FIRB: Navigating security and investment in 2026

Australia’s foreign investment regime is now much more rigorous where risk is high, and faster where risk is low. This sharpens scrutiny in sensitive areas while signalling quicker approvals for passive, compliant capital. For dealmakers, this means more questions and potential conditions for transactions involving critical infrastructure, data-rich businesses, and critical minerals, alongside quicker pathways for lower-risk proposals in non-sensitive sectors.

Why scrutiny has intensified

Foreign investment remains central to Australia’s growth, but reforms now emphasise safeguarding national security and economic interests through a stronger risk-based approach, particularly in sensitive sectors. The shift reflects evolving global risks, including geopolitics and technological change, with heightened attention on critical infrastructure, sensitive data, critical minerals, emerging technologies, and proximity to sensitive government facilities. These sectors are viewed as vital to security and resilience, warranting deeper review where risks are elevated.

Key reforms: What has changed

The March 2025 Foreign Investment Policy anchors a more targeted, risk-based framework that assesses the investor’s identity and character, the nature of the asset or business and the transaction structure.

• Stronger scrutiny in sensitive sectors

Investments in sensitive sectors now face heightened scrutiny, with additional government resources directed to assessing proposals and managing national security risk. Where risks are identified, tailored conditions may be imposed to mitigate specific concerns, reinforcing a more calibrated approach to approvals.

• Enhanced monitoring and enforcement

FIRB’s site visit powers have been strengthened, enabling more proactive monitoring of compliance with conditions post-approval. There is also increased focus on tax arrangements that pose risks to revenue, ensuring adherence to Australian tax laws. Particular attention is given to higher-risk tax characteristics, including internal reorganisations or intragroup transactions that may facilitate tax avoidance, pre-sale asset structuring, related party financing and the migration of intellectual property to low-tax jurisdictions. Where such risks are identified, the government may impose targeted conditions or conduct follow-up reviews to manage exposure.

• Streamlining for low‑risk investments

Faster approvals are expected for passive institutional investors, those with strong compliance histories, and investments in non-sensitive sectors such as manufacturing, professional services, and commercial real estate. The government has set a target to process 50% of proposals within the 30-day statutory decision period from January 2025, signalling a meaningful acceleration for well-prepared, lower-risk filings. By tailoring oversight to risk, the framework aims to support strategic priorities such as the net zero transition, housing supply and critical technologies while reducing burdens where risks are demonstrably low.

What may come next (under consultation)

Government consultation materials released at the end of 2025 signal further refinements aimed at reducing burdens for lower-risk investments while enhancing scrutiny where risks are higher. Proposals include new categories of lower-risk investments that require notification but not pre-approval, inspired by Canada’s pre-notification regime, with examples such as minor shareholding increases or low-value acquisitions in non-sensitive sectors. The Treasurer’s “call-in” powers would remain a key safeguard to address national security concerns irrespective of thresholds. Exemption certificates may be expanded (for example, to reduce burdens for funds with passive investors by adjusting “foreign government investor” requirements or modifying tracing rules in defined circumstances). Reporting to the Register of Foreign Ownership of Australian Assets could be simplified, including joint notifications for multi-party deals, removal of equitable interest reporting, and elimination of duplicative requirements. The government is also seeking feedback on mechanisms to designate new sensitive sectors for mandatory notification and approval. Additional proposals contemplate a public register of non-compliance and infringement notices, expanded penalties, and strengthened enforcement to maintain robustness as risks evolve.

What this means for deals

For sensitive transactions in sensitive sectors, expect more rigorous information requests designed to illicit information on national security and tax arrangements, earlier engagement with FIRB and Treasury (who will likely engage in extensive consultations with various government agencies), and a higher likelihood of tailored conditions addressing data governance, operational controls and reporting. Sponsors should factor potential follow-up reviews into timetables and consider how covenants and conditions precedent allocate compliance and timing risk. For non-sensitive, lower-risk proposals backed by passive or highly compliant investors, the 30-day/50% target may compress decision timelines where filings are complete and risks are minimal.

Across the board, well-structured transactions that align with net zero, social impact, housing, and critical technology priorities are more likely to sit on the streamlined side of the ledger.

The following practical steps may assist with navigating the framework effectively – particularly for transactions in sensitive sectors:

• Engage early. Consult with FIRB and Treasury to understand requirements, address concerns (against the "national interest" test, including proposing potential commercial mitigants to address key aspects of the transaction) and stress‑test structures before signing (where there is a reasonable prospect that the deal will proceed).

• Conduct focused due diligence. Assess national‑security and tax‑risk characteristics, including intra‑group restructures, related‑party financing and IP migration pathways. For target businesses which are the subject of the Security of Critical Infrastructure Act, we suggest purchasers agree a collaborative approach with the vendor to deal with the more stringent confidentiality protocols resulting from that regime.

• Prepare for scrutiny and additional review by consult agencies. Compile clear, comprehensive information about the investor, the target and structure and anticipate bespoke conditions where risks are identified. Ensure the sale agreement obliges the vendor to reasonably assist the purchaser with responding to FIRB information requests, including information requests from consult agencies.

• Monitor policy developments. Track, and engage with, consultations and associated refinements to leverage streamlined options as they are implemented.

Conclusion: design for scrutiny, plan for speed

These changes align with a broader international trend as the United States, the European Union and the United Kingdom have each upgraded foreign investment regimes to address national‑security concerns and protect critical sectors. Australia’s approach seeks to keep pace while maintaining its attractiveness to foreign capital through differentiated treatment based on risk.

Australia’s reforms mark a more adaptable, risk‑sensitive regime – one that strengthens national‑security protections while offering faster pathways for lower‑risk proposals. For dealmakers, the practical takeaway is straightforward: build timetables and conditions around the possibility of deeper scrutiny and tailored conditions in sensitive sectors, and position low‑risk proposals to benefit from streamlined processing. With early engagement, focused diligence and clear alignment to national priorities, investors can navigate the framework effectively and seize emerging opportunities.

_Disclaimer

_{Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.}