Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is by far the largest source of foreign direct investment (FDI) for Australia. According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 162 billion in January 2020. The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment.
While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process. Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years. This continued in 2020 with the passage of the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, which broadens the classes of foreign investments that require screening, with a particular focus on defense and national security supply chains. All foreign investments in these industries will now require screening, regardless of their value or national origin. The legislation also provides the Treasurer with new powers to require certain investments to be scrutinized even if they do not fall within existing guidelines. Additionally, in March 2020 the Australian government announced all foreign direct investment would be reviewed over the course of the COVID-19 crisis, a period which ceased when the Foreign Investment Reform legislation commenced in January 2021. Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years.
In response to a perceived lack of fairness, the Australian government has tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas.
Australia has a strong legal system grounded in procedural fairness, judicial precedent, and the independence of the judiciary. Property rights are well established and enforceable. The establishment of government regulations typically requires consultation with impacted stakeholders and requires approval by a central regulatory oversight body before progressing to the legislative phase. Anti-bribery and anti-corruption laws exist, and Australia performs well in measures of transparency. Australia’s business environment is generally conducive to foreign companies operating in the country, and the country ranks fourteenth overall in the World Bank’s Ease of Doing Business Index.
The Australian government is strongly focused on economic recovery from the COVID-driven recession Australia experienced in 2020, the country’s first in three decades. In addition to direct stimulus and business investment incentives, it has announced investment attraction incentives across a range of priority industries, including food and beverage manufacturing, medical products, clean energy, defense, space, and critical minerals processing. U.S. involvement and investment in these fields is welcomed.
|TI Corruption Perceptions Index||2020||11 of 179||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||14 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||23 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD 162 billion||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 55,100||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for designated types of foreign investment described below, there are no laws that discriminate against foreign investors.
A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract, and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC. In addition, state and territory investment promotion agencies also support international investment at the state level and in key sectors.
Limits on Foreign Control and Right to Private Ownership and Establishment
Within Australia, foreign and domestic private entities may establish and own business enterprises and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices. See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.
Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 11 million) are subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under the Australia-United States Free Trade Agreement (AUSFTA). The current threshold remains AUD 1.216 billion (USD 940 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.
The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest.
Other Investment Policy Reviews
Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp496_e.htm .
The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location, and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See: http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .
Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The government’s business.gov.au website provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets, and financial services regulator, ASIC’s website provides information and guides on starting and managing a business or company in the country.
In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank “Starting a Business” indicator, registering a business in Australia takes two days, and Australia ranks 7th globally on this indicator.
Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. The United States is the top destination, by far, for Australian investment overseas.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) ($M USD)||2020||$1.50 trillion||2019||$1.39 trillion||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2019||$158 billion||2019||$162 billion||BEA data available at https://apps.bea.gov/international/factsheet/|
|Host country’s FDI in the United States ($M USD, stock positions)||2019||$112 billion||2019||$81 billion||BEA data available at
|Total inbound stock of FDI as % host GDP||2019||53%||2019||51%||UNCTAD data available at
* Source for Host Country Data: Australian Bureau of Statistics
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||714,250||100%||Total Outward||579,259||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
|Portfolio Investment Assets|
|Top Five Partners (Millions, current US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||912,160||100%||All Countries||621,379||100%||All Countries||299,781||100%|
|United States||387,323||42%||United States||298,353||48%||United States||88,971||30%|
|United Kingdom||80,348||9%||United Kingdom||44,312||7%||United Kingdom||36,037||12%|