Australia and foreign investment

Frequently asked questions

Why does Australia need foreign investment?

Foreign investment supplements Australia’s domestic savings to enable us to expand our economy. Foreign investment fills the gap between what Australia saves and what Australia invests each year. In 2013, 85 per cent ($317 billion) of Australia’s capital flow was sourced from domestic savings while 15 per cent ($55.6 billion) was sourced from overseas (ABS catalogue 5204.0, 2013). Without foreign investment Australia would be unable to build our economy to its full potential and would have less funds available to spend on hospitals, schools, roads and other government services.

How does foreign investment create jobs?

Australia has always relied on foreign investment to help drive economic growth, and with it, growth in employment. More than one in five businesses in Australia with 200 or more employees have greater than 50 per cent foreign ownership (ABS catalogue number 8167.0, June 2012). A separate study commissioned by the Business Council of Australia by Deloitte Access Economics (2010) found that a 10 per cent increase in foreign investment in Australia would lead to a more than one per cent increase in GDP by 2020.

What makes Australia an attractive destination for foreign investment?

Australia attracts a significant amount of foreign investment, partly because foreign investors have confidence that their investments are safe and will grow. Investors regard Australia an excellent place to invest because of its population growth, highly skilled workforce, strategic location, strong record of economic growth and stable governance and regulatory environment.

How does Australia compare to other countries in attracting foreign investors?

In 2012, Australia was the 14th largest recipient of foreign direct investment (FDI) inflows in the world according to the Global Investment Trends Monitor prepared by the United Nations Conference on Trade and Development (UNCTAD). The same report also ranked Australia as the 18th largest source of direct outwards investment.

Do foreign investors pay tax?

Taxation revenue is an important way in which foreign investment benefits Australia and Australians. When foreigners invest in Australian companies they are required to pay tax on their profits – just like Australian-owned companies. The Australian Tax Office (ATO) can investigate situations where it suspects that companies – including foreign-owned companies – are trying to avoid paying tax. Through its presidency of the G20 in 2014, the Australian Government is working to strengthen international cooperation to address tax avoidance, particularly, base erosion and profit shifting, to ensure profits are taxed in the location where the economic activity takes place.

What percentage of Australian businesses are owned by foreign entities?

The overwhelming majority of businesses in Australia remain Australian-owned. Australian Bureau of Statistics data shows that at June 2011, 97 per cent of all businesses are wholly Australian-owned (ABS catalogue 8167.0, 2013). Small and medium sized businesses are overwhelmingly Australian-owned, as are businesses in the agriculture, forestry and fishing sector (ABS catalogue 8167.0, 2013).

Do foreign investors send most of their profits abroad?

Many foreign investors choose to re-invest their profits in Australia. Close to two thirds of the income from foreign direct investment over the past five years has been re-invested in Australia.

Which Australian industries attract the most investment from overseas?

The largest stock of foreign investment in Australian industry is in mining ($230 billion), followed by manufacturing ($89 billion), then finance and insurance ($70 billion).

Does foreign investment in agriculture impact Australia’s future food security?

Australia produces much more food than it consumes and our farmers are substantial exporters. Over 90 per cent of the fresh food on Australian tables today is grown and produced by Australian farmers (DAFF 2013, Australian food statistics 2011-12). In addition to satisfying the Australian food market, Australian farmers produce enough to feed 40 million people living outside Australia’s borders (DAFF 2013, Australian food statistics 2011-12). Australians spend only 17 per cent of their average income on food (ABS catalogue 4102.0, 2013) and Australia is ranked fifth globally for affordable food (Global Food Security Index 2012).

Is foreign investment in agriculture in the national interest?

Australia’s policy on foreign investment ensures that all major investments are in the national interest, including in agriculture. Foreign investment supports Australia’s agricultural sector through investments in infrastructure that help boost export production while spurring further employment opportunities. This in turn contributes to the prosperity of rural communities and the broader Australian economy.

How much of Australia’s agricultural land is foreign owned?

Around 88 percent of Australia’s 400 million hectares of agricultural land remains Australian owned (ABS 2013) – a figure that has remained largely unchanged in 30 years. Just 12 per cent – or 50 million hectares – of Australia’s agricultural land currently features some level of foreign ownership, with the majority of these located in the Northern Territory and Queensland (ABS 2013)

What happens if foreign investors change their land use in a way that no longer accords with the national interest?

Australia’s foreign investment review framework allows the Government to examine foreign investment applications on a case-by-case basis to ensure they are not contrary to Australia’s national interest. The Government also has the discretion to place conditions on successful investment proposals in a range of areas such employment, ownership, board composition, management and water use. In addition to these conditions, investors also have to comply with Australian State and Territory laws irrespective of the value of the investment, including competition laws and environmental approvals.