Reforms to strengthen and streamline the FIRB regime

By Andrew Wong, Wendy Rae, Jeremy Low, Jessica Choong
Critical Minerals Dealmakers & Investors Foreign Investment Review Board (FIRB) Mergers & Acquisitions Private Capital Private Equity

Announcement of FIRB reforms 10 min read

On 1 May 2024, the Australian Treasurer announced reforms to the Foreign Investment Review Board (FIRB) framework, to make it stronger, more streamlined and more transparent. On the same day, the Government released an updated Foreign Investment Policy document, setting out the reforms.

In this Insight, we outline and comment on the reforms.

Key takeaways

  • The reforms will largely be implemented via changes to the Australian Government's FIRB policies, processes and resources, rather than through immediate legislative changes (other than for the interfunding exemption).
  • No fast-track application process is proposed. However, there will be streamlined FIRB assessment processes for lower-risk foreign investment proposals. Treasury will adopt a new performance target of processing 50 per cent of investment proposals within the 30-day statutory decision period from 1 January 2025.
  • Lower-risk sectors are identified as manufacturing, professional services, commercial real estate, new housing and mining of non-critical minerals.
  • Sensitive sectors, where investment proposals will be subject to greater scrutiny, are identified as including critical infrastructure, critical minerals, critical technology, investments in proximity to sensitive Australian Government facilities, and investments that involve holding or having access to sensitive data sets.


The key objective of the reforms is to ensure that a risk-based approach is undertaken in administering the FIRB regime. According to the Treasurer's announcement, they will 'make Australia a more attractive place to invest, boost economic prosperity and productivity, while strengthening our ability to protect the national interest in an increasingly complex economic and geostrategic environment'.

As stated in the updated Foreign Investment Policy document (the Updated Policy), the risk-based approach 'will focus scrutiny on high-risk investments to protect our national interest, while streamlining low-risk investments to bring in the capital Australia needs quickly'.

The reforms will largely be implemented via changes to the Australian Government's FIRB policies, processes and resources, rather than through legislative changes.

In our view, the reforms are, on the whole, a positive development and long overdue. The FIRB legislative framework is already set up to facilitate risk-based assessments, so one might query why the reforms are needed. The fact, however, is that since the major overhaul of the FIRB regime in 2015, many low-risk investors and low-risk investments have been subject to a disproportionate level of scrutiny, which has resulted in lengthy screening times and burdensome conditions. An express commitment by the Government to implement a risk-based approach is therefore welcomed.

The reforms are set out and discussed below.

Reforms to strengthen the FIRB regime

1. More robust, efficient and effective arrangements to scrutinise complicated or higher-risk proposals

The Government's proposal to increase resources in Treasury (see below) is welcomed. But it will also be necessary to put in place more efficient processes and resources at the various government consult agencies, not just Treasury. This is because FIRB's assessment process involves consultation with these agencies and, in our experience, extended assessment periods have often been due to 'bottlenecks' at the government consult agency level, rather than at Treasury level.

In terms of the identification of risks, the Updated Policy states that:

  • changes to the international security environment and rapid technological change have increased risks to Australia’s national security from foreign investment;
  • foreign investment carries risks related to the potential access and control investors may obtain over sensitive organisations and assets such as critical infrastructure assets, which may provide opportunities for espionage, sabotage or other activities contrary to Australia’s national security interests; and
  • additional scrutiny is also required in sectors where there are supply chain resilience concerns; where there is a need to protect sensitive data, technology or capabilities; or where the concentration of ownership is a factor.

In relation to supply chain resilience concerns, we expect that the Australian Government's Office of Supply Chain Resilience (which sits within the Department of Industry, Sciences and Resources) will be consulted more often in FIRB assessments. This could result in more extensive use of FIRB approval conditions that ensure security of supply. The Treasurer has flagged that FIRB will be especially attentive to a supply chain that may be 'dominated by a foreign investor, where there's the capacity to manipulate that supply chain or to interfere with it in one way or another'.1

2. Greater scrutiny of, and more resources allocated to, screening of foreign investment in critical infrastructure, critical minerals, critical technology, those that involve sensitive data sets, and investment in close proximity to sensitive Australian Government facilities

In our experience, there is already extensive scrutiny of investment proposals in these areas. Interestingly, there are no stand-alone mandatory FIRB approval triggers in the FIRB legislation relating to the 'critical minerals' or 'close proximity defence sites'. We expect that there will be legislative revisions to include critical minerals as critical infrastructure assets and therefore bring them into the mandatory FIRB approval net. In the meantime, or alternatively, it may be that the Treasurer intends to exercise his call-in power more often where investment proposals fall within those categories, and where the proposal is not otherwise subject to a mandatory approval trigger or been voluntarily notified (see below).

Investment proposals in critical minerals are assessed on a global basis, and not merely by reference to the target's Australian operations. This is because the availability or lack thereof of critical minerals globally impacts Australia.

3. Bolstering the FIRB compliance team to better monitor and enforce the conditions to FIRB approvals – including by upping Treasury’s capacity to undertake on site visits

There has already been a significant increase in the FIRB compliance team's monitoring and enforcement activities in the past couple of years, no doubt facilitated by increased resources allocated to compliance. However, there is a perception on the part of foreign investors that compliance activities can sometimes overly focus on contraventions that were inadvertent or pose no obvious national security risks. In keeping with the Treasurer's risk-based approach, we encourage compliance activities to focus on contraventions that could result in material adverse national security or national interest consequences.

The suggestion that Treasury's capacity to undertake more on-site visits would be increased is an interesting one. As noted in the Government's Compliance Framework Policy Statement, Treasury already has legislative power, under the Regulatory Powers (Standard Provisions) Act 2014 (Cth), to enter premises (either by consent or by court-issued warrant) and exercise monitoring powers to determine whether the FIRB legislation is being complied with and that information provided by applicants is correct. It is likely that Treasury will seek to exercise these powers more often.

4. The FIRB compliance team will also support the use of the Treasurer's call-in power to review investments that come to pose a national security concern in time

This suggests that the Treasurer intends to exercise his call-in power more often. The number of instances of the call-in power having been exercised to date is not published, but in our experience, there have not been many. We expect this to change, such that the call-in power will be exercised more often.

5. Making sure that foreign investors pay their fair share of tax, which includes releasing updated guidance about tax arrangements that will attract greater scrutiny – such as those that are overly complex

The Updated Policy states that additional scrutiny will be applied to foreign investment proposals with certain tax characteristics likely to be considered higher risk, including:

  • internal reorganisations or other intragroup transactions that may represent initial steps of a planned broader arrangement resulting in avoidance of Australian tax;
  • pre-sale structuring of Australian assets that present risks to tax revenue on disposal by private equity or other investors;
  • the use of related party financing arrangements to reduce Australian income tax or avoid withholding tax (noting the recent strengthening of Australia’s thin capitalisation rules); and
  • facilitation of migration of assets (eg intellectual property) to offshore related parties in jurisdictions with effective low taxation.

The Government's attention to these areas has already been reflected in more expansive tax conditions in various FIRB approvals over recent months.

The Updated Policy also states that a particular focus is on investments that are structured through effective low or no tax jurisdictions where there is limited relevant economic activity taking place. The Australian Taxation Office (the ATO) has previously expressed views on structuring through such jurisdictions (eg Tax Determination TD 2010/20 and Practice Statement Law Administration (PS LA) 2020/2). The Updated Policy signals an increased focus by the ATO on these issues, with an expectation that foreign investors justify the adoption of particular acquisition structures.

According to the Treasurer's announcement, Treasury will publish more detail and public guidance on its approach to foreign investment and tax integrity over the coming months.

6. Working across Government to ensure the foreign investment settings can better deal with emerging risks and are aligned with other regulatory frameworks

According to the Treasurer's announcement, this will include work to ensure the Security of Critical Infrastructure Act 2018 (Cth) (the SOCI Act) is robust and capable of responding to risks. We are hopeful that this will result in greater alignment between Treasury and the Cyber and Infrastructure Security Centre in terms of how to ascertain whether an asset constitutes a critical infrastructure asset, given that impacts whether a target business is or carries on a national security business for the purposes of the FIRB approval rules.

The Treasurer's announcement also stated the Government will work to enhance energy network security, better manage and monitor investments close to defence sites, and ensure the Government has the right settings when it comes to its critical minerals strategy and critical technologies more broadly. This could result in further updates to the SOCI Act, or related regulations, to include critical minerals and critical technologies as critical infrastructure assets.

Streamlining measures

7. Streamlining measures to provide faster approvals for known investors that are making investments in non‑sensitive sectors, and that have a good compliance record

The Updated Policy states that:

'The Government is streamlining consultation and assessment on foreign investment proposals, to enable low-risk capital to flow quickly. A stronger risk-based approach will mean lower risk investments will be assessed faster and approvals received more quickly. Streamlined consultation and assessment of lower risk investment proposals will also allow Treasury to direct focus and resources toward more rigorous assessment of higher risk investment proposals, supporting effective and efficient processing for these applications.

This approach will be informed by the investor (who), the target of their investment (what), and the structure of the transaction (how).'

There are numerous foreign investors, including foreign government investors, who regularly invest in Australia and pose no risk to Australia's national interest, yet are often subject to lengthy screening times and burdensome conditions. While the Government has not identified any specific investors who will benefit from the streamlining measures, it is expected that sovereign wealth funds and private equity firms from Five Eyes alliance countries who are repeat investors in Australia and with a strong compliance record are likely to satisfy the 'who' criteria.

In addition, the application paperwork for repeat investors will be reduced. Where an investor's ownership structure has not changed since their previous FIRB application and if this is advised to Treasury early in an application process, then the investor will not need to provide duplicate information on matters such as ownership structures.

The Government has not disclosed any target processing timeframes for applications eligible for streamlined assessments. We hope that the vast majority of these should be able to be decided within the initial statutory timeframe of 30 days, given that only investments in non-sensitive sectors can be subject to streamlined assessment. It should not be necessary for these applications to require consultation with national security agencies, which tend to take longer than other agencies to provide feedback to Treasury.

8. Treasury will adopt a new target of processing 50 per cent of investment proposals within the initial statutory timeframe of 30 days from 1 January 2025

The Updated Policy provides that most foreign investors will see an improvement in the speed of processing from 1 July 2024, as Treasury works to increase the number of investment proposals processed within the statutory decision period.

We are hopeful that Treasury will work to maximise the number of business investment proposals that can be processed within 30 days. Anecdotally, many of the FIRB applications that are currently being processed within 30 days relate to high-volume, low-risk commercial or residential land proposals. What is really needed is a significant reduction in assessment periods for business investment proposals. If that can be achieved, it would be a welcome throwback to the FIRB regime of 20 years ago, when the vast majority of business investment proposals were approved within 30 days.

9. Incentivising early applications and greater participation of foreign capital in our economy by providing a fee refund for foreign investment applications that were unsuccessful in a competitive bid process

This reform will address a significant and frequent issue in high-value competitive bid processes, where many foreign bidders are reluctant to submit a FIRB application before being shortlisted or becoming the preferred bidder because of the requirement to pay a high application fee that is not refunded if the bidder is not successful. To date, FIRB's fee guidance note has provided that fees will generally not be waived or remitted if a bidder is unsuccessful. While the guidance note goes on to state that an unsuccessful bidder can apply to have their fee credited to a subsequent application, this does not provide any certainty to bidders. We assume the FIRB fee guidance note will be updated to reflect the new policy.

10. Releasing draft regulations to exempt interfunding transactions from foreign investment approval processes, to make it easier for institutional investors to manage their portfolios

The draft regulations and explanatory statement were released on 1 May 2024. According to the draft explanatory statement, interfunding refers to transactions between investment entities (such as unit trusts) that are managed by the same responsible entity or a related responsible entity. The draft regulations will amend the FIRB legislation to exempt interfunding transactions from mandatory FIRB approval requirements. Submissions on the draft documents are due by 31 May 2024.

11. Allowing foreign investors to purchase established Build to Rent properties to build demand and incentivise construction of new projects, and applying lower application fees to this type of investment

This is a welcome development and is a natural progression of the measure announced by the Treasurer on 10 December 2023 that the commercial land FIRB application fee thresholds will apply to all Build to Rent Projects after 14 December 2023.

12. Removing unnecessary regulatory duplication in the assessment of competition issues through our merger reforms

The Updated Policy provides that, from 1 January 2026, as part of recently announced reforms to Australia’s merger control system, information provided to the ACCC on competition issues by foreign merger proponents will mostly be sufficient for the consideration of competition issues under the foreign investment framework, and this will reduce regulatory duplication. We are hopeful that this will also allow FIRB approvals to be received ahead of Australian Competition and Consumer Commission (the ACCC) approvals where applications do not otherwise raise any national interest or national security issues. At present, FIRB approvals can be significantly delayed while the ACCC assessment is completed.

13. Clarifying that PALM employers can buy established residential properties for their PALM employees to support our agricultural workforce

The Updated Policy provides that in rural and regional areas, where labour supply is tight, Pacific Australia Labour Mobility (PALM) employers will be able to buy established residential properties for their PALM workers, and this will support Australia’s agricultural workforce.

Increased transparency

14. Transparency on timing

The Updated Policy provides that Treasury will improve transparency in communicating to investors when they can expect longer timeframes in the assessment of investment proposals – eg when they involve high tax risks or a proposed investment is in close proximity to a sensitive Australian Government facility.

In our experience, Treasury already has a practice of informing applicants if they can expect a lengthy assessment period. The issue, however, is that Treasury is rarely able to provide guidance on when a decision can be expected, often because many extended assessment periods have sometimes been due to 'bottlenecks' at the government consult agency level, and Treasury cannot control the timing of responses from consult agencies.

Guidance for faster FIRB assessments

While the Government will not establish a fast-track application process, the processing times will be reflective of whether a FIRB application is considered to be low risk or high risk. According to the Updated Policy, 'lower risk investments will be assessed faster and approvals received more quickly' and 'This approach will be informed by the investor (who), the target of their investment (what), and the structure of the transaction (how)'.

Having regard to the Updated Policy and our experience, we consider that all of the following criteria need to be satisfied to maximise the prospects of an application being considered low risk and subject to faster processing (and all of the following should, to the extent possible, be clearly set out in the FIRB application).

The 'Who'

  • The applicant has a strong track record of compliance with the FIRB regime and other Australian laws. We consider this would include compliance with conditions in previous FIRB approvals. We consider that in respect of a private equity or other investment management firm, Treasury will likely consider the compliance record of all funds under the firm's management.
  • The applicant is a repeat investor who is well known to Treasury, investing alone and not in a consortium with unknown investors. We consider it unlikely that a fund managed by a private equity or other investment management firm will be considered a repeat investor merely because that investment firm manages other funds that are repeat investors.
  • The applicant is genuinely passive in nature, and can demonstrate no control or influence over the target entity, business or land. In our view, this indicates that investment proposals to acquire a controlling interest in a target are unlikely to benefit from faster processing. If that is the Government's intention, this would greatly reduce the number of transactions that can benefit from streamlined assessment.

The 'What'

  • The target entity, business or land is in a non-sensitive sector, such as manufacturing, professional services, commercial real estate, new housing and mining of non-critical minerals.
  • The target entity, business or land is not near sensitive Australian Government facilities. However, we note it is not clear what constitutes 'near', and in many cases it is not possible to ascertain if a site is or houses a sensitive Australian Government facility.

The 'How'

  • The ownership structure of the acquirer is clear, and the application clearly articulates who will ultimately control the target entity, business or land once the proposed transaction is complete. We expect this excludes acquirers who are unable to present their full ownership structure at the outset, due to ongoing investor fundraising or incomplete co-investment workstreams.
  • The simpler the transaction structure, the more likely the application is to be processed faster.

Address the national interest considerations

  • The application addresses the national interest considerations (to the extent applicable): national security, competition, taxation, consistency with other government policy, impacts on the economy and community, the character of the investor, and specific considerations relating to agricultural land, residential investment and foreign government investors. We consider that, in particular, the application should include competition and tax-related submissions that are expected to be sufficient for the ACCC (until the 1 January 2026 commencement of the new ACCC regime) and ATO to provide feedback to Treasury without needing to ask any detailed follow-up questions. For instance, the competition submissions should cover all applicable horizontal, vertical and conglomerate elements, and the tax submissions should provide responses to ATO's commonly asked questions

Next steps

If you would like to discuss the issues raised in this Insight, please contact the team below.


  1. 'The Hon Dr Jim Chalmers MP Interview with Patricia Karvelas', RN Breakfast ABC (1 May 2024) Interview with Patricia Karvelas, RN Breakfast, ABC | Treasury Ministers