NO.089

Reforming Australia's Foreign Investment Framework

Today I am pleased to announce reforms to Australia's foreign investment screening framework which will support Australian jobs and economic growth, and position Australia for a more competitive recovery beyond the global recession.

Foreign investment is vital to Australia's future growth and prosperity because it creates jobs, boosts innovation and skills, and promotes healthy competition in our industries.

Currently, some screening requirements on foreign investors impose unnecessary compliance costs on businesses, and fixed foreign investment screening thresholds capture ever more low-value foreign investment proposals each year that do not raise any national interest issues.

This can act as a major disincentive where overseas investors are seeking to set up businesses in Australia which put more Australians in jobs and create more activity in our economy.

In order to reduce these disincentives, the Government will:

• Replace the four lowest thresholds for private business investment with the highest of these – a single threshold of 15 per cent in a business worth $219 million. This means private foreign investment in Australian businesses below $219 million can proceed without review.
• Index the new unified threshold on 1 January every year to keep pace with inflation and to prevent foreign investment screening from becoming more restrictive over time.
• Abolish the existing requirement that private investors notify the Government when establishing a new business in Australia valued above $10 million.

These are important measures to ensure that the Government does not become unnecessarily involved in uncontroversial business transactions. For example, not one new business application has been rejected for more than a decade.

Based on 2008-09 figures, around 20 per cent of all business applications will no longer be screened by the Foreign Investment Review Board.

The Government aims to introduce amending regulation in September 2009.

The global financial crisis has highlighted that Australia is not immune from the fallout when global markets struggle to function and when international capital retreats.

These reforms will help boost Australia's growth as the global economy recovers – streamlining Australia's foreign investment regime, cutting red tape and compliance costs, and improving Australia's competitiveness as a place to invest.

SYDNEY
4 August 2009

Summary of Measures Announced:

The Government will:

1. Amend the Foreign Acquisitions and Takeovers Regulations 1989 to replace the four lower business thresholds with one higher threshold of 15 per cent or more of a business valued at $219 million or more (see table below).
2. Index the new unified threshold on 1 January each year against the GDP price deflator.
3. Abolish the requirements that foreign private investors notify the Government when establishing a new business in Australia valued above $10 million. This currently applies to all non-United States investors.

The six monetary thresholds that currently apply to private foreign investment in Australian businesses will be reduced to two:

• $219 million (indexed) for private foreign investments in Australian businesses
• $953 million (indexed) for United States investment in non-sensitive sectors

Notes:

Special screening arrangements for media and government sector investments will continue.

The special threshold for United States investors in non-sensitive sectors of $953 million (indexed) that currently applies will remain.