The Morrison government on Friday unveiled a new national security test for foreign investment alongside a lift in application fees to cover the costs of administering the new checks. Picture: Evan Morgan
The Property Council of Australia has lashed the federal government’s move to hike fees for foreign investors attempting to buy Australian commercial property, arguing that the new regime will discourage the investment required to support the nation’s economic recovery.
The Morrison government on Friday unveiled a new national security test for foreign investment alongside a lift in application fees to cover the costs of administering the new checks.
The proposed fee framework will see the cost of reviewing a $50m business or commercial land purchase rise to $13,200, up from $10,500, while commercial land and businesses worth more than $1.9bn will incur an application fee of $500,000 for foreign buyers. This compares with the previous maximum of $107,100 for acquisitions over $1bn.
Property Council chief executive Ken Morrison rubbished the proposed hikes as an outrageous impost on institutional investment and warned of the detriment they would cause to the commercial property sector.
“This draft fee regime treats commercial property like it is a national security asset like ports and telecommunications infrastructure,” Morrison said.
“Australian office buildings, shopping centres, industrial parks, retirement villages, tourism assets and other commercial property are vanilla investments from a security perspective, and they attract the highest quality institutional investment from around the world.
Pension funds, life companies and other pooled saving vehicles represented the highest quality institutional capital around the globe, he said.
“Why would we make it less attractive for them to invest in Australia, particularly when we will need this investment to kickstart new job-generating projects?”
Bring Australia in line with US, NZ
But former Foreign Investment Review Board member Alice Williams, who served on the board for five years until June, dismissed the idea that large institutional investors would be put off by the higher fees, saying they brought Australia in line with US and New Zealand costs.
“The big increase is for the large transactions, those in excess of $1bn, particularly those in excess of $1.9bn. And normally, those are quite complex transactions. They can involve the applicant having a very complex corporate or trust structure, with sometimes a lack of transparency in terms of underlying investors or unit holders in that trust.
“And so that requires significant analysis to understand the national interest risks associated with such a transaction. So there is quite a lot of additional work that is required for those large transactions.”
Large institutions engaging in multi-billion dollar transactions would not be deterred by the fee increase, she predicted.
The new fee framework comes days after data showed Chinese investment in Australia fell further last year, following its peak of $15.8bn in 2016.
According to the Australian National University’s Chinese Investment in Australia database, Chinese investment dropped to $2.5bn in 2019, down from $4.8bn in 2018.
The decline coincided with a fall in Chinese investment around the world, but the fall in flows to Australia was steeper, the ANU data found.
In late March, amid growing fears foreign investors would swoop on Australian assets in distress from the coronavirus crisis, Mr Frydenberg immediately lowered to zero the threshold at which foreign investment would trigger a review by FIRB.
In June, the Treasurer embarked on the biggest overhaul of foreign acquisition and takeover laws in 45 years, including the new national security test, a national security power of last resort, and stronger enforcement actions including higher civil and criminal penalties.
Morrison said if the government was trying to reform foreign investment rules to deal with national security issues, it didn’t make sense to deter high-quality investments into commercial property assets.
“The last thing our economy needs is to make it unnecessarily harder for job-creating, economy-boosting investment proposals to get the green light,” he said.
