The most significant reforms to Australia’s foreign investment framework in 40 years were introduced in 2015‑16. The reforms were focused around building a stronger compliance program and a fees system to fund it, while maintaining an assessment system based on the national interest.
There were a number of high profile sensitive cases, dominated by the privatisation of state and territory electricity network assets and Australian ports of national significance. Strong interest in these assets is reflected in the increased number of business approvals in 2015‑16.
Privatisation processes were a significant focus of the Board, which actively engaged with relevant state and territory governments, their advisers and relevant Commonwealth agencies as well as proposed bidders and their advisers. The increasing importance of such cases saw further policy development in relation to managing the national security risks around assets in critical sectors.
Australia continued to attract a large volume of foreign investment applications. The number of foreign investment approvals grew to 41,445 compared with 37,953 in 2014‑15, largely driven by residential real estate transactions. This represented $247.9 billion of proposed investment in comparison to $191.9 billion in 2014‑15.
For the third year in a row, China was the largest source of approved investment ($47.3 billion), driven by continuing approvals in the real estate sector. Overall the United States was the second largest source of approved investment but the largest investor in non‑real estate sectors.
Lower screening thresholds introduced in 2015 saw an increased flow of agricultural land applications. The first report of the Foreign Ownership of Agricultural Land Register showed that, as at 30 June 2016, there were foreign interests in 13.6 per cent of agricultural land by area. The top two source countries were the United Kingdom and the United States.
Proposed investment in residential real estate continues to be focused on investment in new dwellings, which is in line with the policy to encourage residential real estate investment that increases housing supply.
High value commercial property approvals increased in 2015‑16; up by more than $10 billion and 100 approvals on 2014‑15. Some of this growth can be explained by multiple applicants for two large transactions.
Since assuming the role in 2015, the Australian Taxation Office has worked to increase compliance with and enforcement of the foreign investment rules for real estate. In 2015‑16, divestments were issued in 39 cases for residential properties valued at $48.7 million.