What is FIRB approval?

The first test is whether the buyer is a foreign person: someone who is not an Australian citizen or is a temporary resident, a company incorporated overseas or with significant foreign ownership, a trust that is foreign-controlled, or a foreign government investor. For layered structures you map the ultimate beneficial owner to work out foreign status.

If the acquisition is in scope, the buyer either applies through the ATO's foreign investment services for residential property or relies on a clearly applicable exemption, and can seek an exemption certificate for certainty. The application identifies the interest being acquired, the price and the ownership chain, supported by identity documents, structure charts, the contract of sale and any loan documents. The decision maker can ask for more information, then issues an approval, an approval with conditions, or a refusal, with the Treasurer making the final decision on many matters. Approved buyers must comply with the conditions and keep records, because compliance is audited.

Commonly reviewed acquisitions include residential property (new dwellings and vacant land, with established dwellings currently closed to foreign persons), vacant commercial land, agricultural land above statutory thresholds, business acquisitions that give control of an Australian business, interests in national security-sensitive sectors or critical infrastructure, and land near defence installations. New dwellings are often permitted with conditions. Foreign persons, including temporary residents, are currently banned from buying established dwellings, with narrow exceptions for redevelopment that adds housing and for accommodation for Pacific and Timor-Leste workers. The ban runs to 30 June 2029, so check the current position before signing.

Exemptions remove the need to apply, for example certain temporary resident holdings, acquisitions below monetary thresholds, and some intra-group restructures. Misclassifying a transaction as exempt when it is not is a common and costly error. Fees scale with transaction type and value, so check the current settings with the ATO for residential property and with FIRB guidance for business and agricultural cases.

Lenders face specific risks when lending against assets owned by foreign persons. Before accepting security, confirm whether the borrower is a foreign person and whether approval is required, because without it creating or enforcing a mortgage may be restricted. When a mortgagee intends to take possession or sell, a separate mortgagee application may be needed so that enforcement does not breach foreign ownership law.

Practical protections include FIRB warranties and conditions precedent in the facility agreement, indemnities for the cost of obtaining approvals or fixing breaches, checks at origination and again before enforcement, and legal advice on mortgagee applications. Delays in mortgagee consent can hold up settlement, so lenders and borrowers should work out early whether to lodge concurrently or separately.