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As of 29 July 2022 and under newly imposed regulations, fees payable to Australia’s Foreign Investment Review Board (FIRB) for applications for foreign investment transactions will double.
Background
During the 2022 federal election campaign the Labor Party committed to addressing housing affordability in Australia with its “Help to Buy” initiative, which proposes to cut the cost of buying a home by up to 40%.
To fund this programme, Labor planned to double foreign investment screening fees and financial penalties, resulting in an estimated additional AUD455 million in FIRB fees becoming payable by foreign investors over the next four years. As the increase resulted from an election promise, no public consultation was undertaken on the matter, according to the Explanatory Statement for the regulations.
The Result
On 21 July 2022, the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Doubling) Regulations 2022 (Cth) was introduced by the federal government, which effected the doubling of foreign investment application fees. It is also expected that penalties for non-compliance with foreign investment regulations will be doubled.
Under the FIRB regime, all applications made are subject to a prescribed fee. Beginning 29 July 2022, the lowest possible application fee doubled from AUD2,000 to AUD4,000, with the maximum fee also doubling from AUD522,500 to AUD1.045 million.
This fee increase will apply to all foreign investment requiring confirmation of no objections from FIRB (commonly referred to as “FIRB Approval”). Such investments include certain foreign acquisitions of Australian land, Australian businesses or interests in an Australian business, as well as internal reorganisations where a foreign person acquires an interest, exemption certificate applications, and the establishment of an Australian business by a foreign person.
For foreign investors, the new fee regime is likely to have a significant effect on plans to invest within Australia. Careful consideration must be given to the calculation of anticipated FIRB application fees to be factored into budgeted transaction costs and forecasting. The timeframe for FIRB to consider an application does not start until the relevant application fee has been paid in full.
To learn more about the increase in FIRB fees and to view a table summarizing specific requirements for different types of investors and businesses, click here to read the original alert published by Ally Law member firm Russell Kennedy.
