The new Future Made in Australia Act – incoming changes to Australia's foreign investment regime

The Federal Government has today signalled significant incoming changes to Australia's foreign investment regime. 

Future Made in Australia Act

The new Future Made in Australia Act (Act), announced on 11 April 2024 by the Federal Government,¹ will come into effect on 1 July 2024. This Act will introduce a number of measures designed to encourage "low-risk" non-sensitive foreign investments and to ensure more effective screening and monitoring of sensitive foreign investments (e.g. investments in critical infrastructure, critical minerals and critical technology and investments that involve sensitive data sets or are in close proximity to national defence sites or sensitive Australian Government facilities). 

The Treasury has today released an updated foreign investment policy (Policy) which outlines in further detail, information about the sectors which will attract more enhanced and effective screening, as well as the new fast-tracked process for low-risk investors.²

These reforms have been announced today in light of the upcoming May 14 Federal Budget, and are focussed on ensuring that Australia remains an attractive location for the deployment of foreign private capital whilst also balancing national and economic security concerns. 

Investment will be particularly encouraged in emerging industries such as clean energy and industrials in light of the global energy transition as well as professional services, manufacturing, mining of non-critical minerals and commercial and new residential real estate.  

Key reforms

The key reforms under the Act are as follows:

1. Streamlined administrative processes for non-sensitive acquisitions: The Act will streamline administrative processes involved in the Foreign Investment Review Board (FIRB) application process for known foreign investors (such as pension funds) in non-sensitive sectors who have a history of investment in Australia and a good compliance record. This is anticipated to result in reduced wait times for such investors. In particular, repeat investors whose ownership information have not changed since the time of their last application will be required to submit less paperwork as part of their FIRB application. 
2. Faster application processing times: The Treasury has also committed to a new target of processing 50% of FIRB applications within the initial statutory timeframe of 30 days, from 1 January 2025.³ The Treasury anticipates that most foreign investors will see an improvement in the speed of processing from 1 July 2024, as the Treasury works to increase the number of investment proposals proceeding within the statutory decision period over the course of this calendar year.
3. Refund of application fees for unsuccessful bidders: Bidders participating in a competitive sale process for an Australian asset whose bid is ultimately unsuccessful will have their application fee refunded. This reform is intended to boost investor confidence in applying for FIRB approval even in competitive sale processes, and encourage competition in the market. We expect that the effect of this reform will be that vendors who are running a competitive sale process will increasingly require that FIRB applications are lodged and application fees are paid by bidders as part of their binding bids.
4. A stronger system for screening of sensitive and high risk projects: Conversely, a stronger risk-based approach will be taken in respect of complicated or higher risk proposals involving investments in sensitive sectors. This will apply in particular to investments in the critical infrastructure, critical minerals and critical technology sectors, proposals which involve sensitive data sets and investments which are in close proximity to national defence sites or sensitive Australian Government facilities. The Treasury will also increase scrutiny of tax arrangements which are considered to pose a risk of tax avoidance or risk to revenue, to ensure that multinational companies are adhering to Australia's taxation laws.
5. Improved transparency in communicating longer timeframes for assessment: Alongside measures to ensure faster application processing times, the Treasury will improve transparency in communicating to foreign investors when they can expect longer timeframes in the assessment of their investment proposals. This is expected for proposals that involve high tax risks, or where a proposed investment is in close proximity to a national defence site or sensitive Australian Government facilities.
6. Strengthening compliance: The Treasury will deploy additional resources to its foreign investment compliance team to strengthen monitoring and enforcement of conditions on sensitive transactions, including implementing measures to conduct on-site visits. The Treasurer has also foreshadowed a more frequent use of the Treasurer's call-in powers (which may be used to review foreign investments which come to pose national security concerns over time but have not previously been notified to FIRB).  

What does this mean for foreign investors? 

As a result of the reforms, it is anticipated that "low-risk" and "repeat" foreign investors will enjoy significant time savings in their FIRB applications. 

Conversely, foreign investments in sensitive sectors which may pose risks to Australia's national security will be carefully considered and detailed as regulatory intervention will be focussed on these sectors.

While the Policy provides a broad overview of the Federal Government's strategic priorities, details of how such changes will be implemented in practice are not yet known. The Policy also does not comment on the expected implications of such changes, if any, on current FIRB applications or FIRB applications to be submitted prior to 1 July 2024. It will therefore be important for foreign investors currently contemplating or planning to submit a FIRB application to be familiar with the existing foreign investment regime and stay alert to further updates to the changes which may arise from implementation of the Act.

Authors: Bruce MacDonald, Partner; Anita Choi, Partner; Will Mason, Senior Associate and Jin Yoo, Lawyer.

_{1. A future made in Australia | Prime Minister of Australia (pm.gov.au).}

_{2. Australia’s Foreign Investment Policy.} 

_{3. Budget 2024: Labor’s reforms will de-risk foreign investment (afr.com)}