Setting up a Business in Australia. Foreign Investment.

Australia is a great place for business. However, like in any other country, there are things you need to know about doing business onshore.

This article outlines Australia’s regulatory framework for foreign investment. You can read the ‘How to Set up a Business in Australia’ full article here. You can download the complete BridgePoint Doing Business in Australia Guide here.

A controlling (or substantial) foreign interest is established if one foreign person (along with any associates) possesses 15% or more of the ownership or voting rights. Similarly, it arises when multiple foreign individuals (or any associates) collectively possess 40% or more of the ownership or voting rights in any corporation, business, or trust.

The administration of FATA and FIRB Policy rests with the Australian Federal Treasurer, supported by the Foreign Investment Review Board (FIRB). Empowered by FATA and FIRB Policy, the Treasurer holds the authority to decline specific foreign investment proposals, impose conditions upon them, and enact various other measures if they are deemed contrary to the national interest or pose risks to national security.

Certain foreign investment proposals necessitate notification to FIRB and require approval from the Treasurer prior to their execution. Typically, the majority of applications do not raise concerns related to national interest or security and consequently receive approval.

Foreign Persons

According to the Foreign Acquisitions and Takeovers Act (FATA), a ‘foreign person’ is:

An individual who isn’t typically a resident in Australia.
A foreign government or investor representing a foreign government.
A corporation, trustee of a trust, or general partner of a limited partnership where an individual not typically residing in Australia, a foreign corporation, or a foreign government holds an equity interest of at least 20%.
A corporation, trustee of a trust, or general partner of a limited partnership where two or more foreign persons hold a combined equity interest of at least 40%.

Foreign Investment in Sensitive Sectors

Limitations are imposed on foreign investment into sensitive industrial sectors that mirror community concerns and issues concerning the national interest. Restrictions are enforced on foreign investment within sectors including Real Estate, Media, Telecommunications, Transport, Defense-related industries, Critical Infrastructure, National Security Companies, Security Land, Encryption and Security Technologies, Communication Systems, and the Extraction of Uranium or Plutonium, or the Operation of a Nuclear Facility. Special regulations are applicable in Agribusiness to enterprises or nationals of United States of America, Chile or New Zealand.

How foreign investors gets the Green Light (or Red Flag)

The Foreign Investment Review Board (FIRB Policy) plays a crucial role in safeguarding Australia’s national interest when it comes to foreign acquisitions of land, businesses, and other assets. Its approval hinges on four key factors:

National security: Does the investment pose any national security risks, like giving foreign entities undue influence over sensitive infrastructure or technologies?
Competition: Could the acquisition create an unfair monopoly or stifle competition in a particular industry?
Taxation: Will the investment comply with Australian tax laws and contribute its fair share to the economy?
Employment: Will the investment create or preserve jobs for Australians?

For land acquisitions, the FIRB also considers factors like the land’s intended use, its potential impact on Australian residents, and whether it’s deemed “vacant” residential land (subject to additional scrutiny and potential vacancy fees).

The FIRB’s goal is to ensure that foreign investment benefits Australia, not just the foreign investor. So, while it might not always rubber-stamp every proposal, its thorough review process helps maintain a balance between attracting foreign capital and protecting Australia’s strategic and economic interests.

FIRB Approval Process

The processing time for standard applications is 30 days and some of the key steps are:

Determine if FIRB approval is required: This depends on the transaction value, the asset type (land, business, rural land), the foreign investor type (individual, government, etc.), and if the target business involves any sensitive sectors.

Lodge an application: You need to provide details about the transaction, parties involved, and potential national interest impacts. Some specific investments are eligible for exemptions.

Assessment: FIRB meticulously examines the transaction against four key factors.

Treasurer’s decision: The FIRB makes a recommendation to the Australian Treasurer to approve, reject, or approve with conditions. However, the Treasurer has the ultimate say, considering the FIRB’s recommendation and broader national interests.

Post-approval compliance: If approved with conditions, the foreign investor must adhere to them, potentially including divesting specific assets or implementing security measures. The FIRB may monitor compliance and even impose penalties for non-compliance.

Exemptions: Pension funds, government bodies, and certain types of entities, as well as low-risk transactions like buying residential property below the threshold, may be exempt from review.

Doing Business in Australia with BridgePoint Group

We offer a comprehensive solution. From corporate structuring and tax advice, employing and remunerating staff, local representation to maintaining systems of control and reporting. Our team of experts helps you to successfully navigate the regulatory and operational landscape. We are familiar with Standard Business Reporting (SBR); Significant Global Entities (SGEs); Country-by-Country Reporting (CbC); Transfer Pricing; Thin Capitalisation; Single Touch Payroll (STP) and Director Identification Numbers.

BridgePoint Group provides advice in respect of the Corporations Act, Trade Practices Act, National Employment Standards, Fair Work Act, Trade Marks Act, Privacy Act and the various State and Federal acts relating to taxation including Income Tax, Capital Gains Tax, Payroll Tax, Land Tax, Goods and Services Tax (GST) and the requirements to withhold tax from payment of dividends, interest and royalties. We regularly interact with the Australian Taxation Office (ATO), Australian Securities and Investment Commission (ASIC), the Foreign Investment Review Board (FIRB), the Australian Competition & Consumer Commission (ACCC) and various State Revenue Offices around the country.

What makes us different

One stop shop
We offer a comprehensive and holistic approach to supporting international companies – including Significant Global Entities (SGEs) – in their expansion efforts, ensuring a smooth entry into the Australian market whilst carefully navigating the complexities of local regulations and business practices.

Local Knowledge and Market Insights
Venturing into a new market abroad can entail considerable expenses, time, and risks. Our dedication to clients extends beyond offering accounting and regulatory services. We provide comprehensive support by offering market insights and local assessments, empowering you to make well-informed decisions.

Unique Method
We employ a team-based, cross-functional approach to ensure you get the full benefit of our collective capability.

Results-Driven
We partner with our clients with an owner’s mentality.

Commercial Acumen
We understand the drivers of your success and help you to tackle the things that make the difference.

Broad Capabilities
We have a diverse team of highly trained experts selected to support every stage of your business journey.

What to expect from us

A highly experienced team that will tell you everything you need to know about doing business in Australia.
Clarity about obligations when employing and paying people in Australia including PAYG withholding, reporting, payment, superannuation and workers’ compensation insurance.
Corporate structuring advice and establishment.
Taxation advice and registration including ABN, TFN, FBT, Payroll tax, PAYGW and GST.
Opening a local bank account.
Local knowledge and representation including directorship, ATO, ASIC and OSR agency.
Advice regarding the Tax Act, Corporations Act, Trade Practices Act, Privacy Act.
Selection of compliant accounting software.
Preparation of management reporting packs.
Ongoing advice and support including pro-active communication.

We assist overseas headquartered companies to achieve a smooth entry into the Australian market whilst carefully navigating the complexities of Australia’s legal, regulatory and commercial environment. Our services are built on the strong foundation of a deep understanding of the numbers, with accounting, finance and business strategy at the core.

If you would like assistance in setting a business in Australian, or to find out more about the benefits of doing business in Australia with BridgePoint Group, please contact us. You can download the complete Doing Business In Australia Guide here.