Foreign investment in Australian businesses

Note: due to changes in the legislation mentioned below, this article is no longer current.

What governs foreign investment in Australia?

The Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) governs foreign investment in Australia. The Treasurer or the Treasurer’s delegate determines whether an investment will or will not be contrary to Australia’s national interest. 

Missing PieceTo assist the Treasurer in making these decisions, the Foreign Investment Review Board (FIRB) examines investment proposals by foreign persons and makes recommendations accordingly.

Who is a foreign person?

Section 4 of the FATA defines a foreign person as:

  • an individual not ordinarily resident in Australia;
  • a corporation in which an individual not ordinarily resident in Australia or a foreign corporation or a foreign government holds a substantial interest;
  • a corporation in which two (2) or more persons, each of whom is an individual not ordinarily resident in Australia or a foreign corporation or government, hold an aggregate substantial interest;
  • the trustee of a trust in which an individual not ordinarily resident in Australia or a foreign corporation or government holds a substantial interest; or
  • the trustee of a trust in which two (2) or more persons, each of whom is either an individual not ordinarily resident in Australia or a foreign corporation or government, hold an aggregate substantial interest; or
  • a foreign government; or
  • any other person, or any other person that meets the conditions, prescribed by the regulations.

Substantial and controlling interest

According to section 4 of the FATA, a substantial interest is where:

  • for an entity—the person holds an interest of at least 20% in the entity; or
  • for a trust (including a unit trust)—the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the trust.


Who needs Government approval?

Foreign governments and related entities

The Australian Foreign Investment Policy (Policy) requires all foreign governments and their related entities to obtain prior approval from the Australian Government before making a direct investment in Australia.  A direct investment is defined in the Policy as an investment which would have the effect of a long-lasting interest in an asset or a long term relationship with a business or company.  Generally, this would be an investment which gives the investor a significant degree of influence or control in the management of the business or company.

An investment of ten per cent (10%) or more is usually considered to be a direct investment.  In Australia however, investments below ten per cent (10%) can still be a direct investment if it provides the investor with influence or control over the business or company.

Private foreign investors

There are restrictions imposed on privately-owned foreign persons who are seeking to invest in an Australian business or company.  A foreign person should notify the Australian Government if they plan to acquire an interest that is fifteen per cent (15%) or more in a business or company valued above $244 million*.

There is an exception for US investors, as the monetary value of the business or corporation is increased to $1,062 million*.  The $244 million threshold still applies to US investors if the investment is in a prescribed sensitive sector.  Pursuant to regulation 22 of the Foreign Acquisitions and Takeovers Regulations 2015 (Cth), prescribed sensitive sectors include:

  • media;
  • telecommunications;
  • transport; and
  • those involving manufacture or supply of military goods or services for the Australian defence Force or other defence forces, or that which is to be used for a military purpose; and
  • those involving development, manufacture or supply of services relating to encryption, security and communication systems.
  • those involving the extraction of uranium or plutonium.

In accordance with section 13B of the FATA, the value of the business or corporation is measured by the highest of:

  • the total number of shares issued; and
  • its total gross assets.

Restrictions imposed in certain sectors

Foreign investors should also be aware of certain legislative restrictions imposed on foreign investments made in particular sectors such as:

  • the banking sector;
  • Australian international airlines; and
  • Australian registered ships.

Acquisition of a substantial interest

If a foreign person enters into an agreement to acquire a substantial interest in a:

  • trading corporation;
  • financial corporation; or
  • corporation incorporated in a Territory

without notifying the Treasurer, they will be guilty of an offence pursuant to section 26(2) of the FATA.

How is an application assessed?

The applications of foreign investors are assessed on a case-by-case basis.  The investor should notify the Treasurer by using the appropriate form depending on the type of investment they propose to make.  These can be accessed from the FIRB website at

The Treasurer has the authority under the FATA to reject an application or proposal by a foreign person to acquire control of an Australian business or company if it would be contrary to national interest.

The decision to approve or reject a proposal is solely the Treasurer’s or their delegate.  The FIRB does not make such decisions.

What is the effect of non-compliance?

Under section 25(1C) of the FATA, if the Treasurer gives advice of their decision which includes a statement of the conditions to be complied with, the contravention of such conditions is an offence punishable on conviction by:

  • a fine of up to 500 penalty units, imprisonment for a period up to two (2) years or both – for an individual; or
  • a fine of up to 2,500 penalty unites – for a corporation.

Who doesn’t need approval?

Applications do not need to be submitted for acquisitions involving existing business or corporations which are valued below the relevant monetary threshold.  However, exceptions do apply to in certain circumstances such as where the foreign person is a foreign government entity or the investment is in a prescribed sensitive sector.

Further information

If you would like to discuss how Dundas Lawyers can assist you with foreign investment in your company or business please contact us.


This article contains general commentary only.  You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013

Facsimile: (07) 3221 0031
Mobile 0419 726 535
Twitter: @ITCorporatelaw

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