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8 July, 2017
Greater transparency and guidance for foreign investors
What you need to know
With effect from 1 July, new guidance notes have been published and the Foreign Acquisitions and Takeovers Amendment (Exemption and Other Measures) Regulations 2017 amends the Foreign Acquisition and Takeover Regulations 2015 (Cth) (Regulations).
These changes aim to streamline the operation of Australia's foreign investment framework by simplifying and reducing the regulatory burden on foreign investors.
What you need to do
Be aware that the changes to the Australian foreign investment framework are already in effect.
Watch for our more detailed analysis of the amendments to the Regulations, expected later this month.
Overview of key changes
Introduction of new exemption certificates to streamline processing of multiple transactions
Exemption certificates were previously only available for the acquisitions of land and land entities, mining and exploration tenements and interest acquired through underwriting. A new exemption certificate has been introduced, which allows the acquisition of interests in the assets of an Australian business and/or securities in an entity (including interests acquired through the business of underwriting).
The exemption certificate permits a single application to be made for the acquisition of multiple interests, instead of making separate notifications in respect of each proposed action. It is expected that this exemption certificate will be suited to large investment funds, particularly those with low risk foreign government investors.
Applications will be considered on a case by case basis, with the relevant factors being the investor type, nature and scale of the proposed investment and duration of the certificate sought.
What about commercial residential?
In these latest suite of changes, the question of whether residential premises that have a commercial use are residential or commercial land for the purposes of notification under the legislation has been clarified. The good news for investors, particularly those interested in the alternative asset classes of student accommodation, aged care facilities and retirement villages, is that acquisitions of an interest in residential premises that have a commercial use are now subject to the developed commercial land screening thresholds ($55 million or $252 million, depending on the nature of interest in the land being acquired).
Solar and wind farms
The Regulations have been amended to clarify the treatment of land used or intended to be used as a solar or wind farm. From 1 July 2017, land that contains a wind or solar power station is considered to be developed commercial land rather than vacant commercial land where the wind or solar power station is on the surface of the land.
Where the land is yet to be developed as a solar or wind farm, it may be considered to be either agricultural land or developed commercial premises depending on the status of approvals in place for its use as a solar or wind farm.
The difficulty with airspace
The difficulty with prescribed airspace being sensitive developed commercial land, was that it required notification of an acquisition of any interest above $55 million, and this captured many of the commercial buildings in the CBD area of capital cities. The recent changes clarify that notification to FIRB will not be required for an acquisition of land in prescribed airspace unless the land meets one of the other criteria of the lower (sensitive land) thresholds or the value of the land exceeds $252 million.
Foreign government investors
As the one action of investment can comprise a number of notifiable actions, the previous view was that this potentially required separate notifications. In order to streamline the notification process, FIRB has updated its guidance notes with effect from 1 July to make it clear that the acquisition of a direct interest in a consortium vehicle to effect the purchase of an asset (which is notifiable) does not separately need to be notified.
Also, where a foreign government investor establishes a consortium vehicle to start an Australian business where the foreign government investor already carries on the same business in Australia, notification to FIRB will not be required.
Other changes to FIRB
Other legislative reforms include restoring the custodian holdings exemption, increasing global acquisition thresholds so as to reduce the regulatory burden for the offshore global transactions and changes to the fees framework.
For more details, head to firb.gov.au and watch out for our detailed update due later this month.
For further information, please contact:
Vivian Chang, Partner, Ashurst
vivian.chang@ashurst.com
