FIRB stands for ‘Foreign Investment Review Board’, which is a body set up under the Foreign Acquisitions & Takeovers Act 1975 (Cth) (‘FATA’) and reporting to the Treasurer. The FATA requires that certain investments in Australian business, entities or land, are reviewed by the FIRB before they can take place.
FIRB approval is only required where the investor is a ‘Foreign Person’ within the meaning of the FATA. The definition is generally ‘an individual not ordinarily resident in Australia’.
Investments that need FIRB Approval
Several categories of investment can be subject to FIRB review and approval. Generally, acquisition of substantial shareholdings in companies, controlling interests in certain entities, purchases of high-value land, agricultural business and any sensitive businesses or land are all subject to FIRB review. Some transactions require FIRB approval, however the Treasurer has broad powers under the FATA to order that any transaction involving foreign investment be reviewed by the FIRB. If you choose to voluntarily submit for a review a transaction where FIRB review is no compulsory, the Treasurer loses their power to ‘call-in’ for review the transaction.
The FATA has particular significance for foreign investors in residential land, including “off the plan” apartments.
The FATA requires that foreign persons apply for FIRB Approval before acquiring an interest in Australian land. This definition is broad. If one were to generalise, an interest would generally mean any right to deal with Australian land. Interestingly, while ‘non-residential land’ is subject to a minimum value before requiring FIRB approval, all purchases of residential land are subject to FIRB approval.
This means that foreign investors require FIRB approval before formally exchanging contracts for the purchase of residential land. For foreign investors, some solicitors will include a ‘subject to FIRB’ clause in contracts which makes the contracts conditional on FIRB providing approval. This means that if FIRB approval is denied or not granted within a certain period, contracts can be cancelled, and depending on the clause, the deposits may be returned or forfeited. If you are a foreign investor, you should seek advice from your solicitor or conveyancer about what will happen if you fail to receive FIRB approval within the specified timeframe.
However, contracts for sale are not the only way of obtaining an interest in Australian land. A less common example is a Call Option deed (sometimes called a Put & Call Option Deed) to purchase residential property. In a Call Option deed, the buyer is granted a right to either nominate themselves to purchase the property or nominate someone else to purchase the property and the buyer must exercise such rights within the timeframes noted in the call option deed. If a foreign person wishes to enter a call option deed, they will still require FIRB Approval because upon executing the deed they acquire a right to deal with Australian land. This means that a call option deed cannot be used to avoid applying for FIRB.
Breach of FIRB obligations carries significant civil and criminal provisions. Please ensure that you seek advice prior to taking any action.
If you have further questions regarding FIRB, please contact our Property Team at Chamberlains who are more than happy to assist.
Note: This article is intended to provide a general overview of only a few circumstances where Foreign Buyers are required to apply for approval from the Foreign Investment Review Board (FIRB). Please ensure that you seek legal advice regarding whether you are required to apply for FIRB.