Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)General outline and financial impact
Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020
These Bills include a package of reforms to ensure Australia's foreign investment screening framework keeps pace with emerging risks and global developments while remaining a welcoming destination for foreign investment.
The Bill improves and updates the operation of the framework across national security, compliance monitoring and enforcement, and integrity as well as streamlining requirements and making technical changes to improve the operation of the law.
The Imposition Bill simplifies the existing fee arrangements.
The Bill:
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- introduces a new national security review and gives the Treasurer as a last resort, the ability, in extraordinary circumstance, to issue a divestment order where there is no other remedy for a national security risk;
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- strengthens the Treasurer and Commissioner's enforcement powers through increased penalties, directions powers and new monitoring and investigative powers;
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- improves the integrity of the framework by closing potential gaps in the screening regime;
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- expands the information sharing arrangements to assist with the Treasurer and Commissioner's compliance activities and address national security risks;
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- establishes a new Register of foreign owned assets to record all foreign interests acquired in Australian land; water entitlements and contractual water rights; and business acquisitions that require foreign investment approval; and
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- provides that fees are payable for the new types of actions established under the reforms.
Date of effect: 1 January 2021
Proposal announced: The Bills implement the reforms announced by the Government on 5 June 2020.
Financial impact: The Government announced reforms to Australia's foreign investment framework in the July 2020 Economic and Fiscal Update measure Reforming Australia's Foreign Investment Framework and 2020-21 Budget measure Strengthening Australia's Foreign Investment Framework. These measures are estimated to have the following impact on the underlying cash balance over the forward estimates period ($m):
2020-21 | 2021-22 | 2022-23 | 2023-24 | |
Receipts | 20.2 | 42.4 | 43.5 | 43.6 |
Payments | -31.2 | -56.1 | -40.4 | -21.4 |
The Bills implement certain components of these two measures, including introducing a new national security review, strengthening enforcement powers, improving the integrity of the framework, adding streamlining requirements, establishing a Register of Foreign Ownership of Australian Assets and simplifying the foreign investment fee framework.
Human rights implications: The Bills raise human rights issue. See Statement of Compatibility with Human Rights - Chapter 7.
Compliance cost impact: Low. It is estimated that the reforms will result in around 100 additional applications and 1,800 additional registrations being made by investors each year, involving an additional aggregate compliance cost of approximately $1.5 million per annum, on average.
Summary of regulation impact statement
Regulation impact on business
Impact: Low. It is estimated that the reforms will result in around 100 additional applications and 1,800 additional registrations being made by investors each year, involving an additional aggregate regulatory cost of approximately $1.5 million per annum, on average.
Main points:
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- The new national security review is expected to increase the number of applications investors submit each year. This number will be partly offset by an expected decrease in applications as a result of the new foreign government investor streamlining measures which are proposed to be included in the FATR.
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- The expanded registration obligations under the new foreign ownership register will also increase the number of registration events investors incur each year.
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- These additional regulatory costs will be partly offset by other measures to reduce the complexity of the foreign investment framework and improve the user experience (for example, a simpler and fairer fee framework) that will save investors time and expense.
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- The estimated additional regulatory burden from these reforms is not expected to be a significant deterrent to foreign investment in Australia, particularly with the steps proposed to streamline the investment application process.
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