Stakeholder consultation period: major reforms to the Foreign Investment Review Framework 

7 min.
Worthwhile read for: Company directors, CEO, Board members, Investors

On 31 July 2020, the Federal Government released the exposure draft of the Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020 (Cth) (Exposure Draft Bill). The Government has for some time now indicated that major reforms are being proposed to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).

The proposed reforms, outlined in our previous alert, are designed to promote Australia’s national interest, particularly national security, while maintaining a sustainable level of foreign investment and include:

  1. a new ‘national security test’ for foreign investment in ‘sensitive national security businesses’;
  2. a review of all foreign investment in sensitive national security businesses;
  3. a streamlining of less sensitive investments;
  4. power to the Treasurer to scrutinise investments before, during or after their occurrence; and
  5. stronger enforcement powers of the Australian Government to enforce continual compliance by foreign investors.

The Australian Federal Government is now requesting stakeholder views and feedback on the Exposure Draft Bill. The Exposure Draft Bill gives effect to the major reforms to the FATA.

This alert outlines the key changes that arise from the Exposure Draft Bill in respect of:

  1. new national security powers (including the call in and the national security last resort power);
  2. improved compliance and enforcement powers; and 
  3. integrity and technical amendments.

New national security test and powers 

The Exposure Draft Bill establishes a new ‘national security test’ which: 

  1. requires mandatory notification of any proposed direct investment in a sensitive ‘national security business’, which means a ‘business’1 which is:
  • carried on wholly or partly in Australia whether or not in anticipation of profit or gain (including starting such a business); and 
  • falls within an expansive list of prescribed businesses, which includes (but is not limited to) a business which supplies critical goods for military end-use, businesses which store or have access to information which is subject to a security classification, businesses which collect or store personal information collected by Government defence agencies and certain tele-communication carrier businesses;
  1. requires mandatory notification of any proposed investment in sensitive ‘national security land’ , which is defined as land that fits in one of the following three categories:
  • ‘defence premises’ within the meaning of section 71A of the Defence Act 1903 (Cth);
  •  land in which an agency in the national intelligence community has an interest; or
  • land declared by the Treasurer (by way of legislative instrument) to be national security land;
  1. allows a significant action that has not been notified and certain actions not otherwise captured under FATA to be ‘called in’ for screening on national security grounds; 
  2. allows investors to voluntarily notify of an action that could otherwise be ‘called in’; and  
  3. allows the Treasurer, in exceptional circumstances, to impose conditions, vary existing conditions, or, as a last resort, force the divestment of any realised investment which was subject to the FATA where national security concerns are identified.

The following table  provides a comparison of the key features of the new law and the current law under FATA:

Current law

New law 

Notifiable national security actions

A foreign person must notify the Treasurer prior to taking a notifiable action. 

A foreign person must notify the Treasurer before taking a notifiable national security action, or a notifiable action.

Call-in powers

The Treasurer has powers for significant actions assessed against the national interest. 

The Treasurer will also have powers for certain actions not covered by the FATA or significant actions that are not notified, if the action poses a national security concern.

A person may voluntarily notify of a proposed action.

A person may also voluntarily notify of a proposed action that could be reviewed under the Treasurer’s ‘call-in’ power.

Last resort powers

The Treasurer is unable to unilaterally amend a no objection notification or any conditions in the no objection notification, if it is detrimental to the foreign person or without the foreign person’s consent. 

The Treasurer is able to give orders necessary to reduce national security risks if: 

  • there has been a material misstatement or omission in information provided to the Treasurer; or 
  • relevant circumstances or the activities of the person have changed; and
  • a national security risk has arisen; and 
  • all other options, including good faith negotiation and other regulatory powers, have been exhausted.

Improved compliance and enforcement

Enhanced powers of the Treasurer and Commissioner of Taxation

The Exposure Draft Bill grants new compliance and enforcement powers to the Treasurer and Commissioner of Taxation. The key changes consist of :

  1. monitoring and investigative powers, in line with those of other regulators, including access to premises with consent or as permitted by warrant to gather information; 
  2. powers to give directions to investors to prevent or address suspected breaches of conditions or of foreign investment laws;
  3. increased civil and criminal penalties under the FATA;
  4. extension of the foreign investment infringement notices regime to cover all types of breaches relating to foreign investments, and enable proportionate and appropriate enforcement action in response to investor non-compliance; and
  5. power to remedy situations where foreign persons are given a no objection notification or an exemption certificate based on a foreign investment application that makes an incorrect statement or omits an important piece of information.

The changes reflect a significant enhancement of the scope and power that is currently afforded to the Treasurer and Commissioner of Taxation under the FATA. The changes allow for a strengthened response against compliance issues and will increase the regulators enforcement and monitoring capabilities. 

New Register of Foreign Ownership of Australian Assets

Current interests in water, agricultural land and residential property held by foreign persons are maintained on:

  1. the Register of Foreign Owned Water or Agricultural Land; and
  2. the Land Register, which records interests based on reporting conditions imposed on foreign persons who acquire residential property,

both of which are administered by the Australian Taxation Office (ATO).

The Exposure Draft Bill creates a new Register of Foreign Ownership of Australian Assets which will record all foreign interests acquired in :

  1. Australian land; 
  2. water entitlements and contractual water rights; and 
  3. business acquisitions that require foreign investment approval, including acquisitions reviewed under the new national security test.

The Exposure Draft Bill imposes an obligation on foreign investors to notify the Registrar of certain prescribed events which occur in relation to a registrable land or water interest or the acquisition of an interest in an Australian entity or business and interests acquired under the national security test. Civil penalty provisions will apply for failure to register a registrable interest.

Other key amendments

Other key amendments arising out of the Exposure Draft Bill consist of:

  1. a change in the operation of the ‘change in control test’;
  2. the removal of the ‘presumption of advancement’ where it applies to an action under the FATA; and
  3. expansion of the ‘tracing rules’ to allow tracing through unincorporated limited partnerships.

Technical amendments

The Exposure Draft Bill also makes changes to improve the readability of existing provisions by rectifying inconsistencies, addressing unintended consequences, and refines applicable fees to foreign investors to ensure they are fairer and simpler. 


Stakeholders have from 31 July 2020 to 31 August 2020 to provide feedback on the Exposure Draft Bill. Feedback can be given via the following email address:

The Federal Government has also released the first part of the Foreign Investment Reform (Protecting Australia’s National Security) (National Security Business) Regulations 2020 (Cth) (Exposure Draft Regulation). We will provide an update on the Exposure Draft Regulation amendments when the remainder of the changes proposed by the Exposure Draft Regulation have been released, which is estimated to occur in September 2020.

We are currently advising a number of parties on their obligations arising under the FIRB regime and are closely monitoring changes with respect to FATA. If you have any questions, please contact our Mergers and Acquisitions team.


1 The Foreign Investment Reform (Protecting Australia’s National Security) (National Security Business) Regulations 2020 (Cth) s 10A provides an expansive list of businesses that fall within the scope of a ‘national security business’ and includes (but is not limited to) businesses that provide goods and services for military, security or defence purposes.

Key Contacts
Michael Hansel
Michael is a Partner in our Corporate practice with expertise in mergers and acquisitions, capital raisings, due diligence, takeovers, joint ventures, corporate restructuring and private equity transactions. Michael is also the co-lead of our Asia...
Robyn Ferguson
Robyn is a Partner in our Corporate practice with significant experience advising Australian corporations and their respective boards and senior management on capital raisings, IPOs, takeovers, mergers and acquisitions and compliance.

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