On 3 September 2020, the Australian Government changed the foreign investment framework rules again – this time a welcome change.
With effect from 4 September 2020, the Government has lifted the NIL threshold temporary measure in respect of renewal or material variation of non-sensitive leasehold interests.
What this means is that for an entity to which the FIRB rules apply (i.e. foreign or foreign controlled entity) is in occupation of developed commercial land, where the same entity held the same lease or a substantially similar interest under a lease immediately before 10.30pm on 29 March 2020, and either:
(a) the existing lease is to be materially varied from the current arrangements; or
(b) the lease is to be renewed in respect of substantially similar interest in land where the renewed lease term (including options for renewal) would exceed 5 years,
then, so long as the interest is in non-sensitive land, FIRB approval will no longer be required unless the value of the interest in land exceeds the general thresholds set out below.
For non-government investors from US, Canada, NZ and other ‘agreement countries’ – $1,192m
For non-government investors from other countries – $275m
For government investors – $0
What this now means for leases of developed commercial land which is non-sensitive land, where the FIRB rules might apply to the lessee:
- If a new lease is being entered into, or an existing lease the term of which has expired is being renewed and the total lease period (including options to renew) is less than 5 years, then no FIRB approval is required, as the term being less than 5 years means the interest is not a “land interest” for FIRB purposes.
- If a lease which included an option to renew for 5 or more years was in place on or before 29 March 2020 and the lessee now wishes to exercise that option, no FIRB approval is required (as the interest in land was acquired at the time the lease was originally granted so is not caught by the temporary threshold changes).
- If a lease that was in place on or before 29 March 2020, is to be materially varied from the current arrangements or the lease has now expired and a new lease in relation to substantially the same land is to be entered into and the lease term (including options to renew) will exceed 5 years, then no FIRB approval is required, unless the value of the lease interest exceeds the thresholds set out above.
- If an entirely new lease in respect of different premises is being entered into with a term (including options to renew) exceeding 5 years, FIRB approval is needed, and the NIL threshold still applies.
Sensitive land leasehold interest
NIL threshold still applies for renewals or material variations of leasehold interests in sensitive developed commercial land or where there is a change in a lessee.
What is sensitive land?
Sensitive land is land which, one of more of the following applies at the time the interest in the land is acquired:
1. the land will be leased to the Commonwealth, a State, a Territory, or a body of these governments, except specific corporate Commonwealth entities (within the meaning of the Public Governance, Performance and Accountability Act 2013) other than the Australian Nuclear Science and Technology Organisation, Comcare, the Commonwealth Superannuation Corporation, the Commonwealth Scientific and Industrial Research Organisation and the Reserve Bank of Australia;
2. the land will be fitted out for a sensitive business or a business of providing storage of bulk data;
3. the land will be fitted out specifically to store, handle or dispose of biological agents on the List of Security-sensitive Biological Agents (within the meaning of the National Health Security Act 2007);
4. an authorisation under a law of the Commonwealth, a State or a Territory will allow materials that are regulated under that law to be produced or stored on the land;
5. a mining operation will operate on the land;
6. a stored communication (as defined in section 5 of the Telecommunications (Interception and Access) Act 1979) will be stored on the land;
7. the failure of part of a network unit (as defined in Part 2 of the Telecommunications Act 1997) on the land will affect the provision of telephony or internet services on other land;
8. servers critical to an authorised deposit taking institution (being a body corporate authorised under section 9(3) of the Banking Act 1959 to carry on a banking business) or a stock exchange in Australia will be located on the land;
9. public infrastructure will be located on the land.
Peter Shaw and his Team will continue to monitor the situation and provide further updates as new information becomes available.
Ash St. Can Help You
The Ash St. Corporate, Commercial and M&A team are highly experienced professionals who pride themselves on providing clients with practical business solutions.
If you think this Government announcement applies to you, please contact us as soon as possible so that we can give early attention to identifying the path to be followed +61 2 8651 8700 or email firstname.lastname@example.org
Important to Note
The information set out above is general guidance only and is not intended to be relied on as a substitute for legal advice. Liability limited by a scheme approved under Professional Standards Legislation.