Revamping Australia’s foreign investment regime


Posted By , and on 11/06/24 at 3:47 PM
What you need to know
  • On 1 May 2024, the Federal Treasurer announced plans to reform and renew the current FIRB framework with a risk-based approach that is a “stronger, faster and more transparent approach to foreign investment”.
  • Changes will be administered through polices, processes and resources, rather than through legislation. Existing requirements for notifiable security actions will continue to apply.
  • The reforms seek to streamline the approval process for low-risk investments, while scrutinising high-risk investments in critical and/or sensitive sectors to protect the national interest.
  • The FIRB framework will work alongside the new merger control regime, by removing decision‑making duplication in relations to competition issues.


The Foreign Investment Review Board (FIRB) regime in Australia is a critical component of the country’s approach to regulating foreign investments. Recent reforms to this regime reflect the Australian government’s response to the constantly evolving economic, security and geopolitical landscapes.

On 1 May 2024, the Australian Treasurer announced significant reforms to the FIRB framework. The objectives of these reforms are to streamline processes, enhance transparency and strengthen the regulatory framework to better align with national interests.

The FIRB framework will work alongside Australia’s merger control regime by removing decision making duplication in relation to competition issues. The Australian Government has recently proposed a significant overhaul of the country’s merger review system, discussed in our recent article.

The 2024-25 Federal Budget supports these reforms, with the Federal Government allocating A$15.7 million over the next four years (with a yearly allocation of A$4.1 million afterwards) “for Treasury to strengthen and streamline Australia’s foreign investment framework, through more effective monitoring, enforcement of conditions and timely review of foreign investment applications”.

Key objective of reforms

The key objective of the reforms is to ensure that a risk-based approach is undertaken in administering the FIRB regime. This will focus scrutiny on high-risk investments to protect the national interest, while streamlining low-risk investments to bring in the capital Australia needs quickly.

According to the Treasurer’s announcement, the changes will “make Australia a more attractive place to invest, boost economic prosperity and productivity, while strengthening our ability to protect the national interest in an increasingly complex economic and geostrategic environment.”.

As the reforms are designed to make Australia a more attractive place to invest, this could potentially lead to an increase in foreign investment in Australian start-ups and venture capital firms, amongst other areas.

Key changes

The following changes are part of the broader reforms proposed for the FIRB regime to streamline and strengthen Australia’s foreign investment framework:

1.  Increased focus on compliance and enforcement

The reforms will largely be implemented though changes to the Australian Government’s FIRB policies, processes and resources, rather than by immediate legislative changes. This means that the changes will generally be implemented administratively by the FIRB when assessing applications.

This could potentially lead to inconsistencies in the application of the reforms.

2.  Streamlined approach for low-risk foreign investments

One of the main goals of the reforms is to streamline the approval processes for “low-risk transactions”, to provide faster approvals for known investors with a good compliance record who are proposing to undertake investments in non-sensitive sectors. Lower-risk sectors are identified as manufacturing, professional services, commercial real estate, new housing and mining of non-critical minerals.

This could make Australia a more attractive place for foreign investment and, specifically, potentially benefit early-stage start-ups, as these are often considered lower-risk investments.

Treasury will adopt a new performance target of processing 50% of investment proposals within the 30-day statutory decision period, from 1 January 2025. This could potentially improve the efficiency of the FIRB regime. However, as no fast-track application process has been proposed, this could potentially slow down the investment process for some foreign investors.

3.  Increased scrutiny for high-risk investments

Foreign investment proposals in Australia’s critical and/or sensitive sectors will be scrutinised more closely in terms of economic benefit and security risks. Sensitive sectors, where investment proposals will be subject to greater scrutiny, are identified as including:

  • critical infrastructure (critical assets in the electricity, gas, water and ports sectors);
  • critical minerals;
  • critical technology (the communications; financial services and markets; data storage and processing; food and groceries; transport; defence; higher education and research; energy; healthcare and medical; space technology; and water and sewerage sectors);
  • investments in proximity to sensitive Australian Government facilities; and
  • investments that involve holding or having access to sensitive data sets.

This could potentially lead to a better understanding of the process and criteria for foreign investors. However, it could also add further complexity to what is already a complex regime and will significantly increase the level of scrutiny and compliance obligations that foreign investors will need to contend with, which may potentially deter foreign investment in these sectors.

4.  Greater scrutiny on taxation

Additional scrutiny will be applied to foreign investment proposals with certain tax characteristics likely to be considered higher risk, including:

  • internal reorganisations or other intra-group transactions which may represent initial steps of a planned broader arrangement resulting in avoidance of Australian tax;
  • pre-sale structuring of Australian assets that present risks to tax revenue on disposal by private equity or other investors;
  • the use of related party financing arrangements to reduce Australian income tax or avoid withholding tax (noting the recent strengthening of Australia’s thin capitalisation rules); and
  • facilitation of migration of assets (for example, intellectual property) to offshore related parties in jurisdictions with effective low taxation.

The Australian Taxation Office will more closely examine investments that are structured through effective low- or no-tax jurisdictions with limited relevant economic activity.

Additional scrutiny may also be applied to ‘high risk’ foreign investments from a national security, competition, economic and community perspective, as well as in sectors where there are supply chain resilience concerns, the need to protect sensitive data, technology or capabilities, or where concentration of ownership is a factor.


The proposed reforms to the FIRB regime are aimed at implementing a risk-based approach to FIRB’s assessment of transactions, flagging a streamlining of approval processes for low risk transactions, and greater scrutiny for transactions in sensitive sectors or with ‘high risk’ characteristics. These changes are expected to make Australia a more attractive place for foreign investment, while also ensuring the protection of national interests.

However, their effectiveness will largely depend on how they are implemented and administered. It will be interesting to see how these changes affect foreign investment in Australia in the coming years.

For more information, or to discuss corporate queries in general, please contact a member of KHQ’s Corporate & Commercial team on +61 (0) 3 9663 9877 or

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KHQ Lawyers - Ashleigh Le

Ashleigh Le Principal Solicitor

Ashleigh is an experienced corporate and commercial lawyer, specialising in corporate transactions. She has represented myriad corporate clients in structuring and negotiating... Read More

Venn King Principal Solicitor

Venn King is a Principal Solicitor in KHQ’s Corporate & Commercial team.

Venn utilises his broad corporate and finance experience in the context of complex investment structuring transactions... Read More

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Andrew is a director in the Corporate & Commercial team.

Andrew trained in the United Kingdom and relocated to Australia in 1998. Prior to joining KHQ, Andrew was a partner and team leader... Read More