On 24 June 2021, the Foreign Investment Review Board (FIRB) released its 2019 – 2020 Annual
Report for the financial year ended 30 June 2020, a year in which the Treasurer approved more than 8,200
foreign investment applications, representing potential investment of some A$195.5 billion in Australia.
The 2019-20 period was significant not only in relation to the Government's introduction, on 29 March 2020, of zero
dollar thresholds to protect Australia's national interest during the COVID-19 pandemic, but also with the
announcement of substantial reforms to the foreign investment framework which were passed by Federal Parliament and
came into effect on 1 January 2021.
The Report provides an overview of developments in foreign investments and its related policy within the reporting
period, and presents data showing the continuing strength of foreign investment in Australia despite the ongoing
challenges of the COVID-19 pandemic.
What happened with foreign investment in 2019–20?
In 2019-20, Australia remained an attractive destination for foreign direct investment despite a reduction in the
overall number and value of proposed applications compared to 2018-19. While business applications were impacted in
the second half of 2019-20 by the global economic downtown caused by the pandemic, this decrease was only slightly
more than the average reduction globally. Please see "Findings and data for 2019-20" below for further detail on
FIRB's data for the past year.
As we highlighted last year, significant policy changes
to foreign investment review in Australia under temporary COVID-19 measures and foreign investment
reforms were respectively announced and implemented in order to safeguard Australia's national interest in
response to the COVID-19 pandemic and continue to modernise the foreign investment framework. Australia was not the
only country to undertake these measures with countries such as Canada, France, New Zealand, Italy, Germany, Japan,
Spain, China, Russia and India also enhancing their foreign investment frameworks.
Temporary COVID-19 measures
The first of these changes – the temporary COVID-19 measures – came into effect on 29 March 2020, and
involved the Federal Government temporarily reducing all screening monetary thresholds under the Foreign
Acquisitions and Takeovers Act 1975 (Cth) (Act) to $0. While investments are usually
screened only if they fall above a range of different monetary thresholds (depending on the identity of the investor
and value/type of investment, among other factors), the temporary measures aimed to provide the Government with
appropriate scrutiny of foreign investments during the pandemic.
The temporary measures resulted in 137 zero dollar threshold applications made during the reporting period with a
value of A$2.7 billion. FIRB also signalled extended processing timeframes from 30 days to up to six months to
ensure adequate time for screening the increased caseload of foreign investment applications, while prioritising
urgent applications that supported Australian jobs and businesses. Other measures included the review of Treasury
business practices, the introduction of a risk-based triaging process and an increase in staff, allowing the
majority of applications to be processed much faster than six months. Treasury also developed policies and
regulations to facilitate the measures including public information that was continually updated.
The Report notes that these measures did not substantially change the overall foreign investment assessment and
approval process during the year, and were subsequently lifted on 1 January 2021 when the foreign investment reforms
passed in 2020 commenced.
One example of the vital role of foreign investment in supporting businesses through the pandemic downturn was the sale
of Virgin Australia Limited to Bain Capital in November 2020 in which Clayton Utz advised. In April 2020,
Australia's second largest airline, Virgin Australia, and many of its subsidiaries entered into voluntary
administration. Facing liquidity concerns, Virgin Australia's administrator ran a compressed recapitalisation and
sale process. As part of this process, FIRB worked closely with Commonwealth and state and territory regulators,
Virgin Australia's administrators and potential investors to protect the national interest and ensure disruptions
caused by the pandemic were minimised such that the sale was successfully completed in a timely manner.
Introduction of foreign investment reforms
Major reforms to Australia's foreign investment framework – which had been
foreshadowed and were in development for some time – were announced on 5 June 2020. The
key elements of the reforms include (but are not limited to) the following:
- new powers to protect national security, including through zero dollar screening of sensitive national security
investments, the ability to "call in" investments not otherwise requiring approval that raise national security
concerns, and a last resort power for the Treasurer to (in certain circumstances) unwind approvals previously
given which is used only in exceptional circumstances;
- stronger compliance and enforcement powers, including expanding infringement notices and higher civil and
- measures to streamline certain non-sensitive investments, particularly by investment funds with passive foreign
- a new register of foreign owned assets, including land, water entitlements and businesses; and
- new fee structure that ensure the cost of administering the framework continues to be borne by foreign
investors, not Australian taxpayers.
These reforms aim to ensure Australia's foreign investment framework is consistent with global developments and
evolving risks to national security.
Findings and data for 2019–20
The Report provides data on proposed foreign investment in 2019-20. The total value of approved foreign investments
was A$195.5 billion. While both the volume and value of applications were lower than in 2018-19, FIRB noted that the
value of approvals has fluctuated since 2016-17, and that the effect of the COVID-19 pandemic on business
applications was particularly felt in the second half of the reporting period.
The Report notes a few other caveats in interpreting its data, including that the data reflects investor intentions
to acquire Australian assets but not actual purchases, that is, FIRB may grant approval for foreign entities to make
a specific acquisition, but whether each entity actually proceeds and completes the approved acquisition is outside
FIRB's control. Further, notification requirements by investors are subject to screening thresholds and therefore
not all potential investments are captured. Finally, very large investment proposals and multiple competing
proposals for the same target may also skew the Report's findings.
The numbers for FY2018/19 and FY2019/20
While the number of applications declined in 2019-20, the year 2018-19 included a historically high figure of 23 approvals with a consideration value of greater than A$2 billion.
The overall decline was also mainly due to a fall in the number of approved residential and commercial real estate applications.
The number of proposals approved declined by 503.
The value of proposed approvals also decreased by A$35.5 billion to A$231.0 billion, but note that this was an increase from 2017-18 where the total value was A$163.1 billion.
The number of non-zero dollar threshold applications approved declined by 7.3%, while the value decreased by 16.5% compared to 2018-19.
*not expressly stated in the Report, but calculated based on the commentary in it.
Although there was an overall decline in the total number of applications considered, there was a significant
increase in the number of applications that Treasury had outstanding at the end of the financial year. At the start
of the 2019-20 financial year, Treasury had 192 applications on hand. Of the 535 applications on hand at 30 June
2020, it is estimated that around 203 of these were zero dollar threshold applications.
The overall decline in value from A$231.0 billion to A$195.5 billion between 2018-19 and 2019-20 reflects a decrease
in proposed business investments with a value of greater than A$2 billion. A total of 1,155 business applications
worth A$178.4 billion were approved in 2019-20 compared to 1,175 business approvals worth A$216.2 billion in the
previous year. While 2019-20 had 32 approvals valued at A$1 billion or more, with a total value of A$91.5 billion,
the number of approvals valued at A$2 billion or more declined by around 52% to 11 approvals valued at
In terms of country of origin, the United States remained the largest source of proposed foreign investment by value
in 2019-20, followed by Japan, Singapore, Canada and the United Kingdom (in that order).
Investment by industry and sector
The services sector remained the largest by proposed investment value at A$73.6 billion, which represents a fall of
around A$2.4 billion compared to 2018-19. The commercial real estate sector was the second largest by value, where
the value of approvals fell by almost A$34.2 billion to A$38.8 billion. The manufacturing, electricity and gas
sector was the third largest by value, with a decrease of A$3.7 billion compared to 2018-19, at A$33.0 billion.
While the largest number of proposed investment approvals was again in residential real estate at 7,056, there was a
drop of 457 approvals compared with 2018-19. Despite this fall, the total value of residential real estate approvals
increased by approximately 15% from A$14.8 billion to A$17.1 billion which demonstrates that the global
pandemic has not dampened foreign buyer interest in Australian real estate. However, it is yet to be seen whether
this interest will be able to top historical foreign investment in real estate which peaked at A$30 billion in
The United States leads this demand for Australian real estate with applications for investment worth A$13 billion,
followed by Singapore at A$9.5 billion and China at A$7.1 billion. In terms of locale, Victoria topped the list with
3,000 of the 7,056 approvals, followed by New South Wales with 1,329 approvals and Queensland close behind with
The agriculture, forestry and fishing sector had another significant year of investment with 174 approvals worth $8.3
billion. For the last 4 years, foreign direct investment in this sector has remained steady at between A$7 billion
to A$8.3 billion each year. This investment needs to continue if Australia is to reach its target of A$100 billion
worth of production by 2030 - currently it is sitting at A$66.3 billion as at 30 June 2021. The countries investing
in this sector during the 2019-20 period included Canada, Singapore, USA, The Netherlands and New Zealand, in that
Conditional approvals, rejection and variations
The number of approvals made subject to conditions in 2019-20 decreased by around 10% to 3,713 proposals, and
the value decreased by around 25% to A$139.0 billion compared to 2018-19. This represents applications which
raise national interest concerns such as potential tax risks, such that conditions can be imposed when the approval
is granted to mitigate potential risks.
In 2019–20, 3 applications were rejected and 715 applications were withdrawn before decisions were made,
comparing with 1 rejection and 670 withdrawals in 2018-19. Around 76% of withdrawals related to residential
real estate applications.
In 2019-20, FIRB also considered 341 applications for variations, compared to 379 in 2018-19. Of these, 272 were
approved compared to 360 in the previous year. One variation was declined and 65 variations were withdrawn in
2019-20, compared to zero declines and 15 withdrawals in 2018-19. Applications for variations are allowed to be made
in relation to approvals, conditions related to approvals, exemption certificates and orders.
FIRB's engagement with other stakeholders
FIRB engaged extensively with various stakeholders given the major developments in the foreign investment framework
and introduction of the zero dollar threshold in response to the COVID-19 pandemic. This included close engagement
with a range of government agencies. Notably, in connection with the changes to the foreign investment framework,
the Treasury released a summary booklet outlining the proposal for each reform measure and conducted targeted
consultation with around 750 stakeholders.
Engagement with foreign investors was conducted through a variety of channels with significant interactions in
2019-20, including over 1.3 million page views via the FIRB website, over 13,000 foreign investment email queries,
over 20,000 calls and hotline queries and many meetings and webinars with stakeholders, both in person and online.
Treasury and the Australian Taxation Office (ATO) also relied on strong relationships with key
consultation partners, including through secondment arrangements with the Inspector-General of Taxation, the
Critical Infrastructure Centre and the Department of Defence. Multiple other government agencies were also consulted
with the introduction of the zero dollar threshold, including the Australian Competition and Consumer Commission,
the Attorney-General’s Department, the Productivity Commission, the Australian Securities and Investments
Commission and the Australian Bureau of Statistics.
Key developments in compliance assurance
Treasury is responsible for foreign approvals compliance and enforcement activities for proposals within its areas of
screening responsibility, including business, agricultural and commercial land foreign investment proposals. The
ATO, meanwhile, is responsible for proposals in residential real estate and the vacancy fee, as well as some
commercial land proposals.
During the reporting period, Treasury conducted four audits with an additional five audits from the 2019-20 audit
program underway as at 30 June 2020. The results of the audits at 30 June 2020 found only one instance of partial
compliance which was addressed with a remediation action plan. Treasury also received 24 reports of potential
non–compliance as part of its compliance assurance activities. These reviews are often triggered by members of
the public who report suspected breaches of the Act by investors. In addition, Treasury's assurance activities also
include ongoing monitoring of compliance which includes reviewing compliance reports from investors and proactively
conducting its own reviews.
Meanwhile, the ATO's compliance investigation program prioritised screening foreign investment applications arising
from the zero dollar threshold. The ATO gave careful consideration to obligations for foreign investors and fee
waiver and withdrawal requests related to the COVID-19 pandemic. The ATO completed 620 residential real estate
investigations and found 259 properties that were in breach which was less than half the number of breaches in
Outlook for foreign investment in 2020–21 and review
Businesses should look to take advantage of some of the trends contained in the Report and continue to be cognisant
of the impact of the changes made to the foreign investment regime which came into effect on 1 January 2021, as
However, businesses should also be aware that Treasury is currently considering the impact that those reforms (and their implementation) have had on
foreign investment in Australia and the broader Australian economy, and whether the right balance is struck
between welcoming foreign investment and protecting Australia’s national interests. Consultation is now
open, with formal submissions expected to be called later in 2021, and the review expected to be completed by
10 December 2021. If you are considering making a submission, a helpful start is to look at the
Government's Regulator Performance Framework, which assesses Commonwealth regulators against six regulator
performance key performance indicators, and so provides a good basis to consider the impact of the
Looking forward, the Report predicts that the Australian economy will recover in 2020-21 and in doing so, that
Australia will continue to remain an attractive destination for foreign investment.