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MinterEllison insights on the new Australian foreign investment rules

Proposed changes to Australia's foreign investment rules represent a fundamental structural change to Australia's foreign investment regime.

The Treasurer announced further changes to Australia's foreign investment rules from 1 January 2021. These include a national security test and tightening of the regime in some sensitive areas, and the proposed unwinding of the current temporary measures in place to address the coronavirus pandemic.

According to the Treasurer and the Prime Minister, these are to be the most significant reforms to Australia's foreign investment rules since the regime was implemented in 1975, and build on earlier significant reforms passed on 1 December 2015.

What has changed?

In summary, the proposed changes include:

  • A new national security test for foreign investors who will be required to seek approval to start or acquire a direct interest in a ‘sensitive national security business’ – regardless of the value of the investment or type of investor.
  • A time-bound ‘call in’ power enabling the Treasurer to review acquisitions that raise national security risks outside of proposed acquisitions relating to a ‘sensitive national security business’.
  • A national security 'last resort' power that provides the ability to impose or vary conditions and in extraordinary circumstances order disposal on national security grounds.
  • Stronger and more flexible enforcement options including the expansion of infringement notices and higher civil and criminal penalties.
  • Measures to streamline approval for passive investors and investments into non-sensitive businesses, reform certain process aspects such as application fees, and other technical matters.

What is the impact?

The proposed changes will represent a fundamental structural change to Australia's foreign investment regime. Certain investors look set to receive the benefit of a reduced screening burden. However, a broader category of assets - sensitive national security assets - will now be caught than was previously the case.

At the same time, the current temporary measures in place to address Australia's national interest during the coronavirus crisis are expected to come to an end from 1 January 2021.

With the so many potential reforms on the table, the key will be in the detail of the changes

Source: MinterEllison

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