Foreign investors looking to invest in Australian businesses must navigate a structured approval process to ensure compliance with Australia’s foreign investment regulations. These laws are designed to balance economic growth with national security and public interest.
At Ensure Legal, we help foreign investors understand when approvals are required, what conditions apply, and how to avoid legal risks when investing in Australian businesses.
When Do Foreign Investors Need Approval?
Foreign investors generally require approval before:
- Acquiring a substantial interest (at least 20%) in an Australian company or unit trust if the entity is valued above the applicable threshold
- Acquiring a direct interest (at least 10%) in an Australian agribusiness if the investment exceeds the monetary threshold
- Acquiring 10% or more in a listed or unlisted land entity
- Investing in an Australian media business, regardless of the investment amount
- Acquiring any interest in a national security business or starting a new business in this sector
For foreign government investors, stricter rules apply. They must obtain approval before:
- Acquiring a direct interest in any Australian business, regardless of value
- Acquiring 10% or more in a mining, production, or exploration entity
Investors from countries with free trade agreements (FTAs) with Australia, such as the US, UK, and Japan, may have different monetary thresholds depending on the industry.
What Types of Investments Require Approval?
General Business Investments
Foreign investors must seek approval before acquiring a substantial interest in an Australian entity that exceeds the relevant monetary threshold. The current threshold for most business investments is $339 million, but a higher threshold of $1,464 million applies for investors from certain FTA partner countries.
For sensitive businesses, such as telecommunications, media, transport, and defence-related industries, the lower threshold of $339 million applies even to FTA investors.
Agribusiness Investments
A foreign person must obtain approval before acquiring at least 10% of an agribusiness, provided the investment exceeds $73 million.
Agribusinesses include:
- Meat processing
- Dairy product manufacturing
- Grain milling
- Sugar manufacturing
- Fruit and vegetable processing
Media Business Investments
Foreign investors need mandatory approval before acquiring a direct interest in an Australian media business, regardless of value. This includes traditional media, such as TV and radio, as well as digital media businesses that deliver news content to Australian audiences.
National Security Investments
All investments in national security businesses require prior approval. This includes businesses engaged in:
- Defence and military industries
- Critical infrastructure
- Telecommunications
- Energy supply
- Data storage and cybersecurity
Foreign investors who already hold a direct interest in a national security business must also obtain approval for additional investments.
Passive Increases in Ownership
Since 1 January 2021, foreign investors may require approval even if they do not actively acquire additional shares. This applies if their ownership percentage increases due to share buybacks, capital reductions, or other passive changes. If the increased ownership meets the notification threshold, investors must inform the government within 30 days.
Offshore Acquisitions and Takeovers
A foreign investor acquiring an interest in a foreign company may still need approval if the company owns Australian assets or businesses. This is particularly relevant in cases of offshore mergers and takeovers.
If the Australian assets of the foreign company exceed $339 million, the transaction may be subject to review. Investors should check whether their acquisition is classified as a significant action or a reviewable national security action.
What Are the Consequences of Non-Compliance?
Failing to obtain the necessary approvals can lead to:
- Significant financial penalties
- Forced divestment of the investment
- Legal action for serious breaches
To avoid these risks, investors should seek legal advice before finalising any business transactions.
Exemption Certificates for Business Investments
For investors making multiple acquisitions over a period, an exemption certificate may provide upfront approval, reducing the need for separate applications. This is particularly useful for investment funds or businesses making frequent acquisitions in non-sensitive sectors.
Final Thoughts
Foreign investment in Australian businesses offers many opportunities but comes with strict regulatory requirements. Understanding when approval is needed and ensuring compliance is essential for a smooth investment process.
At Ensure Legal, we assist foreign investors with navigating Australia’s foreign investment laws, handling approvals, and structuring investments to comply with regulations. Contact us today for expert legal guidance on your business investment in Australia.
