Foreign Direct Investment in Australia: A Year in Review and Looking Ahead to 2025

Australia’s Foreign Investment Review Board (FIRB) plays a pivotal role in regulating incoming foreign investment to ensure it aligns with the nation’s interests, economic priorities, and security concerns.

In 2024, the Treasurer announced a “significant overhaul” of the country’s foreign investment framework, signalling the Government’s commitment to greater transparency and a more efficient FIRB approval process (as explored in our previous article).

This article examines the progress of the key reforms introduced in 2024 and explores what lies ahead on the Australian FDI landscape in 2025.

2024 in review

Progress on streamlining the application process

In May 2024, the Treasurer announced reforms to strengthen and streamline Australia’s foreign investment framework. A key initiative was the commitment to processing 50% of FIRB applications within the statutory 30-day timeframe, effective 1 January 2025. This initiative aimed to fast-track approvals for lower-risk investments, particularly in sectors such as manufacturing, professional services, commercial real estate, new housing, and non-critical minerals mining.

Based on data self-published by Treasury, between 1 April and 30 June 2024, the median processing time for approved commercial investment proposals was 41 days – an improvement from 49 days in the previous quarter, but still above the 30-day target.

From the perspective of foreign applicants, this looks like good progress. Further improvement in processing times in 2025 would be a welcome development.

Trends from 2024 data

The latest FIRB quarterly reports reveal several notable developing trends from foreign investment in 2024:

1. A total of 340 investment proposals were approved during the 1 April to 30 June 2024 quarter, representing an increase from 271 approvals in the previous quarter, highlighting a rise in overall investment activity.
2. The United States emerged as the largest source of approved foreign commercial investment proposals by value, with the total increasing significantly from $4 billion in the 1 January to 31 March 2024 quarter to $21.9 billion in the 1 April to 30 June 2024 quarter.  Other countries in the Bird & Bird network – Japan, Germany, France and Singapore – also make up the top 5 sources of foreign investment in the quarter. 
3. China continued to dominate as the largest source of approved residential real estate investment proposals by value for the second consecutive quarter, reflecting ongoing foreign investment interest in Australia’s property market.
4. The services sector remained the most popular for investment applications, consistently attracting the highest number of proposals, indicating sustained investor confidence in this industry.
5. Interestingly, no infringement notices were issued in the 1 April to 30 June 2024 quarter, a decrease from the three notices issued in the previous quarter.

Guidance notes updates

While the Treasury foreshadowed changes to the FIRB Guidance Notes as part of the announcements in 2024, those updates are yet to be released.

Looking Ahead to 2025

Caretaker Mode and the Upcoming Federal Election

With the Federal Election set to be called in the coming weeks, the Federal Government will shortly enter the conventional ‘caretaker period’. This period begins when the Prime Minister calls the election, triggering the prorogation (i.e., the cessation) of Parliament and the dissolution of the House of Representatives. While routine government operations continue, significant policy decisions are generally deferred until after the election.

As a result, once the election is called, the processing of complex or high-value FIRB applications will likely be temporarily paused until the outcome of the election is determined. Low-value or routine applications should not be affected. The caretaker period typically lasts between four and nine weeks, ending once the election result is definite, or, in the case of a change of government, when the new administration is appointed.

If the election outcome is uncertain or there is a transition to a new government, investors who have put forward sensitive proposals involving critical infrastructure or high-value proposals should anticipate delays in decision-making.

Prohibition of purchase of residential property by foreign investors

In February 2025, the Federal Government announced a new policy to prohibit foreign investors (including temporary residents and foreign-owned companies) from purchasing established residential dwellings in Australia, unless one of the limited exceptions applies. The available exceptions will include investments that significantly increase housing supply or support the availability of housing supply, and participation in the Pacific Australia Labour Mobility scheme. The policy is set to be effective from 1 April 2025 until 31 March 2027.

As part of the same announcement, the Government also proposes to introduce laws to limit ‘land banking’ (purchasing undeveloped land and dividing it up into smaller parcels, with aims of selling them individually), by compelling foreign investors who buy vacant land to develop that land within a reasonable time.

To implement its plan, the Government plans to provide an additional $5.7 million in funding over 4 years to the ATO’s foreign investment compliance team and upgrade both the ATO’s and Treasury’s audit programs. 

Monetary threshold changes effective 1 January 2025

Effective 1 January 2025, monetary thresholds for foreign investments have been updated, with an increase of about 2.6% applied across most types of investments. The $0 threshold for foreign government investors remains unchanged.

The key changes include an increase of the threshold for business acquisitions from AUD 330m to AUD 339m for investors from non-FTA partner countries and an increase from AUD 1,427m to AUD 1,464m for investors from FTA partner countries (such as New Zealand, the US, the UK, and Japan).

Introduction of the new Foreign Investment Portal

To improve transparency and efficiency, a new FIRB application portal is proposed to be introduced in 2025. This platform aims to streamline the submission process, provide real-time updates, and better facilitate communication between investors and regulatory bodies. Key features of the new portal are set to include ‘Digital ID’ login, the ability to complete and submit investment proposals, online payment of fees, and submission of compliance reports as required.

The portal will be launched in two phases. Phase 1 – the “compliance launch” – [anticipated to go live in late February 2025 , enabling investors and agents to create accounts, communicate with Treasury, and submit compliance forms. Phase 2 – the “submissions launch” – will follow at the end of April 2025, allowing users to complete, submit, and track investment proposals, as well as process payments through the portal.

Emerging trends in enforcement

As part of the 2024 announcements, the Federal Government placed a strong emphasis on strengthening FIRB compliance, aiming to enforce approval conditions more rigorously. In 2025, Treasury intends to allocate additional resources to enhance its oversight of foreign investment regulations, increasing both monitoring activities and on-site inspections to confirm compliance with FIRB legislation. As part of this intensified approach, regulatory audits and investigative reviews are expected to rise.

Conclusion

While not quite an “overhaul” of the FIRB framework, the reforms announced in 2024 appear to be taking effect and show an emphasis from the current Government on balancing efficiency in enabling foreign investment against the protection of Australia’s national interests. With the upcoming election adding uncertainty, staying updated will be imperative, as political shifts may impact future FIRB policies and decisions. As the regulatory landscape evolves, foreign investors must stay informed to navigate these changes effectively.

Our expert team at Bird & Bird is happy to assist with any questions relating to foreign investment applications. For queries, please contact Aaron Chan, Special Counsel at [email protected], and Alex Lazar, Senior Associate at [email protected].