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FIRB Agreement: What it Means for Country Investors
If you are a foreign investor interested in buying or investing in Australian assets, you need to be aware of the Foreign Investment Review Board (FIRB) and its rules. These rules apply to different types of investments, such as acquisitions of land, businesses, securities, or assets in sensitive sectors, and aim to balance the national interest with the benefits of foreign investment. However, not all countries have the same FIRB agreement with Australia, and the terms and conditions may vary depending on the level of risk and scrutiny involved. In this article, we will explain what FIRB agreement means for country investors and how to navigate the process.
First, let`s define what FIRB is and what it does. FIRB is a government agency that oversees and regulates foreign investment in Australia, based on the Foreign Acquisitions and Takeovers Act 1975 (Cth) and related policies. FIRB assesses the potential impact of foreign investment on national security, competition, community, and other factors, and advises the Treasurer on whether to approve, reject, or impose conditions on the investment. FIRB also monitors compliance with the conditions and penalties for non-compliance. The aim of FIRB is to ensure that foreign investment contributes to Australia`s economic growth, job creation, innovation, and trade, while protecting its sovereignty, culture, and environment.
Now, let`s look at the FIRB agreement with different countries. FIRB has a general policy that requires all foreign investors to seek approval for any acquisitions or investments in Australian assets above certain thresholds, such as $0 for residential real estate, $275 million for non-sensitive businesses, and $0 for some sensitive sectors, like media or defense. However, FIRB has also signed specific agreements with some countries that exempt them from some or all of these thresholds and allow faster and easier approvals for certain types of investments. These agreements are called Free Trade Agreements (FTAs) or Investment Promotion and Protection Agreements (IPPAs), and currently cover the following countries:
– Canada: the Canada-Australia FTA (signed in 2007) and the Canada-Australia IPPA (signed in 2014) provide national treatment and pre-establishment rights for Canadian investors, as well as higher thresholds for screening non-sensitive investments ($1.154 billion for 2021) and faster approvals for certain investments in non-sensitive sectors.
– Chile: the Chile-Australia FTA (signed in 2009) and the Chile-Australia IPPA (signed in 2009) allow Chilean investors to benefit from the same thresholds and treatment as Canadian investors, as well as additional access to government procurement and services.
– China: the China-Australia FTA (signed in 2015) and the China-Australia IPPA (signed in 1988) provide reciprocal treatment and higher thresholds for Chinese investors, depending on the type of investment. For example, Chinese investors can acquire up to 20% in an Australian agribusiness without FIRB approval, and up to $1.192 billion for non-sensitive businesses in 2021, but need to seek approval for investments in sensitive assets.
– Japan: the Japan-Australia FTA (signed in 2014) and the Japan-Australia IPPA (signed in 2008) grant Japanese investors similar treatment as Canadian and Chilean investors, but also exempt them from screening for non-sensitive investments below $1.192 billion for 2021. Japanese investors can also benefit from streamlined approvals for certain investments in sectors such as infrastructure, healthcare, and education.
– Korea: the Korea-Australia FTA (signed in 2014) and the Korea-Australia IPPA (signed in 2014) offer Korean investors the same thresholds and treatment as Japanese investors, but also reduce the review period for non-sensitive investments from 30 days to 15 days, and provide mutual recognition of professional qualifications and standards.
– New Zealand: the Australia-New Zealand Closer Economic Relations Trade Agreement (AANZFTA, signed in 1983) and the Trans-Tasman Mutual Recognition Arrangement (TTMRA, signed in 1995) allow New Zealand investors to benefit from national treatment and no thresholds for most types of investments, except for sensitive assets and land over five hectares for residential purposes.
In addition to these agreements, FIRB also has a screening threshold of $0 for investors from countries that do not have an agreement with Australia, or for investments in sensitive sectors regardless of the country of origin. This means that all foreign investors need to apply for FIRB approval if they want to buy or invest in Australian assets that exceed the thresholds or involve sensitive assets. The FIRB process can take up to six months or longer, depending on the complexity and risk of the investment and the level of consultation required with other government agencies or stakeholders.
Therefore, as a country investor, it is important to understand the FIRB agreement with Australia and seek advice from legal and financial experts who can help you navigate the process. You need to consider not only the financial and strategic aspects of your investment, but also the regulatory and compliance requirements that FIRB imposes. You also need to be aware of the potential changes in FIRB policy or government priorities that may affect your investment in the future, and have contingency plans in place. By following these guidelines, you can make informed and successful investments in Australia that benefit both the host country and your own interests.