The foreign investment landscape in Australia continues to evolve. In 2024 we saw legislative change, updates to Australia's foreign investment policy and increased focus on compliance. As 2025 unfolds, foreign investors should take note of potential developments in the regulatory landscape to ensure they are equipped to navigate the rules efficiently and effectively.
In focus: key points to watch out for
Upcoming Federal 'caretaker' period
Australia is due for a Federal election by 17 May 2025. Once the election is called, the Australian government enters a period known as 'caretaker mode'. This convention dictates that the government should avoid making major decisions, entering into significant commitments, or undertaking substantial policy initiatives until the election result is clear and, if there is a change of government, until the new government is formed.
Caretaker mode has specific implications for FIRB purposes in that, once the election is called, FIRB applications will not be processed until the outcome of the election is known. The caretaker period is generally four to six weeks in duration. However, if the election result is close and there is no clear majority, or if there are delays in counting and declaring results, the caretaker period could be extended.
Once the election result is clear and a government is either returned or elected, caretaker provisions cease to apply, and FIRB can return to its normal operations, including making decisions on significant foreign investment proposals. Further delays in processing FIRB applications can be expected if the election results in a change of government, in which case a new Federal Treasurer will be installed (noting that the Treasurer of the day administers the FATA with the advice and assistance of FIRB). Low-value, routine applications continue to be approved during the caretaker period, but approval for more complex applications could be delayed by 1–2 months once the election is called.
Increased compliance focus
As foreshadowed in the Australian Government's updated foreign investment policy released on 1 May 2024, Treasury has bolstered its foreign investment compliance team to ensure strict adherence to FIRB approval conditions. Further resources have been dedicated to monitoring compliance with the foreign investment rules, including the introduction of site-visits.
FIRB's latest quarterly report reveals that there are seven regulatory audits and four investigations in progress. These figures demonstrate an increased compliance focus, with a steady increase in the number of formal investigations reported by Treasury. While most audits and investigations remain confidential, some will inevitably enter the public domain. One such example concerns the request by Global Lithium Resources for FIRB to investigate the extent of foreign influence over the company. Another example is politicians and other stakeholders asking FIRB to investigate matters in relation to Korea Zinc's foreign ownership.
We expect this elevated focus on compliance to continue in 2025, with increased attention from the Foreign Investment Compliance division of Treasury, initiated both from its own internal surveillance and monitoring function as well as from tip-offs and requests from external parties . FIRB's increased compliance focus often involves FIRB writing to a foreign investor querying whether a transaction ought to have been notified to the Treasurer through the FIRB process.
We expect that FIRB will continue to impose tax-related conditions on FIRB approvals requiring investors to submit annual or other ad hoc compliance reports.
New Foreign Investment Portal
FIRB is launching a new Foreign Investment Portal to process investor applications. This Portal will allow users to login using a Digital ID and submit foreign investment submissions through a new, structured submission process, among other features.
While FIRB is currently on track to complete the build of the new portal in March 2025, it remains to be seen how the timeframe for delivery of the new portal will be shaped by the upcoming election.
Indexation of monetary thresholds
Monetary thresholds – the dollar value used to determine which proposed investments may require FIRB approval – are subject to annual indexation on 1 January each year. In 2025, a moderate increase (approximately 2.6%) has been applied across most types of investments, with a $0 threshold continuing to apply to foreign government investors across all transaction types.
The key changes to the thresholds are summarised below:
- the threshold for non-sensitive commercial land and standard commercial transactions has increased from A$330m to A$339m;
- the threshold for investments in sensitive land and agribusinesses has increased from A$71m to A$73m;
- the threshold applicable to Australia's Free Trade Agreement Partners has increased from A$1,427 million to A$1,464 million.
The full list of indexed figures are outlined on the 'Foreign investment in Australia' website.
Foreign investment in 2024 – year in review
Updates to Australia's foreign investment policy
On 1 May 2024, the Australian Government introduced updates to Australia’s foreign investment policy. These updates included the introduction of a 'streamlined approach' for lower-risk investments and a 'strengthened approach' for high-risk investments.
Under the streamlined approach, certain investors may have their investment proposals fast-tracked. This can include repeat investors who are known to FIRB, have a good compliance record and propose to be a passive investor only. To be eligible, the proposed transaction must be considered non-sensitive and involve a clear and non-complex ownership structure.
Under the strengthened approach, FIRB will apply greater scrutiny to investment proposals that are considered to be high-risk. This can include transactions within sensitive sectors, for example those sectors concerning critical minerals, infrastructure or technology. High-risk transactions also cover acquisitions of interests in businesses that hold sensitive data, and investments in real estate located close to defence or other sensitive Australian government sites.
The government also announced changes to refund fees for applications that do not proceed because the investor is unsuccessful in a competitive bid process, where a target either requires or encourages prospective foreign bidders to have lodged their FIRB application as part of their participation in the bid process. Although we have in the past seen FIRB provide fee credits and, in some cases, fee refunds to unsuccessful bidders, this has always been at FIRB's discretion. Therefore, having a consistent and publicly stated Policy position is welcomed. This is especially the case where a fee credit (as opposed to a fee refund) may be of little value if an unsuccessful foreign bidder is unlikely to be transacting in the Australian market in the foreseeable future.
Expansion of national security business concept
Many investments in national security businesses require FIRB approval. The national security business concept is broadly defined. These businesses include responsible entities and direct interest holders in relation to critical infrastructure assets, as defined in the Security of Critical Infrastructure Act 2018 (SOCIA). Reforms to the SOCIA last year expanded the definition of critical infrastructure assets to include secondary assets which hold ‘business critical data’ and relate to the functioning of the primary asset. Investors must now consider such assets in determining whether the proposed investment will trigger a national security business action. This could arise for investments in data storage facilities that house backup data for telecommunications providers or an electricity network's operational data stored offsite.
Application processing times
In the latest Quarterly Report on Foreign Investment released by the Australian Treasury for the quarter of April to June 2024, the median processing time for commercial investment proposals was 41 days, down from 49 days in the previous quarter. This may be partly attributable to a marginal reduction in the overall number of commercial investment proposals compared to the previous quarter. The median processing time across commercial investments was also likely affected by the streamlined approach flagged in the updated foreign investment policy announced on 1 May 2024.
We expect that repeat investors that are known to FIRB will continue to enjoy faster FIRB application processing times under the streamlined approach in 2025. Other investors should expect longer processing times where their transaction involves sensitive assets or complex structures.
Source countries for investment
In the April to June 2024 quarter, the top 5 source countries for approved commercial investment proposals (not including residential real estate proposals) were:
- United States (A$21.9b);
- Japan (A$9.5b);
- Germany (A$5.4b);
- France (A$4.1b); and
- Singapore (A$2.3b).
The largest target sector for investment was Services with a total direct investment value of A$27.3b.
China continues to be the largest source country of investment for approved residential real estate proposals (A$0.4b), followed by Hong Kong SAR (A$0.1b) and Taiwan (A$0.1b).
Interfunding exemption
From December 2024, qualifying interfunding transactions have been exempt from mandatory FIRB approval requirements. This includes transactions that occur between investment entities that are managed by the same responsible entity of a registered scheme. This exemption was welcomed by the investor community, having been the topic of reform for a number of years.
New fee rules for residential land
In 2024, new fee rules were established for applications involving residential land. Changes from April 2024 effectively:
- tripled the filing fee payable for the acquisition of residential land containing at least one established dwelling; and
- doubled the annual vacancy fee for established dwellings that are not residentially occupied or available for rent.
The maximum FIRB filing fee payable for developed residential land is now A$3,514,800 and the maximum annual vacancy fee payable for established dwellings is A$7,029,600 (following indexation).
Further changes in December 2024 modified the treatment of Australian land entities whose dominant land holding is residential land containing at least one established dwelling. The higher 'established dwelling' fees will apply to applications concerning proposed investments in this type of Australian land entity.
Adverse orders and investigations
In June 2024, the Treasurer made five disposal orders in relation to shares held by foreign persons in Northern Minerals Limited.
While no prohibition orders were published during 2024, the number of applications withdrawn by investors during Q1 and Q2 of 2024 increased by almost 100% when compared to Q1 and Q2 of 2023.
Outlook for foreign investment in 2025
2025 may bring significant changes in the global landscape for foreign direct investment, as investors active in economies including the United States respond to changing geopolitical conditions. Trade tensions may impact demand in the Australian market.
Australia's strong regulatory framework and commitment to net zero initiatives will continue to attract foreign investors to the energy sector. Government incentives will open up new avenues for investment, including in sectors like green metals, low carbon liquid fuels and hydrogen production, making Australia competitive in international markets. Australia may be seen as a 'safe harbour' for investors at a time when the international economic order is in flux. The Australian government will want to take advantage of that by encouraging foreign investment, while being sensitive to increased public perceptions of the national security risks that such investment involves.
Obtaining timely and considered legal advice will remain critical for implementing successful transactions that have a connection to Australia.
In the current global climate, there are many reasons for investors to be excited about investing in Australia. However, doing so requires investors to navigate a lot of rules. Our national foreign direct investment and trade team remains dedicated to working with clients and counsel around the world to tailor solutions for their business goals. We look forward to connecting with you throughout 2025.