Announcement of reforms 16 min read
On 19 May 2026, the Australian Treasurer announced extensive reforms to the Foreign Investment Review Board (FIRB) framework and released a reforms overview paper. The stated purpose is to further streamline and strengthen the FIRB framework, building on the reforms in May 2024. Unlike the reforms made two years ago (see Allens Insight), which were implemented largely via changes to policies and processes, the reforms this time will largely be effected via legislative amendments. No exposure draft legislation has been released and no timeframe specified. Given the breadth and complexity of the proposed changes, exposure draft legislation is unlikely before late 2026 at the earliest.
In this Insight, we outline and comment on the reforms.
Key takeaways
- The proposed expansion of the associate definition, the introduction of a non-ownership call-in power, and bolstered anti-avoidance provisions will create significant deal and compliance risk. These changes will require close attention when the exposure draft legislation is released.
- While some low-risk transactions may no longer require FIRB approval, new mandatory approval requirements will be introduced for investments in certain (as yet unidentified) sectors.
- The Exemption Certificates regime will be expanded so that certain low-risk investors may be exempt from aspects of the FIRB framework altogether, including potentially not being treated as a foreign person and being exempt from certain reporting obligations.
- Reporting to the Register of Foreign Ownership of Australian Assets will be reduced for acquisitions of interests in entities and businesses.
- The notification-only pathway for low-risk investments proposed in the October 2025 Discussion Paper will not be introduced. Instead, low-risk transactions will be subject to a 30-day decision-making target, alongside measures to exempt certain investments from FIRB approval requirements altogether.
Introduction
The Government's plans to reform the FIRB legislative framework were first foreshadowed on 31 October 2025 with the release of a Discussion Paper seeking stakeholder views.
According to the reforms overview paper, 'Stakeholders overwhelmingly supported streamlining reforms for low-risk investments, faster assessments, more certain and simpler rules, and less duplicative obligations. Stakeholders also supported strengthening reforms which are proportionate to risk, clear and predictable.'
Consistent with that, the reforms are intended to reduce the regulatory burden for foreign investors (particularly proponents of low-risk transactions), whilst giving the Government more powers to identify, manage and respond to high-risk investment and serious non-compliance.
Nevertheless, foreign investors should be aware that the Government's proposals to:
- expand the associate definition to cover relationships of influence, such as lending arrangements (see #4 below);
- expand the call-in power to cover non-ownership forms of control, such as offtake agreements and lending arrangements (see #5 below); and
- bolster the anti-avoidance provisions (see #6 below),
could give rise to significant deal and compliance risk, and will require close attention in the exposure draft legislation.
The key reforms are described and examined below.
Strengthening of FIRB legislation
1. Expanding conditions to pre-acquisition period and introduction of statutory undertakings
Under the current legislation, conditions imposed in a NON or EC only operate if and when the relevant foreign person undertakes an action in reliance on the NON or EC. The Government will expand the Treasurer's ability to impose conditions. New conditions might require a foreign investor to do or not do something before, when, or after an acquisition is undertaken.
The Government will also enable the Treasurer to accept statutory undertakings from applicants or third parties to mitigate identified risks as a supplement to the use of the strengthened conditions power. Under the current legislation, the Treasurer can only impose conditions on persons who are undertaking 'actions' that are subject to the FIRB legislation.
The Government considers that strengthened conditions and undertakings will enable mitigation of some risks that currently are not manageable, allowing investments that may currently be subject to prohibition to proceed. There are situations where the use of undertakings will be more appropriate than conditions, but we would be concerned if the Government uses undertakings to achieve policy outcomes vis-à-vis non-applicants.
2. More powers for Treasurer to make orders and directions
The Government will give the Treasurer power to issue targeted and flexible orders and directions. For example, disposal orders might specifically exclude particular entities from acquiring the disposed interests, and prohibition orders might take effect more quickly in high-risk situations.
The Government states that these changes will restrict investors’ ability to circumvent the intention of the orders and directions and enable the Treasurer to more quickly address risks to the national interest and national security. No doubt the Government is thinking of the multiple disposal orders the Treasurer has made with respect to shares acquired by various investors in Northern Minerals Limited. The latest orders are available here.
In our view, the Government should also consider giving the Treasurer power to take ownership of and sell shares and other assets that are the subject of a disposal order, in circumstances where the person subject to the order has failed to do so by the required time. An analogy is the vesting of shares in the Australian Securities and Investments Commission where a person has breached the takeovers rules in the Corporations Act 2001 (Cth).
In addition, the Government will allow a single infringement notice to cover multiple alleged breaches, and will expand the range of contraventions to which tiers of infringement notices can be applied. The Government says this will enable proportionate deterrence with appropriate infringement notices for a wider range of contraventions of the FIRB legislation.
3. Expanding approval requirements in sensitive sectors
The Government will expand mandatory notification and approval requirements for investments in current and emerging sensitive sectors, and which can give rise to high national security risks. No sectors have been named. and the Government says it will consult government and industry on the details.
That said, we expect that at the very least investments in critical minerals entities and businesses will become subject to mandatory notification and approval requirements. In addition, it may be that investments in data centres businesses and land will trigger approval requirements, even if the acquirer is not considered a direct interest holder or responsible entity of a critical data storage or processing asset. We say this because the Government's updated Foreign Investment Policy (released on 19 May 2026) says 'Investments must also be consistent with the Government’s wider policy objectives…For example, for investments into data centres, the National AI Plan sets out the Australian Government’s expectations of data centres and AI infrastructure developers. The Australian Government will prioritise proposals aligned with the expectations where possible, consistent with the risk-based approach under the foreign investment framework.'
The Government will also expand mandatory notification and approval requirements for mining tenement acquisitions, it being noted that some currently fall outside current notification requirements. We anticipate this could involve acquisitions of interests in certain mining companies to trigger a mandatory approval requirement, irrespective of value. It could also involve mandatory approval requirements for acquisitions of mining tenements that are not mining leases. We would be concerned if the acquisition from government exemption no longer applies to the grant of new mining leases to non-FGI foreign persons.
Under the current legislation, the types of acquisitions that trigger a mandatory notification and approval requirement are fixed and can only be expanded by amending legislation. The Government will confer power on the Treasurer to declare that investments in certain sensitive sectors will become subject to mandatory approval requirements. This will be achieved 'though a new legislative tool'.
4. Expanding the associate definition
The Government will expand the definition of 'associate' to include relationships where a person is capable of exercising influence (including persons with debt arrangements that allow the exercise of influence). The Government says this will allow better mitigation of risks arising from third parties linked to a foreign investor via a relationship of obligation or control which is outside the current definition.
Given the associate definition is already quite broad at present, a further broadening could result in many types of relationships (such as customer or supply contracts) being considered to confer influence on a counter-party and therefore result in an association.
5. Addressing non-ownership forms of control
Under the current legislation, the call-in power can only be exercised in respect of a foreign person vis-à-vis an entity where the person acquires some form of equity interest in the entity or is in a position to veto board or shareholder resolutions of the entity.
The Government will enable the Treasurer to call-in for review non-ownership commercial arrangements that could pose national security risks through foreign control without ownership, such as offtake agreements and lending arrangements. The Government says this power would be used rarely and would not be intended to interfere with the ordinary course of business, and would not materially impact on the vast majority of transactions.
This is a conceptually novel extension of a call-in jurisdiction which goes beyond anti-avoidance. Care needs to be taken to ensure that the legislative amendments indeed do not capture ordinary course lending arrangements and other ordinary course of business agreements.
6. Bolstering the anti-avoidance provision
Under the anti-avoidance provision in the current legislation, investors are only considered to have avoided the application of the legislation if avoidance is the 'sole or dominant purpose' of their conduct. The Government considers this to be a relatively high threshold and suggests that it will lower the threshold.
Currently, a person who engages in avoidance is not subject to any criminal or civil penalties. The Treasurer can only make a disposal order, and cannot impose any penalties. The Government says it will align the anti-avoidance provision with other anti-avoidance frameworks to better deter persons from avoidance behaviour to appropriately penalise avoidance conduct. It therefore appears that avoidance of the FIRB legislation could result in criminal and/or civil penalties.
While the Government says it will distinguish avoidance behaviour from ordinary professional advice and legitimate transaction structuring, when bundled with the foregoing proposed changes to the associate definition and non-ownership forms of control, these changes could give rise to significant transaction uncertainty.
7. Improving the utility of the last resort power
The Government will modify the last resort power so that it is more accessible. The Government considers that currently the last resort power imposes too high a bar in circumstances where the Treasurer seeks to impose new conditions, prohibit an acquisition or partially unwind an acquisition. The existing high bar will remain where the Treasurer seeks to issue a disposal order.
To our knowledge, the Treasurer has not utilised the last resort power. This may be due to the very 'high bar' that the Government says exists under the current legislation. Or it may be the case that no post-FIRB approval national security risks have emerged since 1 January 2021 (when the power was introduced) that have necessitated the exercise of the power.
Streamlining of policy and practice
8. New 30 day target for low-risk applications
From 1 January 2027, the Government will aim to make decisions on all low-risk applications within 30 calendar days.
The criteria for a 'low-risk application' are:
- The applicant: has received a FIRB approval in the past 24 months, is not subject to extrajudicial direction (which appears to rule out some state-owned entities) and has no record of non-compliance or character concerns.
- The proposed transaction: is not in a sensitive sector or business (ie. it cannot be a national security business or involved in a 'sensitive business' such as media, telecommunications, transport, security technologies, defence or uranium), has no national interest sensitivities, and has a straight-forward and transparent corporate transaction structure.
- The application is for a no objection notification. Therefore, the target will not apply to exemption certificates, variations or retrospective applications.
The criteria do not seem to preclude foreign government investors (FGIs) from having some of their applications being treated as low-risk applications.
The Government also effectively confirmed that, as with current practice, FIRB approvals will not be given prior to receipt of Australian Competition and Consumer Commission (ACCC) approval where a proposed transaction is also subject to ACCC clearance.
It appears that this 30 day decision-making target, along with exempting certain investments from approval requirements (see below), are the Government's solution to dealing with low-risk investment proposals. This is in lieu of the notification-only regime mentioned in the Discussion Paper, under which foreign investors undertaking low-risk transactions would make a notification of the proposed transaction but need not await approval before completing the transaction.
9. Review of ineffective conditions
From 1 July 2026, the Government will review conditions in existing FIRB approval to update or remove ineffective conditions. There will be an initial focus on tax conditions. Investors will be given opportunities to engage with the review.
The Government says conditions may be removed where obligations overlap with other regulatory regimes or where their reporting burden far outweighs their value.
An obvious example is 'standard tax conditions' which are no longer applied and simply require an applicant to comply with existing tax laws and to provide annual compliance reports to Treasury until such time as the applicant ceases to own the target entity. Foreign investors who have undertaken numerous acquisitions are often subject to multiple sets of standard tax conditions, sometimes in relation to the same target entity. Consistency and standardisation across other tax conditions should also be applied. Minor differences between conditions across multiple applications often creates compliance headaches.
We encourage the Government to also closely examine data storage and access conditions. With the increasing use of Artificial Intelligence tools, it is becoming more difficult for foreign investors to verify that all data is stored only within Australia. If the Government is not inclined to make across-the-board changes to data conditions to deal with these market related changes, then at the very least the fee for applying for a variation of these types of changes to conditions should be reduced from $30,300 to the lowest fee tier of $4,500. The lowest fee tier should also be applied where an applicant is applying for variations to ensure consistency of approach across a suite of conditions.
Streamlining of FIRB legislation
10. Broadening Exemption Certificate powers
Under the current legislation, the effect of an Exemption Certificate (EC) is that certain types of transactions undertaken by persons named in the EC over a specified period will not give rise to stand-alone FIRB approval requirements and/or not be subject to call-in. In other words, there is upfront FIRB approval for certain types of transactions.
Many foreign investors have received ECs, and they have certainly been useful in reducing the regulatory burden. But there are limitations. Under the current legislation, the Treasurer does not have the power to declare that a person not be considered a foreign person and/or FGI. This means that a foreign person and/or FGI who is issued an EC is still subject to reporting obligations under the Register of Foreign Ownership of Australian Assets regime, will still have its interests in other entities counted in determining whether those other entities are foreign persons and/or FGIs, and could still be considered an associate of other persons.
The Government plans to broaden the existing EC powers so that the Treasurer can issue broader ECs which switch off or adjust the operation of concepts such as FGI status, foreign personhood, tracing, associate rules, and reporting obligations. It is proposed that low-risk investors currently caught by the broad application of the legislative tracing rules and FGI status will be the primary beneficiaries.
This is certainly welcome and it is expected that low-risk investors will primarily benefit. What is less welcome are the Government's suggestion that EC application fees will increase to 'reflect the associated significant benefit to investors, including the potentially significant reduction in the number of applications that investors will need to submit while the EC remains valid'.
11. Exempting certain lower risk investments from approval requirements
Under the current legislation, numerous types of acquisitions are subject to mandatory notification and approval requirements. This is because once the relevant percentage interest and monetary thresholds are met, an approval is required, irrespective of the circumstances of the relevant transaction.
The Government plans to remove mandatory notification and approval requirements for certain low-risk acquisitions that do not have significant control implications. These include:
- exempting small percentage increases in existing holdings with no change of control (eg. an increase from 25% to 30% in an Australian entity will generally no longer trigger an approval requirement);
- increasing the monetary threshold (currently $347 million) for non-free trade agreement non-FGIs in non-sensitive sectors (but note that FGIs will still be subject to a nil monetary threshold);
- exempting increases in interests in securities with no change in percentage interest, that do not result in a change of control (this will cover situations where the rights issue exemption is not available);
- expanding current exemptions for professional trustees (we welcome an exemption that is similar to the current foreign custodian exemption);
- expanding the current interfunding exemption to unregistered schemes;
- exempting land subdivisions or amalgamation where ownership does not change (we have always been of the view that these should not trigger approval requirements); and
- exempting acquisitions of Australian Carbon Credit Units under defined conditions.
It may be that some acquisitions in sensitive sectors are still subject to the call-in power, whilst acquisitions in non-sensitive sectors are excluded from the FIRB regime entirely.
12. Changes to the traced interest rules
Under the current legislation, the rules regarding tracing of interests in downstream entities are counter intuitive.
Where a person (the First Person) has a 20% or greater interest in an entity (Entity A), and where Entity A has an interest in another entity (Entity B), say 100%, the First Person is taken to have a traced interest of 100% in Entity B. This traced interest rule also applies through a vertical chain of entities where at each level there is a 20% or greater interest. Therefore, there are often scenarios where a person at the top of a chain has a traced interest in a downstream entity that is of a percentage significantly higher than the person's look-through percentage interest in the downstream entity.
This can give rise to anomalous outcomes.
- For example, assume Entity A is a foreign company that does not carry on an Australian business and that Entity B is an Australian company that carries on a national security business. Assume the First Person is a non-FGI foreign person and currently has a 25% interest in Entity A. The First Person can increase its interest in Entity A to 100% without that triggering a FIRB approval requirement, or can directly acquire 100% of Entity B, because the First Person already has a 100% FIRB interest in Entity B. This seems anomalous, because the First Person will have directly or indirectly acquired control of a national security business without needing FIRB approval.
- On the other hand, assume the First Person currently has a 19% interest in Entity A and seeks to increase to 21%. That would trigger a FIRB approval requirement as the First Person will acquire a traced interest of 100% in Entity B. However, the First Person will not be in a position to control Entity B.
The Government will amend the tracing rules to overcome such types of anomalous outcomes. Its amendments will focus approval requirements on situations where upstream entities may have material interests or control, so that the tracing rules are proportionate to risk. The amendments will also result in approval requirements arising where the upstream entity materially increases their level of control or influence by acquiring interests directly despite having previously received FIRB approval for the acquisition of a traced interest.
We expect that changes to the tracing rules will significantly impact whether transactions, particularly cross-border ones, will trigger FIRB approval requirements.
13. More flexible no objection notification powers
Under the current legislation, the Treasurer can issue a no objection notification (NON) with or without conditions. Once a NON is issued, it is difficult to change. For instance, the Treasurer cannot easily convert a conditional NON into an unconditional NON. The Government will remove inconsistencies and procedural inefficiencies in how the Treasurer's existing NON powers can be exercised. This will include enabling the Treasurer (or delegate) to issue NONs more flexibly and more readily vary existing NONs where appropriate.
14. Increasing standard approval validity period from 12 to 24 months
Under the current legislation, NONs (ie. FIRB approvals) are issued with a standard 12 month validity period. That is, the approved transaction must occur within 12 months after the approval date. This is often insufficient, particularly with large or complex transactions which require regulatory approvals in multiple jurisdictions, and also in situations where the opportunity to undertake the approved transaction has not arisen within the 12 month period.
The Government will increase the default validity period from 12 to 24 months, with flexibility to vary periods on a case-by-case basis. As the Treasurer can already extend a validity period, albeit for a not insignificant $30,300 filing fee, we hope the Government will reduce the filing fee and streamline the extension request process.
15. Enabling incorporation of standards in conditions
The Government will enable NONs and ECs to incorporate conditions that refer to non-legislative standards, such as those issued by Standards Australia. According to the Government, this will ensure that conditions do not become outdated over time and provide greater clarity to investors on their obligations.
In our view, the incorporation of standards would create uncertainty, unless they are fixed as at a particular date and attached to a NON or EC so that they can be read on a stand-alone basis. Conditions should not be subject to changes in non-legislative standards over which an investor (and possibly also the Government) has no control. Standards are not the same as legislation, and should not be treated as such.
16. Exemption Certificate applications to no longer have statutory decision deadlines
Under the current legislation, the Treasurer is subject to statutory decision deadlines in respect of both NON and EC applications. The Government will remove the deadlines in respect of EC applications, given they are complex and need adequate time for detailed and thorough assessment. It is certainly our experience that EC applications take longer to process than NON applications, so this change makes sense.
The Government will also exclude the shutdown period (from Christmas to New Year) from statutory decision-making timeframes in the foreign investment framework. This simply formalises the practice that Treasury undertakes each year whereby there is an en masse extension of the statutory decision deadline for applications just prior to Christmas.
17. Streamlined reporting to the Register of Foreign Ownership of Australian Assets
The Register of Foreign Ownership of Australian Assets (Register) regime has been in place for almost three years, and continues to significantly frustrate foreign investors. Part of the problem is due to challenges in navigating the Register notification system administered by the Australian Taxation Office, and part is due to the Register regime capturing too many events.
The Government proposes to address this by removing the requirement to report acquisitions of interests in commercial land, businesses or entities to the Register. Instead, foreign investors will be required to register completed acquisitions that were approved by Treasury through Treasury's application system, avoiding the need to re-enter information already included in their applications. However, acquisitions of water interests, agricultural land, residential land and certain mining tenements will still need to be reported to the Register.
The ATO will strengthen its administrative support for foreign investors using the Register notification system. This is of course welcome, but what is needed are changes to the Register notification system itself, in the form of IT-related changes.
Next steps
If you would like to discuss the issues raised in this Insight, please contact any of the people below.