Last updated: October 2018

Introduction

Foreign buyers acquiring an interest in Australian land generally require approval from the Foreign Investment Review Board (FIRB). This restriction includes agricultural land, commercial land, residential land, and mining or production tenements, unless an exemption applies. Foreign investment laws enable the Treasurer to make a range of orders relating to significant and notifiable actions. Investors should conduct comprehensive due diligence regarding any property or interest they intend to purchase, to ensure they are aware of the FIRB restrictions for that property.

When developing a project in Australia, it is crucially important to rule out any uncertainty about a FIRB application for the purposes of the project.

Interests in land

An interest in Australian land includes:

  • a legal or equitable interest in land (except in certain circumstances)
  • an interest in a security in an entity that owns Australian land
  • an interest as a lessee or licensee
  • an interest in an agreement that gives rise to an interest in land
  • an interest in a share in an Australian land corporation or agricultural land corporation
  • an interest in a corporation that acts as trustee of an Australian land corporation or agricultural land trust.

An interest in land does not include an interest under a lease or licence that has a term of less than five years.

Significant actions

A significant action includes an acquisition of an interest in Australian land above the monetary thresholds set by the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (Regulations). An acquisition may involve entering into an agreement or option, including those that depend on the fulfilment of a condition.

Notifiable actions

The Foreign Acquisitions and Takeovers Act 1975 (FATA) requires foreign persons proposing to acquire an interest in certain Australian real estate to notify the Treasurer (a notifiable action). Only some significant actions are notifiable actions; one way to determine this is whether the action meets the monetary screening threshold test.

The Foreign investment section of this guide sets out the monetary thresholds and applicable application fees for lodging a FIRB application.

The Treasurer’s powers

Notifiable actions cannot proceed without the Treasurer’s approval. The Regulation sets out prescribed time periods for the Treasurer to make a decision.

At present, the Treasurer has 30 days to consider the notice and make a decision; however, the time period is amended from time to time. The period that applies is the one that was current on the date of the application. The Treasurer may extend this period up to a further 90 days, or applicants may request in writing that the period be extended for the same period of time.
The Treasurer can make disposal orders if notifiable actions proceed without approval, or if any conditions placed on an approval are breached. 

Exemptions

The Regulations set out a number of exemptions for certain significant and notifiable actions. There are several exemptions in relation to acquiring an interest in real estate, for example a foreign person does not need to notify the Treasurer of the acquisition:

  • of a new dwelling if the developer selling the dwelling has been granted an exemption certificate;
  • of an interest in land from an Australian Government entity (except if the party acquiring the interest is a foreign government investor, or the acquisition involves an interest in critical infrastructure assets); or
  • of an interest in land acquired by will, or by devolution by operation of law.

Because this list is updated regularly, exemptions must be considered on a case‑by‑case basis.

Offences and civil penalties

There are criminal and civil penalties for foreign persons who breach the provisions of FATA.  Breaches include failing to notify the Treasurer, or contravening a condition of approval. The criminal penalties include a fine and up to three years imprisonment for individuals, and a fine for companies. The Treasurer may also commence civil penalty proceedings.

The penalties may extend to third parties such as company officers, lawyers, accountants and real estate agents.  Unpaid penalties will result in a charge being placed on the land, which will only be removed upon payment of the outstanding amount.

Native title and cultural heritage

Since 1992, the Australian courts have recognised that a form of native title – one that reflects the entitlement of the Indigenous inhabitants of Australia to their traditional lands, in accordance with their laws and customs – may have survived the process of European settlement.

The courts have held that native title survives unless extinguished either by:

  • an act of Government that is inconsistent with the continued existence of native title rights and interests; for example:
    • the grant of freehold title
    • the creation of a lease giving the right of exclusive possession
    • the construction or establishment, by or on behalf of the Crown, of certain public works such as buildings and roads
  • the concerned group or clan of Aboriginal or Torres Strait Islander peoples losing connection with their traditional lands.

This means native title may continue to exist over large areas of the Australian continent – particularly in relation to state-owned reserves, parks, forests, beaches and other Crown lands, as well as in relation to waters both within and beyond the territorial limits of each state and territory.

The Native Title Act 1993 (Cth) (NTA) supports these developments in the common law, which establishes a framework for recognising and protecting native title. It does so by creating procedures for Aboriginal and Torres Strait Islander peoples to claim native title in relation to land and waters where native title has not been extinguished, and for such claims to be determined by the Federal Court.

When developing a project in Australia, it is crucially important to rule out any uncertainty about the validity of titles and permits that governments grant for the purposes of the project.

Under the NTA, any act of Government – such as the grant of a freehold or leasehold estate, or of the statutory authority to use Crown land – done after 1 January 1994 that would extinguish (or be otherwise inconsistent with the continued existence or enjoyment of) native title, will be invalid to the extent that it affects native title, unless the act is covered by (and, where relevant, is done in accordance with) a relevant provision of the NTA. These Government acts, where they affect native title, are known as ‘future acts’.

All people doing business in Australia must consider the extent to which future acts may be required for their projects or transactions. If future acts are planned and are covered by relevant provisions of the NTA, there may also be a requirement to follow particular procedures laid down in the NTA. These procedures typically give registered holders of, and registered claimants to, native title the right to be notified about – and to make submissions in relation to – the future acts.

In some instances, particularly with respect to the grant of mining tenements, these procedures include a requirement to negotiate with the relevant native title party to obtain their agreement to the doing of the future act in question. Validation procedures such as this have been prescribed for various types of future acts, including those that permit the construction or operation of certain types of infrastructure that will be operated for the general public.


Since 1998, the NTA has allowed an alternative future act process. Many businesses and developers find it more convenient to begin negotiating and seeking registration of an Indigenous land use agreement (ILUA) with the people who hold or may hold native title over the project area (for example, the registered native title claimants) at an early stage of project development. With a registered ILUA in place, a future act will be valid if there is included in the ILUA a statement that the parties agree to the doing of the act.

ILUAs commonly deal with matters such as the preservation of sacred or important sites; the exchange of important cultural information concerning the Indigenous group or clan concerned; the project developer employing members of the group or clan; and the payment of compensation for the effect of the project development on native title.

The recognition of native title is a relatively recent development in Australian property law, and it can present challenges in the context of mining in remote areas and in infrastructure development.

However, starting early on negotiations with native title holders or claimants will generally result in native title presenting no insurmountable obstacles to a successful project.

Cultural Heritage Management Plans

The Federal Government and each of the states and territories have passed legislation to protect Aboriginal and Torres Strait Islander cultural heritage.

In the case of major projects, Cultural Heritage Management Plans generally must be negotiated with relevant Aboriginal or Torres Strait Islander parties, unless there is already a registered ILUA in place that deals with such issues.

It is important to begin negotiations for such a plan at an early stage in the project development, contemporaneously with the negotiation of native title issues.

Property due diligence

Due diligence is the process of investigating and verifying information, records and documentation relating to an entity or an asset. Due diligence is important as it allows investors to be fully informed of the risks involved in purchasing an asset. It also allows investors to make informed decisions about asset pricing.

Common property due diligence inquiries include investigating the title to the property; reviewing any leases over the property; and reviewing planning certificates, planning instruments and regulations that may affect the property’s use and future redevelopment potential.

When conducting due diligence, it is advisable to keep the following tips in mind.

  • Start early. It is often advantageous to undertake due diligence as soon as the materials are available. This provides purchasers with a timing advantage if the seller is looking for a purchaser who is ready to progress to the next stage of the transaction.
  • Use professional consultants. Engaging experienced consultants such as lawyers, engineers and environmental consultants provides investors with the most comprehensive analysis of the property.
  • Seek permission for third-party reliance. If a purchaser wishes to rely on a report prepared by a consultant for the seller, the purchaser would usually need to seek permission from the consultant before they can rely on the report. The purchaser may also need to pay the consultant for this reliance.
  • Get insurance. It is important for the investor to obtain sufficient insurance for the property they wish to purchase.

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