Legislation update

FIRB approval no longer required for certain commercial leases

By Michael Hansel and Christina Hooper / 14 September 2020
6 min.
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Worthwhile read for: Company Directors, Investors, Executive members

The Federal Government of Australia has recently introduced the Foreign Acquisitions and Takeovers Amendment (Commercial Land Lease Threshold Test) Regulations 2020 (Amendment) which amends the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (FATR).

As discussed in previous alerts, in response to COVID-19, the Treasurer announced that the monetary thresholds associated with foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), will require approval from the Foreign Investment Review Board (FIRB).

The effect of the Amendment is that the renewal of certain pre-existing interests in commercial leases will no longer require FIRB approval. 

The following interests in occupied commercial leases now have the corresponding threshold value to trigger the requirement for FIRB approval:

Requirement

Comment

Both of the following apply:

the interest is an interest as lessee in a lease; and

At this juncture, the increase in the monetary threshold extends to leases and not purchases by foreign persons. 

the interest is substantially the same as an interest held by the foreign person as lessee in a lease over the land immediately before the March announcement;

At this juncture, the increase in the monetary threshold extends to foreign persons who held the lease prior to the threshold being decreased to $0.

None of the following will apply when the proposed lease is entered into:

  1. the land will be leased to the Commonwealth, a State, a Territory or a Commonwealth, State or Territory body, except to one or more bodies covered a corporate Commonwealth entity (within the meaning of the Public Governance, Performance and Accountability Act 2013) other than any of the following bodies:
  • the Australian Nuclear Science and Technology Organisation;
  • Comcare;
  • Commonwealth Superannuation Corporation;
  • the Commonwealth Scientific and Industrial Research Organisation; and
  • the Reserve Bank of Australia.
  1. the land will be fitted out specifically for a sensitive business or a business providing storage of bulk data.

Sensitive business is defined in the regulation to include business that are used wholly or partly in :

  • the supply of training or human resources to, the manufacture of military goods, equipment or technology for, or the supply of military goods, equipment or technology to, the Australian Defence Force or other defence forces; 
  • the manufacture or supply of goods, equipment or technology able to be used for a military purpose; 
  • the development, manufacture or supply of, or the provision of services relating to, encryption and security technologies and communications systems; or
  • the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of a nuclear facility.
  1. the land will be fitted out specifically to store, handle or dispose of biological agents on the List of Security sensitive Biological Agents (within the meaning of the National Health Security Act 2007);

 

This includes the following Biological Agents:

Tier 1 SSBAs (with toxin thresholds*)

  • Abrin (5 mg) 
  • Bacillus anthracis (Anthrax – virulent strains)
  • Botulinum toxin (0.5 mg)
  • Ebolavirus
  • Foot-and-mouth disease virus
  • Highly pathogenic influenza virus, infecting humans
  • Marburgvirus
  • Ricin (5 mg)
  • Rinderpest virus
  • SARS coronavirus
  • Variola virus (Smallpox)
  • Yersinia pestis (Plague)

Tier 2 SSBAs

  • African swine fever virus
  • Capripoxvirus (Sheep pox virus and Goat pox virus)
  • Classical swine fever virus
  • Clostridium botulinum (Botulism; toxin-producing strains)
  • Francisella tularensis (Tularaemia)
  • Lumpy skin disease virus
  • Peste-des-petits-ruminants virus
  • Yellow fever virus (non-vaccine strains)1
  1. an authorisation under a law of the Commonwealth, a State or a Territory will allow materials that are regulated under that law to be produced or stored on the land;
 
  1. a mining operation will operate on the land;

At this juncture, the increase in the monetary threshold does not extend to mining leases. 

  1. a stored communication will be stored on the land;

A stored communication is a communication that: 

  • is passing over a telecommunications system; and
  • is held on equipment that is operated by, and is in the possession of, a carrier; and
  • cannot be accessed on that equipment, by a person who is not a party to the communication, without the assistance of an employee of the carrier.
  1. the failure of part of a network unit on the land will result in telephony or internet services not being provided on other land;

 

There are four types of network units:

  • a single line link connecting distinct places in Australia, where the line link meets certain minimum distance requirements;
  • multiple line links connecting distinct places in Australia, where the line links meet certain minimum distance requirements;
  • a designated radiocommunications facility; and
  • a facility specified in a Ministerial determination.
  1. servers critical to an authorised deposit taking institution or a stock exchange in Australia will be located on the land;
 
  1. public infrastructure will be located on the land.

 

Public infrastructure means:

  • an airport or airport site; 
  • a port; 
  • infrastructure for public transport; and
  • a system of facility that is used for the provision of any of the following services to the public:
  1. the generation, transmission, distribution or supply of electricity;
  2. the supply of gas;
  3. the storage, treatment or distribution of water; and
  4. the treatment of sewage.

                       
Commercial land is defined by the FATA to be land in Australia or the seabed of the offshore area, other than land:

  1. that is used wholly and exclusively for a primary production business; 
  2. on which there is at least one dwelling (except commercial residential premises); or
  3. on which the number of dwellings (except commercial residential premises) that could reasonably be built is less than the number prescribed by the FATR. 

Where the foreign person is from an agreement country or region investor (the United States of America, New Zealand, Chile, Japan, the Republic of Korea, China, Peru, Singapore, a country other than Australia for which the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, done at Santiago on 8 March 2018 is in force; and the region of Hong Kong China) the monetary threshold is $1,192 million dollars.

Where the foreign person is not from an agreement country or region investor the monetary threshold is $275 million.

For more information, please contact our Corporate Advisory and Governance team. 


1 https://www1.health.gov.au/internet/main/publishing.nsf/Content/ssba.htm#list

Authors
Michael Hansel
Partner
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...
Christina Hooper
Associate
Christina is an Associate in our Corporate practice.

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