Business FIRB Approval
Not all foreign investors need FIRB approval when buying a business!
You’re probably aware that as a foreign investor or temporary resident, you may need to get permission from the FIRB if you’re planning to to buy your own business in Australia.
Whether you want to buy a small to medium enterprise (SME) or a large corporate, you may need to notify the Foreign Investment Review Board (FIRB) of your investment plans.
With some knowledge under your belt, you can make the process a lot smoother. In fact, you may be able to skip the business FIRB approval requirement if you can meet certain criteria.
How does business FIRB approval work?
Generally speaking, the requirement for business FIRB approval only applies to large, multi-million dollar acquisitions.
However, depending on the business sector, you may be required to notify Treasury even if it’s a much smaller acquisition.
Who needs FIRB approval?
As a basic rule, certain non-resident investors will need to notify FIRB when buying, or acquiring an interest of 20% or more, in a business valued at over $252 million.
This requirement is only for foreign investors and temporary residents and doesn’t apply to:
- Australian citizens.
- Australian expats.
- New Zealand citizens.
- Permanent residents (PR).
What if I want to start a business in Australia?
You won’t need FIRB unless you’re a foreign government investor, that is a person or entity that will hold a substantial or controlling interest in the business.
So as long as you have the right business visa, you can start your business right away, avoid the $10,000 FIRB application fee and we can help you finance it!
We have a number of business loan solutions available from a wide variety of major banks and lenders, whether you need start-up capital or working capital such as invoice lending or equipment finance.
Call us on 1300 889 743 or simply fill in this enquiry form and we can provide a free assessment of your situation and business needs.
What if I want to buy a commercial property as well?
Different thresholds apply depending on the type of land and property that you want to buy:
For example, for developed commercial land such as buying retail shop front, a warehouse or an office building to run your business from, there’s a threshold of $252 million.
However, for mining and production land, you must notify FIRB no matter the value of the tenement.
Check out the Commercial Property FIRB Approval page for more information on thresholds.
Can I avoid FIRB approval?
Australia regularly signs Free Trade Agreements (FTAs) with select countries and, because of this, certain FTA partner countries can actually buy or invest in a business valued up to $1,094 million without the need to notify FIRB.
Australia currently has agreements with the 10 member countries of the Association of Southeast Asian Nations (ASEAN):
- New Zealand
- The United States
This higher threshold doesn’t apply to all of these countries nor does it apply to any foreign government investors such as a corporation or trustee of a trust in which a foreign government holds a significant interest.
In addition, depending on the sector, the sensitivity of the business and the FTA partner country that you’re from, a lower reporting threshold may apply.
What are sensitive businesses?
FIRB places lower thresholds on what the government calls “sensitive” business sectors.
At the moment, this refers to businesses that have anything to do with the Australian military, security technologies and communications systems, plutonium and uranium exploration, and the operation of nuclear facilities.
Because of this, the business FIRB approval must be sought for these businesses if they are worth $252 million or more, no matter whether you’re from an FTA partner nation or not.
Other types of sectors and industries may be considered sensitive by FIRB so it’s best to give them a call before signing a contract to buy.
What about agribusiness?
If you’re from New Zealand, the United States or Chile, the threshold for agribusiness is still at the higher $1,094 million mark.
However, if you’re from FTA partner nations China, Japan or Korea, or any other nation, a lower threshold of $55 million applies.
Do I always need to notify the FIRB?
Do you think you might need to get business FIRB approval?
Rather than risking it, get in contact with FIRB before signing a contract of sale or heads of agreement with the current business owners (vendors).
You can always speak to someone over the phone to clarify whether you’re required before submitting an application.
No matter whether you need to apply with FIRB or not, it’s essential you do this before proceeding with the acquisition and avoid penalties for non-compliance.
This can range from fines of up to $45,000 or criminal penalties up to $135,000 or 3 years imprisonment.
You also won’t be able to qualify for business finance without getting FIRB approval or a no objection notification.
How do I apply with FIRB?
If you need to notify the board, you can simply apply via the ‘Applications‘ page on the FIRB website.
It usually takes up to 10 days to receive a reply from FIRB regarding your application.
What should be in my application?
An FIRB application to buy a business usually includes the following details:
- The value of the business including assets
- The amount interest you will hold in the entity as well as the total amount to invested
- Proposed location of the business including the lease agreement or details of the property to be purchased
- The ownership structure of the business including any relationship between the parties that could provide a financial benefit
- Documents relating to the contract of sale (heads of agreement), debt and equity term sheet and share agreement
- The most recent financial year’s financial statements audited by an accountant (unaudited financial statements may also be accepted)
There is more information that FIRB may ask for so check out this checklist for more information.
Can my application be knocked back?
Yes, Treasury may decide that your acquisition isn’t in the nation’s best interests.
This is happening more often in the agricultural sector since the threshold was dropped from $252 million to $15 million for agricultural land and the threshold for agribusiness currently at $55 million (unless you’re from a select FTA partner nation).
The reason for this is that FIRB is actually receiving more applications from this industry so this pushing up the number of declined applications.
When it comes to other businesses, the majority of applications are approved or on the condition that certain requirements be met.
The trick to getting approved is to be open and honest with your intentions and provide the evidence when the board asks for it.
Are there application fees involved?
Yes. Be prepared to pay quite a hefty application fee including:
- Australian businesses (including agribusiness) valued at $1 billion or less: $25,000
- Over $1 billion: $100,000
- Foreign government investor starting a business in Australia: $10,000
Other application fees may apply so please see the FIRB website for more details.
Buying a business in Australia is a big financial decision so it’s important that you seek independent legal and financial advice first.
Will FIRB take into account my current business interests?
FIRB won’t take into account current interests or ownership that you may already have in other businesses.
You’ll only be required to notify the board if you plan to acquire at least a 20% stake in a business that’s worth $252 million or more.
This is great news because you can potentially buy multiple businesses without ever needing to notify FIRB.
This is very different to buying agricultural land, where FIRB uses a “cumulative” approach and takes into account all interests and investments that you may already have in Australian farmland.
You could actually hit the agricultural land threshold of $15 million if you previously bought a parcel of land worth $5 million and are now planning to buy farmland worth $30 million.
Check out the Farm FIRB Approval page for more information.
Do I need a licence to run a business?
In order to run a business in Australia as a non-resident, you need to apply for a Business Innovation and Investment Visa (subclass 888) through the Department of Immigration and Border Protection.
Your expression of interest will be assessed by your state or territory government and if it’s approved you can apply for the visa.
If you’re approved, the visa will be valid for four years, after which you can apply for a Permanent Business Innovation and Investment visa.
Check out the Australian Business Licence Information Service (ABLIS) for licences you may require in order to begin operating.
What kind of businesses are foreigners buying?
Recent data from the Department of Foreign Affairs and Trade (DFAT) found that direct investment in business made up 25% of all foreign investment in Australia.
Foreigner investors love Australia because of our:
- Largely uninterrupted economic growth, even in the wake of the Global Financial Crisis (GFC)
- Geographic location providing strategic and logistic advantages when it comes to accessing the Asian and American market.
- Strong and world-renowned banking system and business-friendly regulatory and tax policies.
The last 25 years has seen much of this investment in the mineral and energy sectors (around 40% of total foreign investment currently) but the areas of healthcare, ageing, agribusiness and agriculture have also attracted significant investment over the past 10 years.
Much of this has been due to Australia’s ageing population and the slowdown in our mining boom.
You can find more interesting information on investing in Australia on the DFAT website.
Do you need a business loan?
Did you know that foreign investors and temporary residents can get the same interest rates and borrow at the same Loan to Value Ratios (LVRs) as Australian citizens and expats, permanent residents and New Zealand citizens?
You won’t be charged more for a business loan just because you’re a non-resident!
In fact, as specialist mortgage brokers with a range of major banks and lenders to choose from, we have the negotiating power to get you discounted interest rates and borrow the amount you need to start a business.
So call us today on 1300 889 743 or complete our free assessment form and we can help present a strong business case with the right lender.