The Foreign Investment Review Board or also known as FIRB was created to review applications for any foreign person who intends to invest in Australian residential real estate, agricultural land, or water entitlements. Effective as of 10:30pm 29 March 2020, the COVID-19 pandemic has resulted in changes to the current FIRB regulations which may have an effect on your next purchase if you’re a foreign person.
KEY TAKE OUTS:
- The new FIRB changes have now reduced the threshold to $0 despite the type of investment.
- The Australian Government has advised these changes are temporary, however will remain in effect for the duration of the COVID-19 pandemic.
What is a foreign person?
According to the Foreign Acquisitions and Takeovers Act 1975 (Act), a foreign person for the purpose of FIRB is a person, corporation or a trustee of a trust which is not ordinarily a resident of Australia. If you’re deemed to be a foreign person and have the intention to invest in our Australian economic market, then you will need approval prior to proceeding to invest.
How has the COVID-19 changed the FIRB Regulations?
On 29 March 2020, the Australian government announced changes to the FIRB regulations in the hope of protecting Australia’s economy in the current situation. The changes which were effective as of 10:30pm on 29 March 2020, are changes to the screening thresholds and the processing of application timeframes.
Prior to new changes, (depending on a person’s investment), different thresholds applied. If the investment was under the threshold a person was exempt and did not require additional approval. However, the new changes have now reduced the threshold to $0 despite the type of investment.
For a foreign person who would like to invest in Australian residential land, this change does not affect them as the threshold for any investment in residential land for a foreign person has always been $0; however, some business acquisitions had a higher threshold than $0 and as such this is a change which will affect these forms of investments.
The second change is the processing timeframes for all FIRB applications. Previously, Section 77 of the Foreign Acquisitions and Takeovers Act 1975 (Act), the Treasurer had 30 days from the date an application was received to provide an applicant with their decision. However, with the recent changes, the timeframe for all applications has been extended from 30 days to up to 6 months; The Australian government has also advised that they will prioritise any urgent applications.
How do the recent changes affect foreign persons and their investments?
Any transactions entered into prior to 10:30pm 29 March 2020 that were under the threshold, will not be affected by these changes; however, if the transaction did require FIRB approval, then the extended timeframes will apply. Any future transactions still to be entered into will now all need FIRB approval and are subject to the extensive extended timeframes for review.
The Australian Government has advised these changes are temporary, however will remain in effect for the duration of the COVID-19 pandemic. Therefore, it is important that if you’re a foreign person who has recently applied for FIRB approval or you intend to apply for approval, then you consider these changes when negotiating any terms and deadlines that may apply to your investment.
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This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.
