Amendments to the Foreign Acquisitions and Takeovers Act 1975

Source: http://www.firb.gov.au/content/policy.asp?NavID=1

On 12 February 2010, the Foreign Acquisitions and Takeovers Amendment Act 2010 received Royal Assent.  It clarifies the operation of the Foreign Acquisitions and Takeovers Act 1975 to ensure that it applies equally to all foreign investments irrespective of the way they are structured. The amendments are intended to capture complex investment structures which may provide avenues of control beyond that provided through traditional shares or voting power. The amendments apply retrospectively, from the date of the Treasurer's announcement (12 February 2009).

The Government has also made Regulations to coincide with the amendments. The Regulations will ensure that Australian companies are not inadvertently treated as foreign companies under the Act by virtue of the expanded definition of substantial interest.

Changes to Foreign Investment Policy - Monetary Thresholds

On 22 September 2009, the Government made changes to Australia's foreign investment screening framework.

It replaced the four lowest thresholds for private business investment ($100 million, $110 million, $200 million and $219 million) with a single threshold of 15 per cent in a business worth $219 million. The Government committed to index this threshold annually. As such, it was increased to $231 million on 1 January 2010.

The Government also abolished the requirement that private investors notify proposals to establish a new business in Australia valued above $10 million.

Changes to Foreign Investment Policy – Residential Real Estate

On 18 December 2008, the Assistant Treasurer released details of administrative changes to the Government’s foreign investment screening arrangements for acquisitions of residential real estate by foreign persons. They generally maintained the previous restrictions but provided for streamlined notification and administrative arrangements. These changes were fully implemented on 31 March 2009, when the relevant amendments to the Foreign Acquisitions and Takeovers Regulations 1989 (the Regulations) came into effect.

There were no changes to the Foreign Acquisitions and Takeovers Act 1975 (the FATA).

A summary of the changes is provided below.  The policy and related documents (above) have been updated to fully incorporate the changes.

FROM 18 DECEMBER 2008 THE POLICY CHANGED AS FOLLOWS:

Temporary residents purchasing second hand dwellings

The definition of ‘temporary resident’ includes all foreign persons living in Australia who:

# hold a valid temporary visa which permits them to stay in Australia for a continuous period of more than 12 months (irrespective of how much time is remaining until that visa expires); or

# have submitted an application for permanent residency (PR), and hold a bridging visa which permits them to stay in Australia until their PR application has been finalised

Short-term visitors such as tourists, business people and those here for a medical procedure are not temporary residents.

Foreign students resident in Australia are no longer subject to a $300,000 limit on the value of an established dwelling purchased as their principal place of residence.

Vacant residential land            

Acquisitions by foreign-owned companies, trust estates and non-resident foreign persons of single blocks of vacant residential land are required to build a dwelling within a period of 24 months (previously within 12 months and development expenditure of at least 50 per cent of land cost).

‘Single blocks’ of vacant land generally refers to a block of land on which only a single dwelling could be constructed. This does not include large tracts of land (eg for the purpose of subdivision) or multiple adjacent single blocks (eg to develop a multi-dwelling apartment complex) – additional development conditions may apply to such acquisitions.

New dwellings           

The previous requirement that only 50 per cent of new dwellings can be sold to foreign persons on an ‘off the plan’ basis was removed provided developers market locally as well as overseas. Vendors are no longer required to have concurrently developed a similar dwelling in order to be able to sell a new stand-alone dwelling to a foreign person. This will be reviewed after two years.

A ‘new dwelling’ was previously defined as having never been occupied or sold; this now includes dwellings that have not been sold but that may have been occupied for no more than 12 months.

Foreign companies purchasing second hand dwellings

Foreign-owned companies can now purchase established dwellings for the use of their Australian based staff provided that they sell or rent the dwelling if it is expected to remain vacant for more than 6 months. There is no limit to the number of established dwellings which can be purchased, where required for employee accommodation.

Redevelopment of second hand dwellings

A proposed redevelopment must increase the number of dwellings and no rental income can be obtained from the existing dwelling prior to demolition. Such redevelopments are required to demolish the existing dwelling and commence construction of the new dwellings within 24 months in line with vacant land (previously 12 months).

FROM 31 MARCH 2009 THE REGULATIONS CHANGED AS FOLLOWS:

Temporary residents’ exemption

Temporary residents are no longer required to notify proposed acquisitions of: 

an established dwelling to be used as their principal place of residence (not for investment purposes);any new dwellings; and

single blocks of vacant residential land (other acquisitions of vacant land will require notification and will normally be approved subject to development within 24 months).

The exemption applies to contracts entered on or after 18 December 2008 (the date that the Assistant Treasurer announced the policy changes) - that is, notification is not required even if a temporary resident signed/exchanged contracts to purchase such property before the Regulations were amended on 31 March.

The exemption includes acquisitions of property by temporary residents via their trust or Australian incorporated company.

The existing notification requirements continue to apply to non-residents, who must notify all proposed acquisitions of residential real estate.

Accommodation facilities

Accommodation facilities such as hotels, motels, hostels and guesthouses are treated as commercial real estate rather than residential real estate. Acquisitions of such facilities – or individual units within them – valued below the relevant developed commercial property threshold are exempt from the FATA and do not require notification and approval.  See Accommodation Facilities for further details.