All direct investments by foreign governments or their agencies irrespective of size are required to be notified for prior approval under the Government's foreign investment policy. This applies whether the investment is made directly or through a company that is owned 15 per cent or more by a foreign Government. Applications must be submitted for:
Decisions are subject to the national interest test and the general requirements of policy.
Proposed investments by foreign governments and their agencies (e.g. state‑owned enterprises and sovereign wealth funds (SWF)) are assessed on the same basis as private sector proposals. National interest implications are determined on a case‑by‑case basis.
However, the fact that these investors are owned or controlled by a foreign government raises additional factors that must also be examined.
This reflects the fact that investors with links to foreign governments may not operate solely in accordance with normal commercial considerations and may instead pursue broader political or strategic objectives that could be contrary to Australia's national interest.
The Government is obliged under the Foreign Acquisitions and Takeovers Act 1975 to determine whether proposed foreign acquisitions are contrary to Australia's national interest. In examining proposed investments by foreign governments and their agencies, the Australian Government will typically have regard to the following six issues.
In considering issues relating to independence, the Government will focus on the extent to which the prospective foreign investor operates at arm's length from the relevant government.
It also considers whether the prospective investor's governance arrangements could facilitate actual or potential control by a foreign government (including through the investor's funding arrangements).
Where the investor has been partly privatised, the Government would consider the size and composition of any non‑government interests, including any restrictions on governance rights.
To this end, the Government considers the extent to which the investor has clear commercial objectives and has been subject to adequate and transparent regulation and supervision in other jurisdictions.
The Government will examine the corporate governance practices of foreign government investors. In the case of an SWF, the Government would also consider the fund's investment policy and how it proposes to exercise voting power in relation to Australian companies.
Proposals by foreign government owned or controlled investors that operate on a transparent and commercial basis are less likely to raise additional national interest concerns than proposals from those that do not.
These issues are also examined by the Australian Competition and Consumer Commission in accordance with Australia's competition policy regime.
For example, investments by foreign government entities must be taxed on the same basis as operations by other commercial entities. They must also be consistent with the Government's objectives in relation to matters such as the environment.
The Government would consider the extent to which investments might affect Australia's ability to protect its strategic and security interests.
The Government would consider any plans by an acquiring entity to restructure an Australian business following its acquisition. Key interests would include impacts on imports, exports, local processing of materials, research and development and industrial relations.
The Government would also consider the extent of Australian participation in ownership, control and management of an enterprise that would remain after a foreign investment, including the interests of employees, creditors and other stakeholders.
For full details of how to apply for approval, please see the How To Apply section. All applications must address the 'Guidelines for foreign government investment proposals' outlined above.