Ahead of the Deal - Australian M&A briefing
Key insights
- The Australian Government has confirmed a package of significant reforms to Australia's foreign investment regime, aimed at streamlining processes for low-risk investments whilst strengthening responses to sensitive investments and serious non-compliances.
- The reforms combine new processing targets with a patchwork of changes to Australia's foreign investment laws. The laws will be updated in a separate phase, with timing yet to be confirmed.
- Key aspects include more flexibility around exemption certificates, new exemptions for low-risk cases, and faster processing for certain low-risk applications, which the Government says will lead to "faster and fewer approvals". The Government will also review and consolidate outdated conditions in existing approvals and simplify the process for modifying conditions moving forward.
- At the same time, the Treasurer will have broader new powers to respond to emerging national security risks. These powers extend well beyond the Government's current toolkit, including the ability to modify approval requirements and 'call in' a wider range of transactions for review. The definition of 'associate' will be expanded to pick up a wider range of relationships that may exert influence. The proposal for a broader anti-avoidance regime is also of interest.
- It will be important to review and give feedback on the draft legislation when this is released, to ensure the correct balance is struck and Australia remains an attractive destination for foreign capital.
"The reforms have the potential to simplify processes significantly for low-risk investors (particularly repeat investors into Australia), whilst creating a more layered and interventionist regime for investors in sensitive sectors."
Overview
On 19 May 2026 the Australian Government announced a suite of reforms to Australia's foreign investment framework, which have been outlined in an Overview Paper. The announcement follows a public consultation on the proposed reforms, which we commented on in a previous article. There are three key components to the reforms:
- Review of existing conditions: From 1 July 2026 the Government will review and remove "ineffective" conditions in existing FIRB approvals, initially focusing on tax conditions. The Government will provide further information on this review, and how investors can engage with it, in July 2026.
- New target for processing low risk applications: The Government has committed to a new performance target from 1 January 2027, to process certain "low risk" applications within 30 days.
- Suite of legislative changes: There will be a suite of significant changes to Australia's foreign investment laws,. Exposure draft legislation, reflecting these changes, will be released for public comment in due course.
Overall, the proposed changes are positive. They will provide welcome relief for low-risk investors and a suite of procedural changes benefitting all investors. However, many of the concepts are still expressed in very general terms, and it will be critical to consider the detail of the proposed legislation when available.
In parallel with the announcement, the Government released an updated Foreign Investment Policy, which highlights new risks to national security as a result of evolving technologies. We expect investments involving AI, critical minerals, critical technologies and sensitive data will be a focus moving forward.
"National security threats are increasingly complex as technologies evolve and strategic competition intensifies. At the same time, competition for global capital is becoming sharper. While we have a strong track record in attracting investment into Australia, we cannot be complacent." (Australia's Foreign Investment Policy, updated May 2026)
The changes at a glance
A snapshot of the proposed changes is outlined below. The changes touch on all aspects of Australia's foreign investment regime, from approval requirements through to compliance tools.
| Topic | Streamlining | Strengthening |
|---|---|---|
| Approval / screening of investments |
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| Conditions and no objection notifications |
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| Reporting and information |
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| Compliance tools | - |
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Streamlining
Fast track: 30 day processing target for low risk applications from 1 January 2027
From 1 January 2027, Treasury will aim to process certain applications within 30 days. To qualify:
- The investor must be a repeat applicant who has received an approval in the past 24 months, not be subject to extrajudicial direction, and have no record of non-compliance or character concerns.
- The proposed investment must be in a non-sensitive sector (i.e. not a national security business, or a business in the media, telecommunications, transport, security technologies, defence or uranium sector), not raise national interest sensitivities and have a "straightforward and transparent transaction structure".
- The application must be for a no objection notification (not an exemption certificate or variation).
First-time investors in Australia, investors with complex fund structure and any party acquiring assets in sensitive sectors will remain outside this expedited pathway.
Reduced approval requirements
A suite of changes will be made to reduce the approval requirements for foreign investments in low-risk sectors or with limited control implications. This will include new exemptions for specified low-risk scenarios, a reset of the tracing rules and broadening the Exemption Certificate so investors can apply to "switch off" or adjusting concepts such as FGI status, tracing and associate rules.
These have the potential to streamline approval requirements significantly, if framed appropriately, and will be particularly beneficial for repeat investors and investment funds with upstream FGI investors.
Interestingly, the Government has indicated that the fees for granting ECs may be raised and there will be no statutory deadline for granting ECs, in light of their more bespoke nature.
"This measure will address the current requirement for repeated applications by low-risk investors that are disproportionate to the risk to the national interest. Low-risk investors currently caught by the broad application of tracing rules and FGI status will be the primary beneficiaries." (The Treasury, Overview of reforms, May 2026).
Improving procedures
Conditions will be able to be varied more easily (i.e. without a formal variation application) and incorporate industry standards, and the default duration of no-objection notification will be extended from 12 months to 24 months. These are positive developments.
Strengthening
New approval requirements for sensitive sectors
The Government will expand mandatory notification requirements for certain investments in "current and emerging sensitive sectors of the Australian economy". Treasury will consult across government and industry to identify these areas. We expect AI, critical technologies, data centres and interests in proximity to Australian Government facilities will be a focus.
New powers for the Treasurer
The Treasurer will have a suite of new powers to call upon in response to emerging national security risks. Some of these are very significant. For example, the Treasurer will have the ability to adjust notification requirements in response to emerging risks, and "call-in" for review commercial arrangements short of ownership (e.g. offtake agreements and lending arrangements). It will be critical to see how these powers are structured in the draft legislation, and what safeguards are put in place.
Expanded definition of "associate"
The concept of "associate" plays a key role in Australia's foreign investment framework, in determining if particular thresholds are met and whether an action involves a 'change in control'. Under the new laws, the definition of "associate" will be expanded to capture a wider range of third parties who may be able to exert influence. Examples given at this stage include 'direct interest holders' (i.e. holder of interests of 10% or more) and 'debt arrangements'. This will be a key point to monitor in the draft legislation. If cast too widely, it could undermine the efforts to streamline processes for low-risk investments.
Expanded compliance tools
The Treasurer's existing powers to issue disposal orders, prohibition orders and infringement notices will be expanded slightly to provide for more effective responses (e.g. to come into effect more quickly and appropriately penalise multiple breaches).
The "anti-avoidance" framework will also be strengthened, although details have not yet been provided. It will be important to see how the Government proposes to distinguish avoidance from legitimate transaction structuring under the tightened regime.
Conclusion
Overall, whilst must of the detail is yet to be confirmed, investors in low-risk sectors can look forward to reduced approval requirements and faster processing, and all investors can look forward to improved procedures around conditions and no objection notifications.
On the other hand, investors in sensitive sectors, including emerging areas such as AI and critical technologies, can expect a tighter set of rules to navigate. It will be critical to consider the details of the proposed changes in due course, to ensure these do not overreach.
Other authors: Eliza Wallace, Senior Associate and Radhika Tamhane, Lawyer.
