Federal Treasurer, Jim Chalmers has announced that the Federal Government will introduce new reforms aimed at strengthening Australia’s foreign investment network.
Mr Chalmers said that the renewed framework would work better for investors, the economy and Australia’s national interest.
“By providing more clarity around sensitive sectors and assets, our reforms will give businesses and investors greater certainty, while safeguarding our national security.
“Foreign investment has a key role to play in our economy but only if it’s in our national interest.
“We are ensuring our framework can evolve to respond to the changing global and economic environment we face,” Mr Chalmers said.
The reforms are aimed at making Australia a more attractive place to invest, boosting economic prosperity and productivity and strengthening the Federal Government’s ability to protect the national interest in an increasingly complex economic and geostrategic environment.
This risk‑based approach to reviewing foreign investment proposals is hoped to make Australia’s foreign investment framework stronger, more streamlined and more transparent:
Stronger
- More robust, more efficient and more effective arrangements to scrutinise complicated or higher risk proposals
- More resources to screening foreign investment in critical infrastructure, critical minerals, critical technology, those that involve sensitive data sets, and investment in close proximity to defence sites, to ensure that all risks are identified, understood and can be managed – balancing economic benefits and security risks
- Bolstering the foreign investment compliance team to better monitor and enforce the conditions put on the transactions, including an increase in the Treasury’s capacity to undertake onsite visits
- Ensuring foreign investors pay tax, including releasing updated guidance about tax arrangements that will attract greater scrutiny
- Working across government to ensure foreign investment settings can better deal with emerging risks and are aligned with other regulatory frameworks. This is expected to include work to ensure the Security of Critical Infrastructure Act is robust and capable of responding to risks; enhancing energy network security; better managing and monitoring investments close to defence sites and ensuring the correct settings when it comes to the critical minerals strategy and critical technologies more broadly
More streamlined
- Streamlining the processing regime to provide faster approvals for known investors making investments in non‑sensitive sectors that have a good compliance record. This is expected to reduce wait times and compliance costs
- Treasury will consider the investor, the target of their investment and the structure of the transaction in assessing whether an application is low risk
- Consultation timeframes will be shortened for these applications
- Reduced paperwork for repeat investors, where the ownership information hasn’t changed since their previous foreign investment application and this is advised to Treasury early in the process
- Treasury is expected to adopt a new target of processing 50 per cent of cases within the initial statutory timeframe of 30 days from 1 January 2025
- Foreign investment will be facilitated by:
- Incentivising early applications and greater participation of foreign capital in Australia’s economy by providing a fee refund for foreign investment applications that were unsuccessful in a competitive bid process
- Releasing draft regulations to exempt interfunding transactions from foreign investment approval processes to make it easier for institutional investors to manage their portfolios
- Allowing foreign investors to purchase established Build to Rent properties to build demand and incentivise construction of new projects
- Removing regulatory duplication in the assessment of competition issues through merger reforms
- Clarifying that PALM employers can buy established residential properties for their PALM employees to support Australia’s agricultural workforce
More transparent
- To support the changes and improve transparency, the government has released an updated foreign investment policy document outlining the new risk‑based approach in more detail, including information on which sectors will attract more enhanced, effective and efficient screening, plus the new fast‑track process which will take effect from July 1 2024
- Treasury will publish more detail and public guidance on its approach to foreign investment and tax integrity
Mr Chalmers said that Australia is an attractive destination for foreign investment, with investment flowing into Australia, consistently outpacing the Organisation for Economic Co-operation and Development (OECD) average since 2006.
Direct and portfolio foreign investment in the Australian economy grew to be worth approximately $3.5 trillion in 2023.
Mr Chalmers said, “Our economic plan is all about addressing inflation and cost of living pressures, at the same time as we build a more productive, dynamic and resilient economy – and to do this we need to better attract and facilitate investment that is in Australia’s national interest.”
Industry response
The Mineral Council of Australia (MCA) welcomed the announcement to renew Australia’s foreign investment framework, stating that it is critical that Australia’s minerals sector remains internationally competitive to attract the foreign investment needed to build the new mines and processing infrastructure required for the future.
The MCA said that the reforms are an important step towards the recommendations it has long advocated for.
“The Treasurer’s plan to streamline the FIRB processing regime, increase the efficiency of approvals, and enhance transparency mirrors the MCA’s longstanding call for a more dynamic and less burdensome regulatory environment, particularly in the critical and strategic minerals sector.”
The MCA said it is encouraged by the government’s commitment to accelerate foreign investment in low-risk critical minerals, critical technology and related projects from known investors and that the reforms are a promising step toward mitigating the challenges in the framework and enhancing Australia’s attractiveness as a prime destination for global capital in the mining sector.
However, the MCA said that the reforms must be coupled with domestic reforms that drive productivity growth to increase the competitive advantage of investing in Australia.
“It is essential to maintain the provision that allows investors to neutralise the Treasurer’s call-in power by voluntarily notifying of reviewable actions. This measure is crucial for reducing risk and increasing predictability for foreign investors.”
The MCA said that continuing to explore ways to integrate mining and minerals processing into the clean energy supply chains of strategic partners is essential for strengthening the ability to protect the national interest in an evolving and complex global landscape.
“By addressing these critical areas, the government can not only assist the mining industry but bolster the national economy by ensuring it remains competitive and well-positioned to capitalise on global shifts in markets for clean energy and advanced technologies.”
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