General: Australian entities and business (not land rich or agricultural)
3.1 Do any special tests apply?
Before applying the general rules as to when FIRB approval is needed to acquire a stake in an Australian entity or business, you must first ensure that none of the special rules apply (there are many). If the transaction relates to the agricultural sector, land‑rich entities, media, mining, or oil and gas, consider the rules explained in paragraphs 3.4, 4, 5 and 7. If the acquirer is a foreign government investor, see paragraphs 1.5 and 1.6.
3.2 Acquisitions of securities and businesses: general thresholds
If no special rules apply:
the acquisition by a foreign person of a direct interest (generally 10% plus) in a target’s securities or in the assets of a business is a notifiable national security action if the target operates, or the business is, a ‘national security business’ (see paragraph 3.3), and in such cases a nil monetary threshold applies;
the acquisition by a foreign person of a substantial interest (20% plus) in a target’s securities is both a notifiable action and a significant action if the target does not operate a national security business and the target is:
an Australian corporation carrying on an Australian business;
an Australian unit trust; or
a holding entity of either of them,
and the target is valued above the thresholds in the table below; and
INVESTOR: FTA Country investors – An entity that is an enterprise or national of an FTA Country (see paragraph 1.7) but excluding:
acquisitions by their subsidiaries incorporated elsewhere, including Australia
foreign government investors; and
acquisitions of targets which are or operate a national security business (see paragraph 3.3) or which are sensitive (see paragraph 3.4)
Threshold: $1,216 million, indexed annually
INVESTOR: FTA Country investors – where the target is carrying on a sensitive business
Threshold: $281 million, indexed annually
INVESTOR: Foreign persons other than foreign government investors
Threshold: $281 million, indexed annually
Where target is an entity, the higher of:
the total asset value for the entity; and
the total value of the issued securities of the entity
Where target is a business and proposed action is acquisition of interest in assets of business – the value of consideration for the acquisition
Where target is a business and proposed action is entry into or termination of significant agreement – total value of assets of the business
subject to (a), each of the following is a significant action (but not also a notifiable action):
the entry into an agreement relating to the affairs of one of the entities mentioned in (b), or the alteration of a constituent document of one of those entities, such that senior officers are subject to instruction or direction by a foreign person that holds a substantial interest (20% plus) in the entity’s securities; and
the acquisition by a foreign person of interests in the assets of an Australian business or entry into or termination of a significant agreement with an Australian business which is valued above the thresholds in the table above and which results in the foreign person controlling the business (and for this purpose a person has ‘control’ where they are in a position to determine the policy of the business in relation to any matter).
each of the following is a reviewable national security action (and in each of these cases a nil monetary threshold applies):
the acquisition by a foreign person of a direct interest (generally 10% plus) in a target’s securities; and
the acquisition by a foreign person of any interest in the assets of an Australian business, as a result of which:
the person has a direct interest (generally 10% plus) in the business;
the person will be in a position, or more of a position, to influence or participate in
the central management and control of the business; or
the person will be in a position, or more of a position, to influence, participate in or determine the policy of the business.
Once a foreign person (with associates) holds a 20% plus stake or 10% plus stake (as applicable), any further acquisition of securities will require a new FIRB approval where the applicable monetary threshold is exceeded, unless an exemption applies.
There is no exemption for internal reorganisations even if they do not cause any change in ultimate ownership.
3.3 National security businesses
A ‘national security business’ is generally one which is involved in or connected with a ‘critical infrastructure asset’, telecommunications, defence or a national intelligence community (of either Australia or a foreign country), or their supply chains.
However, a business is only a ‘national security business’ if it is publicly known, or could be known upon the making of reasonable inquiries, that the business meets the criteria for being a national security business.
‘Critical infrastructure asset’ has the meaning given in the Security of Critical Infrastructure Act 2018 (Cth) (SOCI Act) – currently defined to cover critical assets in electricity, gas, water and ports sectors. It is proposed that the SOCI Act will be amended to cover critical assets in 11 additional sectors: communications, data storage and processing, defence industry, financial services and markets, food and grocery, higher education and research, healthcare and medical, transport, energy, space technology, and water and sewerage.
3.4 Sensitive businesses, media, and financial sector companies
The FATR defines sensitive businesses to include media, telecommunications, transport, and various military applications. Those businesses simply trigger the lower threshold for FTA Country investors shown in the table in paragraph 3.2 (though note the proposed changes to the SOCI Act - see paragraph 3.3). However, the FATR also creates special rules for media and certain finance sector companies.
Any acquisition of 5% or more in an Australian media business is deemed to be both a significant and a notifiable action, and therefore requires FIRB approval.
An exception applies so that the FATA does not apply to an acquisition of an interest in shares in a financial sector company within the meaning of the Financial Sector (Shareholdings) Act 1998 (Cth). A ‘financial sector company’ is an Authorised Deposit‑taking Institution (ADI), an authorised insurance company, or a holding company of an ADI or an authorised insurance company. ‘Authorised insurance company’ includes insurers under the Insurance Act 1973 (Cth) and life insurers under the Life Insurance Act 1995 (Cth). Investments in financial sector companies are not regulated by the FATA – rather, approval is required under the Financial Sector (Shareholdings) Act 1998 (Cth). The relevant threshold for both foreign and domestic acquirers under the Financial Sector (Shareholdings) Act 1998 (Cth) is 20%. Foreign government investors do not benefit from this exception, so that the FATA applies to transactions relating to ADIs and authorised insurance companies in addition to the Financial Sector Shareholdings Act 1998 (Cth).
Agribusinesses are also subject to a range of specific thresholds and rules as explained in paragraphs 5 and 6.
3.5 Passive increases
Passive percentage increases in an Australian company or Australian unit trust (eg as a result of non-participation in a share buy-back, capital reduction or unit redemption) can in certain circumstances constitute the acquisition of an interest in securities of an entity and therefore can constitute a notifiable action, significant action, notifiable national security action or reviewable national security action if the other conditions to such types of actions are met, except in relation to:
passive increases of an existing substantial interest or direct interest;
the foreign government investor ‘direct interest’ rules; and
the rules regarding Australian land entities.
Where a passive increase constitutes a notifiable action or notifiable significant action, the relevant foreign person must make a notification to FIRB within 30 calendar days after the increase.
3.6 Exemption certificates for securities and business acquisitions
The Treasurer has the power to issue exemption certificates allowing foreign persons to undertake multiple acquisitions of Australian businesses and securities in Australian entities without having to obtain individual approval for each transaction (including where the transaction would otherwise be a notifiable national security action or reviewable national security action).
The Government has indicated that exemption certificates are intended for foreign persons with a high volume of investments. In practice, exemption certificates are often granted to large investment funds, particularly those with low-risk foreign government investors and investors who intend to make a series of passive investments in sectors or industries that are typically not considered sensitive from a national interest perspective.
Applications for exemption certificates are considered on a case-by-case basis to ensure they are not contrary to the national interest. Examples given by the Government of where the grant of an exemption certificate would be considered contrary to the national interest are: the program of proposed acquisitions is not well defined by an applicant and the scope is very broad; national interest factors cannot be adequately assessed at the time of the application; the program of investment is not considered to be ‘low risk’ or ‘low sensitivity’ and do not raise national security issues; and the potential tax risks cannot be adequately assessed at the time of the application.
An exemption certificate will generally specify the period during which acquisitions can be made. While a period of 12 months will often apply (and is the default period for first time exemption certificate holders), certificates can be issued for shorter or longer periods depending on the circumstances. However, periods exceeding 12 months are generally granted only for investors that have a demonstrated compliance history with exemption certificates.
Foreign persons that are not foreign government investors benefit from an exemption allowing Australian governments (whether Commonwealth, state or territory), their wholly owned entities and entities established for a public purpose to privatise any Australian business that they carry on, or to dispose of any interest in land, without the acquirer needing to obtain FIRB approval.
However, this exception does not apply in relation to the following:
An acquisition of an interest by a foreign government investor (that is, the FATA applies to any action of a foreign government investor to acquire interests through an Australian government privatisation or asset sale process, if the action is a significant action, notifiable action, notifiable national security action or reviewable national security action under the FATA).
An acquisition of an interest in Australian land that is ‘national security land’ (see paragraph 4.1), or if the interest is, or includes, an interest in any of the following types of infrastructure: public infrastructure (an airport or airport site, a port, infrastructure for public transport, electricity, gas, water and sewerage systems), existing and proposed roads, railways, inter-modal transfer facilities that are part of the National Land Transport Network or are designated by a state or territory government as significant or controlled by the state or territory, telecommunications infrastructure and nuclear facilities.
An acquisition of an interest in a national security business.