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This article has been written by Ayushi Ajay Sharma pursuing the Diploma in International Business Law from LawSikho. This article has been edited by  Zigishu Singh(Associate, Lawsikho) and  Ruchika Mohapatra (Associate, Lawsikho). 


Foreign investment happens at the decision of an individual, business or an investment vehicle outside the country, who wants to set up a new business in the country or purchase property or shares in the country’s economy. Due to the global lockdown caused by the COVID-19, economic disruptions had been caused. Foreign investment (FDI) had assisted the economies during the crisis via supporting the government in addressing the challenges of pandemic and linkages with Multinational enterprises, research and development, and local firms. However, even in this rough patch, the Australian economy showcased a resilient economic growth, formed strong institutions and drew high levels of foreign investment. In 2020, the country had attracted A$1 trillion of foreign direct investment. The aggregate value of foreign investment stock had grown up from 120% in 2000 to 203% in 2020. Foreign investment in Australia rose up to 2.5% in 2020 leading to a total stock of 7% Foreign Investment per year. Developed economies like the US, Japan, the UK, the Netherlands and Canada have been prime investors. More than half of the FDI is spent on real estate and financial services, followed by investment in scientific, mining and professional sectors. However, mining has accounted for the principal beneficiary of the FDI, with a total of 35%.

Outline of foreign investment framework

Australia’s economic growth is attributed to the competitiveness, open, resilient and diverse markets and a rules-based trading system. There are two broad categories under which the foreign investor can approach the Australian government:

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1. Portfolio investment: It refers to the acquisition of securities or equity and debt transactions wherein the investor doesn’t have any control over the operation of the enterprise. It is inclusive of property, shares in Australian companies or pension funds.

2. Foreign direct investment (FDI): it is performed when the individual or entity sets up a new business or purchases 10% or more of an Australian enterprise and has at least partial control over its operations.

The Australian government evaluates the proposals in a detailed manner through the Foreign Investment Review Board (FIRB). Thereafter the board examines pertinent investment applications which fall within the scope of Australia’s foreign investment policy and Foreign Acquisitions and Takeovers Act (FATA), 1975. It recommends to the Treasurer on behalf of the proposals and the government. This system enables the government to consider community issues revolving around foreign ownership of certain assets while examining Australia’s national interest.

The Treasurer is empowered to prohibit investment if they assume it would go against the ‘national interest’. Primarily national interest was interpreted in terms of economic benefits keeping in mind the  five factors mentioned below:

1. National security: the influence of investment on Australia’s capability to secure its strategic and security interests,

2. Competition: the competitive spirit between customer and producer, investor having more power over global market,

3. Australian government policies,

4. Influence of the economy and community: assurance of fair return to Australian people,

5. Character of investor.

Temporary measures in response to Covid-19

  1. Reduction in monetary threshold: Monetary screening thresholds for the completion of application and approval under FATA were reduced to $0. This had a huge impact on the foreign investments as every single investment required FIRB approval, irrespective of the amount of investment or nature of the investor. This guaranteed that all the foreign investors are given equal opportunity. Previously the threshold was as high as $1,192 million, depending upon the nature of investment and origin of the investor. The Federal Government took this extreme step to protect the ‘national interest’ by restricting the investors from investing in critical sectors which might hamper the security and viability of such sectors in the economy.
  2. Increased time limitation: The statutory period for the examination of applications has been extended from 30 days to six months. However, the agreements entered prior to the new measures will stand unaffected. These rules will be applied for the duration of COVID-19 and no specific time period for exhaustion of the same has been decided yet. Moreover, the Treasurer had declared that it will give importance to urgent applications for investments and consider the commercial deadlines in relation to the proposals.
  3. Student Accommodation, Retirement Villages and Residential Care: The Regulation had expressly declared that aged care facilities, student accommodations and retirement villages are excluded from the strict rules subjected under ‘residential land’. These categories would assume lenient rules and thresholds of developed commercial lands.
  4. Application Fees: All fees with respect to the investment proposals are payable and no action can be taken prior to the payment. The foreign investment generally expects a fee between $2,000 and $105,000 which is necessary to be paid off. The time limit on approval of application doesn’t commence unless fees are paid. Further, the Federal Government had announced that the Treasurer will consider the refund of fees if the investor wishes to withdraw the application.

Benefits of foreign investment in australia

Ranked at third position in the Economic Freedom Index 2021, it is needless to justify the FDI benefits Australia can offer to the investors. Moreover, the country has witnessed consistent economic growth over the years, starting in 1990. It is credited to the highly skilled workforce as the country has the seventh-highest proportion of working population in the tertiary sector.

Australia is proud of its stable democracy and strong governance. Governance of Australia was ranked at 93.8 percentile in 2020. It’s location further benefits the trade and cultural links amidst the Indo-Pacific region with a 24 hour connectivity between major time zones in Americas, Asia and Europe. Befitting the geography, the country has built a world-class infrastructure to even the needs of businesses.

Not just to foreign countries, but the country itself benefits a lot from FDI. Foreign investment supports the nation to reach its economic potential via capital funding, improving existing industries, and creating employment opportunities. It pays dividends for the Australians as it boosts the tax revenues to the federal and state governments, further increasing funds for hospitals, roads, schools and essential services. Through foreign investment, competition and interaction amongst different businessmen also expand, motivating the countries to spend more on innovation and technological advancement.

Restrictions on FDI policies in Australia

Even though the country offers a wide range of opportunities for trade and foreign investment, the Australian economy is less open than the rest of the OECD (Organization for Economic Cooperation and Development) member countries. The country had ranked at 5th most restrictive of the OECD countries in 2018 owing to the screening and approval regime. Australia had also secured the same position in real estate investment regime in OECD.[16]


Despite the pitfall caused by the COVID-19 pandemic, the economy of Australia did not stagger. Due to the resilient approach and highly structured FDI policies, the country had a total FDI influx of $1 trillion in 2020, with higher stakes from Direct Investment and Portfolio Investment Equity. The temporary amendments had widened the scope for foreign investors for better returns in future. However, these amendments will be re-evaluated after the COVID-19 eases out.

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