaways are:

FIRB must be a consideration for the whole of an investment’s life.

You must be aware of:

1. your FIRB approval requirements
2. your conditions and ongoing reporting requirements
3. your registration requirements (even if a FIRB approval was not required)
4. your obligation to update the register of any changes including disposal

Now, to the detail – what has changed recently? What do you need to know?

Here is a snapshot of the recent FIRB changes 

An increase to certain monetary thresholds - occurs annually on 1 January

• agricultural land threshold remains at A$15m (cumulative)
• foreign government investor threshold remains at $0
• general mining and production tenement threshold remains at $0
• residential and vacant commercial land threshold remains at $0
• National security business and land remain at $0

Filing fee indexation and changes

• filing fees increased by 7% on 1 July 2023 to align with inflation
• filing fees will be indexed again on 1 July 2024
• residential land filing fees will triple for purchases of established homes
• commercial land filing fees will apply for eligible Build to Rent projects

More attention on private equity and investment structures and more regulatory alignment

• the need to coordinate tax, competition and FIRB regulatory analysis grows
• private equity investment is attracting greater scrutiny from FIRB and the ATO, with more detailed tax information disclosures required and more intrusive tax conditions imposed
• greater scrutiny on investment holding and offshore structures
  

The Register of Foreign Ownership of Australian Assets continues to confuse

• Difficulties registering on the system remain commonplace
• Throughout the life of a transaction, investors must be wary of registrable events, including the need for full asset stocktakes when an Australian entity becomes a ‘foreign person’ for FIRB purposes despite never needing to consider FIRB before
• Investors are expected to actively comply with the complicated rules, with a short 30-day period to register
• Treasury’s foreshadowed compliance action in 2024 could include monitoring the timeliness of register notices

Alongside these changes, a new foreign investment website was also released, with new guidance notes.  The new website can be accessed here.

To give credit where it is due, before the lead up to the December-January holidays period, the FIRB has improved processing times for non-sensitive applications.  Whilst not quite the FIRB’s claimed median of 37 days, the average times we are seeing for non-sensitive applications are in the 2 to 3 month bracket and getting closer to 2 months which is welcome.  Unfortunately, what has not changed is the lengthy processing times for proposals that raise even the most minor of sensitivities giving rise to enormous frustration for many investors as applications incur many deadline extensions that put significant pressure on commercial timing.  The holiday backlog also does not appear to have cleared completely and continues to delay applications, including non-sensitive ones. 

What’s Missing?

The Treasurer’s surprise announcement of an interfunding exemption in last year's Budget has yet to see the light of day.  Whilst ultimately narrowly focussed, the interfunding exemption will be welcomed by Superannuation and Life Funds that invest on behalf of Australian members.  The long requested amendment to mirror the land exemption for Superannuation (properly defined) and Life Funds for business acquisitions unfortunately remains in the basket of reform requests. 

An update to the Guidance regarding subdivisions and amalgamations is long overdue but also remains a distant hope. 

A better way for FIRB to accept and process application by investors that regularly make applications.  There are investors that have invested in Australia for decades and are significant contributors to the Australian economy yet face the same delays and complexities as a new investor.