Australia’s management of foreign investment through the Foreign Investment Review Board (FIRB) relies on the following legislation: the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA); the Foreign Acquisitions and Takeovers Regulation 2015 (Cth); the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Cth); and the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 (Cth).
The starting point of the framework is that foreign investment should be welcomed for the significant benefits that it provides. It is that fundamental proposition that has pushed the regime into one that does not aim to restrict/ prevent foreign investment in Australia in any way, but rather seeks to welcome and “manage” investment. At times, the manner in which it is managed may be considered overly robust.
The range of tax technical risks suitable for review during the FIRB process is limited by the pre-transaction nature of the review. This means risks associated with structuring decisions rather than operational concerns (ie taxes that can only be reviewed once a business is operating such as GST) are given far more weight. Importantly this means financing decisions are made during the initial deal stages are a major focus of the FIRB review process and frequently impact the risk ratings assigned by the ATO.