1. Overview of FDI in the jurisdiction
1.1 Which countries are the principal sources of FDI into
The largest sources of FDI into Australia are the US, the
UK, Japan, China (including Hong Kong), the Netherlands and
1.2 What are the key sectors in your jurisdiction which
attract, or the government is seeking to attract, FDI?
FDI into Australia's mining sector attracts the largest
share (32 %) of total FDI into Australia.
The energy (oil and gas), manufacturing, retail and finance
sectors also attract significant FDI.
1.3 Is the government generally supportive of FDI? Which
government, and regional, bodies are responsible for driving
FDI in your jurisdiction?
The Government of the Commonwealth of Australia (Government)
One of the responsibilities of the Australian Trade
Commission (Austrade) - the Government's trade, investment and
education promotion agency - is to promote and facilitate
productive FDI into the country. Austrade has offices in over
50 countries and can provide international investors with:
- initial coordination of investment enquiries and
- information on the Australian business and regulatory
- market intelligence and investment opportunities;
- identification of suitable investment locations and
partners in Australia; and
- advice on Government programmes and approvals.
Each Australian state and territory government also provides
information on opportunities within their respective
jurisdiction and local requirements.
2. Investment vehicle
2.1 What are the most common legal entities and
pass-through vehicles used for FDI in your jurisdiction, and
how long do they take to become operational?
A foreign company may carry on business in Australia either
through an Australian branch or Australian subsidiary.
To carry on business through an Australian branch, a foreign
company must register with the Australian Securities and
Investment Commission (ASIC). A registered foreign company must
lodge copies of its financial statements and comply with
notification obligations under the Corporations Act 2001
The most common investment vehicle is an Australian limited
liability company incorporated under the Corporations Act. A
company is a separate legal entity capable of holding assets in
its own name and is liable for its own obligations. Shareholder
liability is limited to the amount paid or payable on
subscription for shares.
The two main types of company are proprietary and public. A
proprietary company is limited to 50 non-employee shareholders
and cannot engage in public fundraising. Proprietary companies
enjoy less regulation and cost less to administer. A public
company may be listed on the Australian Securities Exchange
Registration of an Australian branch of a foreign company,
or of an Australian company, takes approximately one week once
all required information is to hand. Alternatively, the
acquisition of shelf companies or new incorporations may be
completed within 24 hours.
2.2 What are the key requirements for establishment and
operation of these vehicles which are relevant to FDI?
An Australian company must have a local registered office,
Australian resident directors (one for proprietary companies,
two for public companies), and an Australian resident company
secretary (optional for proprietary companies).
A registered foreign company must have a local registered
office and must appoint a local agent to represent it.
3. Investment approval
3.1 For foreign investment approval (including national
security review) explain the following:
a) The regulator/s' name, factors it must consider when
making its decisions, and how much discretion it has;
Foreign investment in Australia is regulated by the Foreign
Acquisitions and Takeovers Act 1975 (Cth) (FATA) and Foreign
Investment Policy. FATA notifications are lodged with the
Foreign Investment Review Board (FIRB) for assessment. FIRB
makes recommendations to the Treasurer, who has statutory
discretion to prohibit any proposal regarded as contrary to
Australia's national interest.
The Treasurer typically considers the following factors:
- National security: whether the investment affects
Australia's ability to protect its strategic and security
- Competition: whether an investor may gain control over
market pricing and production of a good or service in
Australia, or over global supply of a good or service;
- Other Government policies: the impact on Government
- Economy and community: the impact on the
Australian economy and community generally; and
- Character of the investor: whether the investor operates
on a transparent, commercial basis and is subject to adequate
The Treasurer also considers:
- whether the foreign investor is wholly or partly
government owned, and whether it operates on an arm's length
and commercial basis;
- whether the investor is pursuing broader political or
strategic objectives that may be contrary to Australia's
national interest; and
- the size, importance and political impact of the
The Treasurer may object to (ie reject) a notification or
approve it (including by making it subject to certain mandatory
b) Any investment caps and other
Subject to certain exceptions, FIRB is not concerned with
transactions that do not exceed prescribed monetary thresholds.
Today, foreign investors are exempt from notifying:
- transactions valued at less than A$248 million ($225
million), or A$1,078 million for US or New Zealand investors;
- transactions involving developed
non-residential commercial real estate valued at less than
A$54 million (or less than A$5 million if land is heritage
FIRB will require notification of all acquisitions
(regardless of value):
- in vacant non-residential land;
- in residential land;
- in Australian urban land; or
- by foreign governments or their agencies.
c) Which party must notify and
when/if notification is mandatory or voluntary;
Notification must be made by the foreign
investor and should occur in advance of a transaction. Failure
to notify of a prescribed transaction is an offence under the
FATA, but does not invalidate any act done in contravention of
However, non-compliance may result in substantial penalties
and potentially trigger the Treasurer's powers under the FATA,
including to order divestiture.
d) What information must be
included with notification and what is the review
There is no fee to submit a notification. Notifications
should include the following information:
- explanatory covering letter including details of the
- identity of the parties;
- applicable standard form FATA notices;
- latest audited financial statements for the investor and
- the consideration;
- reasons for the proposal;
- the investor's future intentions for the
- relevant transaction agreements; and
- other supporting documentation.
e) How long does the review and approval
process take, and are there any fast-track options;
The Treasurer has 30 days to reach a decision (which can be
extended by up to 90 days), and FIRB has 10 days thereafter to
communicate the decision. There are no formal fast-track
f) Is there the ability to consult
on a named or unnamed basis;
Parties may consult with FIRB or Austrade on a named or
g) Does notification/review occur
pre- or post-closing, and are there any pre- or post-filing
requirements unique to FDI;
Notification/review generally occurs prior to closing. A
FIRB condition precedent is invariably included in FDI
transaction documents in Australia.
h) What is the position if no
response is received on an application for approval and are
there any rights of appeal from disapprovals?
If the Treasurer does not object to the proposal within 30
days (or 90 days if extended), they lose the ability to block
or impose conditions on the transaction. There is no prescribed
right of appeal against an unfavourable decision.
3.2 Briefly explain the investment restrictions for any
The following sector-specific restrictions apply to FDI:
- Total foreign investment in Australian international
airlines is limited to 49%.
- Foreign ownership of airports offered for sale by the
Commonwealth is limited to 49%, with a five percent airline
- Only majority Australian-owned ships may be registered in
Australia, unless designated as chartered by an Australian
- Aggregate foreign ownership of telecommunications company
Telstra is limited to 35% and individual foreign investors
may only own up to five percent.
- Foreign ownership in the banking sector must be
consistent with the Banking Act 1959 (Cth), the Financial
Sector (Shareholdings) Act 1998, and Government banking
- For areas of military significance (such as the Woomera
Prohibited Area), FIRB may require the approval of the
Australian Department of Defence as part of its
Note that this is a non-exhaustive list and
industry-specific legislation may also apply.
3.3 Which authority oversees competition clearance, when is
notification mandatory, and briefly explain the merger
The Australian Competition and Consumer Commission (ACCC) is
the principal regulator of competition clearance under the
Competition and Consumer Act 2010 (Cth) (CCA). The CCA
prohibits mergers that would (or are likely to) have the effect
of substantially lessening competition.
The ACCC's informal clearance process enables merger parties
to seek the ACCC's view on whether it will seek an injunction
to stop a merger from proceeding. The ACCC encourages merger
parties to notify the ACCC where: the products of the merger
parties are either substitutes or complements; and the merged
firm will have a post-merger market share of greater than 20%
in the relevant market/s.
Pre-notification to the ACCC of mergers or acquisitions is
not compulsory under the CCA. However, as non-compliance with
the CCA attracts severe penalties, parties normally seek an
informal clearance as a matter of course before completing a
4. Tax and grants
4.1 Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for FDI into the
As a general rule, there are no specific structures or
intermediary jurisdictions that are particularly favourable for
Foreign investors may conduct business through an Australian
branch rather than an incorporated subsidiary to consolidate
the financial results of the company in the foreign
jurisdiction. Australian subsidiaries of foreign companies may
consolidate under the foreign parent.
Transactions between consolidated group companies are
ignored for tax purposes and losses can be transferred between
Certain venture capital limited partnerships are exempt from
capital gains tax (CGT) subject to conditions. They are taxed
at the partner level as flow-through entities. A partner's
share of income derived from an eligible venture capital
investment is exempt, as is the gain made on disposal of an
eligible venture capital investment.
Distributions by managed investment trusts to foreign
investors are generally subject to concessional withholding tax
The investment manager regime (IMR) ensures that certain
investment income and gains of qualifying widely-held foreign
funds that operate through an Australian financial intermediary
are tax exempt. The exemptions are extended to foreign
beneficiaries and partners of IMR foreign funds.
Disposals of non-land Australian assets by non-residents are
not subject to CGT. 'Land' includes interests in entities
principally deriving their value from land, where a
non-portfolio (greater than 10%) interest is held.
4.2 What are the applicable corporate tax rates?
4.3 Does the government have any FDI tax incentive schemes
Immediate deductions are available for expenditure on mining
and petroleum exploration, or income-producing activity with
environmental protection as its sole or dominant purpose.
A deduction is available for investment in forestry managed
Concessions and averaging offsets are available to primary
producers, levelling the tax liability resulting from
fluctuating yearly incomes.
Research and development expenditure, and investment in
Australian films and television, attract tax offsets.
Interest withholding tax is not payable on loans from
offshore banking units.
4.4 Other than through the tax system, does the government
provide any other financial support to FDI investors?
The Government primarily encourages FDI through the
establishment of Austrade (see answer to 1.3). Some state and
territory governments encourage FDI through state agreements,
which historically were directed at facilitating project
approvals rather than financial assistance. Although less
common now, it is worthwhile for investors to discuss these
with relevant governments.
5 Operating locally
5.1 What is the most common governing law of contracts and
local business language?
Most contracts are governed by the law applying in the
relevant Australian state or territory. The local business
language is English.
5.2 Explain any local content or local participation
requirements relevant to foreign investors.
5.3 How difficult is it for foreign investors to secure
expatriate visas for shareholder representatives and
Non-Australian residents can apply to the Department of
Immigration and Border Protection (Department) for a subclass
457 visa. This visa enables a person to work in Australia for
up to four years and must be paid at least the minimum
entitlements that an equivalent Australian worker would receive
for performing the same role. Companies seeking to utilise this
visa must satisfy the Department that there is a lack of
suitably qualified workers within Australia to perform the
5.4 What foreign currency or exchange restrictions should
foreign investors be aware of?
Anti-money laundering and counter-terrorism legislation
regulate currency and exchange transactions, particularly in
the financial and banking services sectors.
5.5 Does the country prohibit domestic companies from doing
business in any foreign jurisdictions?
Counter-terrorism legislation restricts Australian companies
from providing domestic currency to certain entities associated
with terrorism or jurisdictions subject to trade sanctions.
6. Legal and regulatory framework
6.1 Are there any other FDI-specific laws that foreign
investors must be aware of?
See answer to 3 above.
6.2 What challenges if any do investors find in getting
certainty around local law and regulation?
Generally speaking, Australian law is well understood and
generally consistently applied through courts. Sophisticated,
confidential legal advice is readily available.
7. Dispute resolution
7.1 How efficient are local courts' enforcement and dispute
resolution proceedings, and are there any procedural
idiosyncrasies foreign investors must be aware of?
Australia has both federal and state jurisdictions, with the
appropriate forum dictated largely by the subject matter of the
dispute. In each jurisdiction, the relevant case management
rules ensure that cases run as efficiently as possible.
Superior courts in Australia publish statistics in relation to
efficiency and performance standards. For example, the Federal
Court of Australia completes 92% of cases within 18 months.
A judgment creditor is generally able to enforce a judgment
through a range of statutory procedures, including the seizure
and sale of assets. A judgment debt may also form the basis of
a statutory demand under the Corporations Act which, if unpaid,
may allow insolvency proceedings to be brought against a
7.2 Do the courts of the FDI jurisdiction respect foreign
judgments and are arbitration awards enforceable in the
Australia is a signatory to the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (New
York Convention) and the Model Law on International Commercial
Arbitration adopted by the UN Commission on International Trade
Law (UNCITRAL Model Law).
International arbitration awards made in a foreign
jurisdiction are enforceable at the federal level in accordance
with the provisions of the International Arbitration Act 1974
(Cth), while domestic arbitration awards made in Australia are
enforceable at the state and territory level according to the
Commercial Arbitration Act applicable in that jurisdiction.
The judgments of certain foreign countries' courts can be
enforced in Australia by registration under the Foreign
Judgments Act 1991 (Cth) without the need for fresh
proceedings. Generally this process is available only with
respect to money judgments from countries with which Australia
has reciprocal enforcement arrangements. Certain foreign
judgments may also be enforceable in Australia at common
7.3 Are judgments and arbitration awards from the FDI
jurisdiction generally enforceable in other jurisdictions?
Enforcement of arbitration awards made in Australia can
generally be expected in those jurisdictions that are
signatories to the New York Convention and/or the UNCITRAL
Model Law. The enforcement of judgments of Australian courts
can be expected in those jurisdictions with which Australia has
an agreement for the reciprocal enforcement of judgments (see
above). Otherwise, whether an Australian judgment is
enforceable in a particular foreign jurisdiction will depend on
the local laws of that jurisdiction.
Partner, Clayton Utz
T: +61 8 9426 8439
Kevin O'Sullivan is a partner in Clayton Utz's
corporate energy & resources team. He has extensive
cross-border experience in energy and resources,
corporate and broader commercial transactions,
particularly M&A, joint ventures, distressed
transactions, foreign investment, and project
His relevant experience includes representing Agrium
in its A$1.3 billion acquisition of AWB Limited by
scheme of arrangement. A key feature was obtaining FIRB
approval in record time through key relationships,
early and consistent engagement with FIRB, and
commercially and politically focussed application
documentation. O'Sullivan also acted for Chubu Electric
Power in relation to its equity investments in
– and significant long-term LNG offtake
arrangements from – the A$52 billion Gorgon
LNG project, and the $34 billion Ichthys LNG project.
Elsewhere he advised Shin-Etsu Chemical in its
acquisition of the Simcoa Group of Companies.
O'Sullivan is recognised as a worldwide leading
energy practitioner in the 2013 edition of The
International Who's Who of Energy Lawyers.
Partner, Clayton Utz
T: +61 8 9426 8490
Peter Wiese advises in a wide range of matters in
connection with mining, oil and gas, electricity,
M&A and corporate areas.
He has acted in connection with the sale, purchase,
development and operation of many public and private
infrastructure and resources assets, including in
connection with: airports; telecommunications; rail;
regulated and unregulated gas pipelines; upstream and
downstream oil and gas; and, upstream and downstream
electricity assets. He also has extensive experience
advising on commodity and asset transactions in
connection with LNG and domestic gas, gold, iron ore,
alumina, nickel, coal and other resources.
For many years, and again in 2013, Wiese has been
rated in Chambers Global Guide in the first band of
energy and natural resources lawyers in Australia. He
is also rated as 'leading individual' in Australian
energy and resources law by The Legal 500.
Partner, Clayton Utz
T: +61 8 9426 8443
Heath Lewis is a corporate partner in the Perth
office of Clayton Utz. He practises in all areas of
corporate and commercial law, with a particular focus
on M&A (both private treaty and regulated), equity
capital markets (including initial public offerings and
secondary raisings), incorporated and unincorporated
joint ventures, and corporate and securities law and
Lewis acts for a number of ASX and TSX-listed
clients, as well as significant private firms, most
often in the energy and natural resources industry (all
sectors including mining, agribusiness, and oil and
He has been recognised by his peers in the
Australian Financial Review's list of leading lawyers
in M&A and corporate/governance, and was recognised
as a worldwide leading practitioner in the
International Who's Who of Mining Lawyers for 2013.