Rising national security concerns have led many countries to review both their frameworks for screening inward investment and the way in which these frameworks are applied.

This paper outlines the most comprehensive reforms to Australia’s foreign investment review framework in more than 20 years. The Australian government will shortly release exposure draft legislation for consultation on the reforms prior to its introduction into Parliament, and provide further guidance for investors on implementation.

These reforms include measures to strengthen the existing framework with: enhanced national security review of sensitive acquisitions; extra powers and resources to ensure foreign investors comply with the terms of their approval; and amendments to streamline investment in non-sensitive areas.

In particular, the national security reforms will enable the government to better address emerging national security risks that arise from foreign ownership, such as powers to screen any direct investment on national security grounds regardless of value. There are also measures to reduce the regulatory burden for certain investments that do not pose national security risks, and provide greater clarity on the scope and application of the Foreign Acquisitions and Takeovers Act 1975 (FATA).