The Morrison government is set to adjust fees for all foreign investment applications after having lowered to zero the dollar value threshold of every foreign bid that must be screened.
The changes will see fees go up for all residential property acquisitions except for those valued at $38 million or more, where a cap of $500,000 will be in place. Fees will also change under the new regime for commercial businesses and commercial land.
As an example, the fee for the $1.5 billion purchase of infant formula group Bellamy's Australia last year by Chinese group China Mengniu Dairy Company will change from $107,100 to $396,000 under the new regime.
Treasurer Josh Frydenberg said the proposed fee framework would ensure that larger investors, and investors that now pay a disproportionately smaller fee for their investment, pay a fee that more closely reflects the costs of administering the framework.
"Stronger and more flexible enforcement options will ensure that our foreign investment regime is able to respond to emerging risks and global developments," he said.
"While undertaking these reforms Australia still remains open for business and recognizes the significant benefit foreign investment provides to our economy."
In late March the Treasurer introduced zero dollar FIRB screening thresholds to stop opportunistic foreign buyers – from China and elsewhere – seizing on financially distressed local assets and to safeguard the national interest.
Now the government plans to legislate changes to the fees foreign buyers must pay that will see some application costs increase and others lowered.
Costs of reviewing applications
Fees are being updated to reflect the costs associated with reviewing foreign investment applications as a result of the reforms to the foreign investment framework.
The existing fees for businesses, entities and commercial land are currently set at $2100 for acquisitions below $10 million; $26,700 for acquisitions below $1 billion; $107,100 for acquisitions above $1 billion.
They will change to $2000 for acquisitions below $75,000; $6600 for acquisitions below $50 million; $13,200 per $50 million of consideration; and a maximum fee of $500,000 for an acquisition of more than $1.9 billion.
For residential property the fee regime currently stands at $1000 for acquisitions below $23,200; $5800 for acquisitions below $1 million; $11,800 per $1 million consideration and no cap on maximum fees.
The new fees will be $2000 for acquisitions below $75,000; $6600 for acquisitions below $1 million; $13,200 per $1 million of consideration; and a maximum fee of $500,000 for an acquisition of more than $38 million.
To understand this, if a foreigner had purchased Australia's most expensive house, Fairwater, for $100 million instead of local billionaire Mike Cannon Brookes, they would have previously paid $1.3 million in FIRB fees. That is now capped at $500,000.
For agricultural land deals the current regime of $2100 for acquisitions below $2 million, $26,700 for acquisitions below $10 million and $107,100 for acquisitions above $10 million will change to $2000 for acquisitions below $75,000; $6600 for acquisitions below $2 million; $13,200 per $2 million of consideration; and a maximum fee of $500,000 for an acquisition of more than $76 million.
"Agricultural land is considered of national significance, with substantial resources across government used to screen investments," Treasury documents said.
At the end of 2019, the stock of foreign direct investment in Australia was over $1 trillion.
The proposed fee framework is comparable to recently updated fees charged by similar foreign investment screening regimes.
For example, the United States introduced filing fees for applications in May 2020, which can be as high as $435,000 (or $US300,000) for an acquisition of $1 billion. In contrast, a similar acquisition under the proposed framework will be approximately $277,200.
New Zealand’s Overseas Investment Office increased foreign investment application fees in July 2016 and most recently updated its fee schedule in October 2018.
Author: Matthew Cranston
Source: Financial Review