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On 9 December 2020, the Australian Government passed important changes to the foreign investment laws pursuant to the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 (Cth) and Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 (Cth). The changes commence on 1 January 2021.

Importantly, the pre-COVID monetary screening thresholds for proposed foreign investments in non-sensitive national security businesses have been reinstated. This will be a relief for many foreign entities that were subject to the temporary reduction in monetary screening thresholds for foreign investment to $0 under the Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 (Cth). The recent changes follow the restoration of the normal monetary thresholds for the renewal or extension of leases for non-sensitive developed commercial land, which commenced on 4 September 2020.

Under the new laws, foreign investors will be required to seek approval for all investments in sensitive national security land or business (including starting a business) regardless of value. The draft definition of “national security business” under the Foreign Investment Reform (Protecting Australia’s National Security) (National Security Business) Regulations 2020 proposed two criteria:

  1. the business is carried on wholly or partly in Australia whether or not in anticipation of profit or gain, and
  2. the business had a national security element as prescribed in s 10A(2). For example, the business manufactured goods or supplied technology that is intended for a military use or the business stores or has access to information that has a security classification.

The Foreign Investment Review Board (FIRB) is expected to publish guidance materials regarding these changes shortly. It will be helpful to understand how FIRB intends to implement these reforms in practice.

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