Offshore

International Investment IssuesOne of the Government's principal trade objectives is to capture the benefits of trade liberalisation and international investment for Australia by pursuing a multi-faceted trade policy of progressing complementary multilateral, regional and bilateral partnerships.

The Foreign Investment Policy Division is responsible for international investment policy issues in multilateral forums, such as the Organisation for Economic Cooperation and Development (OECD) and the World Trade Organisation (WTO), in regional forums such as Asia-Pacific Economic Cooperation (APEC), and bilaterally through free trade agreements, investment protection and promotion agreements and other bilateral partnerships.

The capacity to invest in foreign economies is increasingly becoming as important to global growth as the capacity to trade. According to the United Nations , there are 65,000 transnational corporations, with approximately 850,000 foreign affiliates across the globe. Sales by foreign affiliates in 2001, of almost US$19 trillion, were more than twice as high as world exports, while they were roughly equal in 1990.

Accordingly, bilateral free trade agreements (and to some extent multilateral agreements) now perform a larger role than just the removal of trade barriers. They are an instrument to promote two-way investment and to define investment parameters.

ResidentialResidential real estate means all Australian urban land other than commercial properties (that is offices, factories, warehouses, restaurants, shops). Acquisitions of 'hobby farms' and 'rural residential' blocks by foreign interests are included in the residential real estate category.

Foreign purchasers intending to acquire real estate in Australia must seek prior approval from the Government through the Foreign Investment Review Board unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations.

Entering Into A ContractAll contracts by foreign persons to acquire interests in Australian real estate must be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract.

For properties to be purchased at auction, prior foreign investment approval must still be obtained and advice provided whether the parties were successful or not, and if so, a copy of the signed contract forwarded to the Foreign Investment Review Board (FIRB) after the auction.

Who is Exempt?
Exemptions include:

acquisitions by Australian citizens resident abroad;
acquisitions of property zoned residential by foreign nationals who hold permanent resident visas or hold, or who are eligible to hold, a 'special category visa' (eg a New Zealand citizen); and
foreign persons purchasing, as joint tenants, with their Australian citizen spouse property that is zoned residential.
Under the Act, a foreign person is:

a natural person not ordinarily resident in Australia;
a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.
A substantial foreign interest (ie, a controlling interest) occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

The Government seeks to ensure that foreign investment in residential real estate increases the housing stock. The Government, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments - house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

The policy on developed residential real estate is negative. The effect is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent, therefore maintaining greater stability of house prices and the affordability of housing for Australians.

Other InvestmentThe foreign investment policy provides for Government scrutiny of many proposed foreign purchases of Australian businesses and properties. The Government has the power under the Foreign Acquisitions and Takeovers Act 1975 (the Act) to block proposals that are determined to be contrary to the national interest. The Act also provides legislative backing for ensuring compliance with the policy.

In the majority of industry sectors, smaller proposals are exempt from notification and larger proposals are approved unless judged contrary to the national interest. The screening process undertaken by the Foreign Investment Review Board (FIRB) enables comments to be obtained from relevant parties and other Government agencies in considering whether larger or more sensitive foreign investment proposals are contrary to the national interest.

The Government determines what is 'contrary to the national interest' by having regard to the widely held community concerns of Australians. Reflecting community concerns, specific restrictions on foreign investment are in force in more sensitive sectors such as the media and developed residential real estate. The screening process provides a clear and simple mechanism for reviewing the operations of foreign investors in Australia whenever they seek to establish or acquire new business interests or purchase additional properties. In this way the Government is able to put pressure on foreign investors to operate in Australia as good corporate citizens if they wish to extend their activities in Australia.

Under the Act, a foreign person is:

a natural person not ordinarily resident in Australia;
a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.
A substantial foreign interest occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

The Government recognises the commercial-in-confidence sensitivity of much of the information provided to the Board. The Government respects this confidential status and ensures that appropriate security is given to it. Where third parties outside of Government seek to obtain access to confidential information held by the Government, it will not be made available without the permission of the applicant, except upon the order of a court of competent jurisdiction. In this respect, the Government will pursue the defence of this policy through the judicial system.

Australia Welcomes Singapore InvestorsIn recognition of our longstanding friendship and growing trade and investment relationship, on 28 July 2003 a free trade agreement between Australia and Singapore entered into force, creating greater economic integration and bilateral relations between our countries.

Under this agreement, Australia agreed to provide a help desk to assist Singaporean business investors with direct investment applications in Australia. This was agreed in response to concerns expressed by Singaporean investors for more certainty and tangible assistance in the foreign investment application process.

The Help Desk’s Services:

The help desk does not provide assistance with residential real estate applications.
The help desk assists Singaporean business investors with the foreign investment application process, including the provision of:
advice on foreign investment policy and its administration in Australia;
application forms and statutory notices;
advice on how to complete forms and where to submit them;
advice on any potential national interest concerns that proposals raise; and
advice regarding statutory and non-statutory timeframes for assessing proposals.
The help desk will provide advice to Singaporean business investors regarding the status of their applications.
The desk will assist Singaporean investors to fulfil requests by the Foreign Investment Review Board for further information.

Our Commitment Under the Singapore/Australia Free Trade Agreement (SAFTA)

Australia’s commitment under Annex 4-III(IV) of SAFTA:

Australia shall establish a dedicated help desk to assist Singaporean investors with direct investment applications to acquire existing Australian businesses or establish new businesses, including purchases of property as an integral part of the business. The help desk shall:
assist investors to respond to further requests for information;
provide information on any national interest concerns arising from these applications; and
keep such investors up-to-date with the status of these applications.
Australia shall review these applications from Singaporean investors expeditiously in accordance with its laws, regulations and policies.
Unless an application to acquire an existing Australian business or establish a new business is denied, such application is deemed to be approved at the end of the statutory review period, or where notice of a statutory extension is given to the investor, at the end of the statutory period of extension.

For more infomation go to http://www.firb.gov.au