Update on the 2016-2017 Annual Report of the Foreign Investment Review Board

Key Points

• On 8 May 2018, the Foreign Investment Review Board presented their 2016-2017 annual report to the Treasurer.

• Key findings suggest continued dominance of foreign investment sources, changes to the volume of residential real estate approvals and an increased focus on compliance.

On 8 May 2018, the Foreign Investment Review Board presented their 2016-2017 annual report to the Treasurer.

Highlights of the report include continued dominance of foreign investment sources, a fall in residential real estate approvals, and an increase in success and focus on compliance with the foreign investment regulatory framework.

Major foreign investment sources

Key findings of the report indicated that in 2016-2017, China and the United States (US) continued to be the top two sources of approved investment. This was despite the total value approved falling in comparison to 2015-2016 levels, with China falling by $8.4 billion and the US by $4.5 billion. The report also showed that Canada continues to grow as a key source of investment, with $23.2 billion worth of approvals, an increase of $7.5 billion from 2015-2016.

Residential real estate

Residential real estate approvals fell substantially from 40,149 in 2015-2016 to only 13,198 in 2016-2017. Appearing to be the most significant factor explaining this drop is the introduction of application fees in December 2015, resulting in investors only applying for properties they intended to purchase. The reduction in number of applications is not necessarily a reduction in actual investment.

Other factors that may have contributed to the reduction in applications include tighter Chinese capital controls, weaker market conditions and additional foreign investment taxes in some Australian states.

Foreign investment regulatory compliance framework

Compliance with the foreign investment regulatory framework continues to be a priority, with an emphasis on voluntary compliance. The ATO has been active in identifying residential real estate related breaches, and data matching is an increasingly important source of investigations. The number of residential real estate-related breaches identified by the ATO more than doubled from 2015-2016 to 549 in 2016-2017.

The treasury has expanded its work to ensure compliance in relation to foreign investment in business assets, and subsequent to 2016-2017 has initiated its first round of compliance audits.
 
The 2016-2017 Annual Report by the Foreign Investment Review Board is available for download and viewing at: http://firb.gov.au/2018/05/2016-17-firb-annual-report-is-now-available/
 
Posted by Jack Guthrie & John Kell