In light of the COVID-19 pandemic, Australia’s Treasurer Josh Frydenberg has introduced new measures to protect Australian real estate and businesses from foreign investor acquisitions.
Prior to 29 March, 2020, foreign persons were required to apply for approval by the Foreign Investment Review Board (FIRB) only when the value of their proposed investment in Australia was greater than a prescribed threshold. The monetary threshold ranges from $0 – $275 million and is based on factors including the nature of investor (e.g. private or government foreign investors) and the type of investment (e.g. residential, commercial or agricultural land and sensitive businesses such as media, telecommunications, transport and defence and military related industries).
As of 29 March 2020, the monetary thresholds for all foreign acquisitions have temporarily been reduced to $0. This means all foreign purchasers will require FIRB approval irrespective of the nature of investor or investment type.
The Treasurer has also increased the application review period from 30 days to up to six months to allow enough time to process all applications.
Impact on Foreign Investors
These delays will inevitably have a significant impact on foreign investors looking to invest in Australia. This is especially true for investors who have entered into contracts prior to 29 March, 2020, with an FIRB condition precedent, but have not yet applied for FIRB approval. Foreign purchasers in these positions will need to think about extending the FIRB approval date or take necessary action to protect their position under the contract. These temporary changes will also impact parties who are looking for a quick transaction with a short settlement. This will be difficult to achieve as the FIRB approval condition precedent may require up to six months to be satisfied.
These changes will remain in place until further advised by the Treasurer. We anticipate that they will remain for the duration of the COVID-19 pandemic.
If you wish to discuss your circumstances or have questions about the impact of these temporary changes, please contact our team at Morrows Legal on 03 9690 5700.