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AUSTRALIA


b) Any investment caps and other legislative restrictions; Subject to certain exceptions, FIRB is not concerned with transactions that do not exceed prescribed monetary thresholds. Today, foreign investors are exempt from notifying: • transactions valued at less than A$248 million ($225 million), or A$1,078 million for US or New Zealand investors; or


• transactions involving developed non-residential commercial real estate valued at less than A$54 million (or less than A$5 million if land is heritage listed).


FIRB will require notification of all acquisitions (regardless of value): • in vacant non-residential land; • in residential land; • in Australian urban land; or • by foreign governments or their agencies.


c) Which party must notify and when/if notification is mandatory or voluntary; Notification must be made by the foreign investor and should occur in advance of a transaction. Failure to notify of a prescribed transaction is an offence under the FATA, but does not invalidate any act done in contravention of the FATA.


However, non-compliance may result in substantial penalties and potentially trigger the Treasurer’s powers under the FATA, including to order divestiture.


d) What information must be included with notification and what is the review fee; There is no fee to submit a notification. Notifications should include the following information: • explanatory covering letter including details of the proposal; • identity of the parties; • applicable standard form FATA notices; • latest audited financial statements for the investor and the target; • the consideration; • reasons for the proposal; • the investor’s future intentions for the target; • relevant transaction agreements; and • other supporting documentation.


e) How long does the review and approval process take, and are there any fast-track options; The Treasurer has 30 days to reach a decision (which can be extended by up to 90 days), and FIRB has 10 days thereafter to communicate the decision. There are no formal fast-track options.


f) Is there the ability to consult on a named or unnamed basis; Parties may consult with FIRB or Austrade on a named or unnamed basis.


g) Does notification/review occur pre- or post-closing, and are there any pre- or post-filing requirements unique to FDI; Notification/review generally occurs prior to closing. A FIRB condition precedent is invariably included in FDI transaction documents in Australia.


h) What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? If the Treasurer does not object to the proposal within 30 days (or 90 days if extended), they lose the ability to block or impose conditions on the transaction. There is no prescribed right of appeal against an unfavourable decision.


3.2 Briefly explain the investment restrictions for any special/restricted sectors. The following sector-specific restrictions apply to FDI:


• Total foreign investment in Australian international airlines is limited to 49%.


• Foreign ownership of airports offered for sale by the Commonwealth is limited to 49%, with a five percent airline ownership limit.


• Only majority Australian-owned ships may be registered in Australia, unless designated as chartered by an Australian operator.


• Aggregate foreign ownership of telecommunications company Telstra is limited to 35% and individual foreign investors may only own up to five percent.


• Foreign ownership in the banking sector must be consistent with the Banking Act 1959 (Cth), the Financial Sector (Shareholdings) Act 1998, and Government banking policy.


• For areas of military significance (such as the Woomera Prohibited Area), FIRB may require the approval of the Australian Department of Defence as part of its assessment.


Note that this is a non-exhaustive list and industry-specific legislation may also apply.


3.3 Which authority oversees competition clearance, when is notification mandatory, and briefly explain the merger clearance process. The Australian Competition and Consumer Commission (ACCC) is the principal regulator of competition clearance under the Competition and Consumer Act 2010 (Cth) (CCA). The CCA prohibits mergers that would (or are likely to) have the effect of substantially lessening competition.


The ACCC’s informal clearance process enables merger parties to seek the ACCC’s view on whether it will seek an injunction to stop a merger from proceeding. The ACCC encourages merger parties to notify the ACCC where: the products of the merger parties are either substitutes or complements; and the merged firm will have a post-merger market share of greater than 20% in the relevant market/s.


Pre-notification to the ACCC of mergers or acquisitions is not compulsory under the CCA. However, as non-compliance with the CCA attracts severe penalties, parties normally seek an informal clearance as a matter of course before completing a transaction.


4. Tax and grants


4.1 Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country? As a general rule, there are no specific structures or intermediary jurisdictions that are particularly favourable for FDI.


Foreign investors may conduct business through an Australian branch rather than an incorporated subsidiary to consolidate the financial results of the company in the foreign jurisdiction. Australian subsidiaries of foreign companies may consolidate under the foreign parent.


Transactions between consolidated group companies are ignored for tax purposes and losses can be transferred between members.


Certain venture capital limited partnerships are exempt from capital gains tax (CGT) subject to conditions. They are taxed at the partner level as flow- through entities. A partner’s share of income derived from an eligible venture capital investment is exempt, as is the gain made on disposal of an eligible venture capital investment.


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IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014


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