Announcing new BCI consent thresholds for ‘significant business assets’ for Australian investors

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As a result of the implementation of the New Zealand-Australia Closer Economic Relations Investment Protocol, some Australian non-governmental investors have benefited from a significantly higher threshold than other foreign investors to consents of “significant business assets” from the Overseas Investment Office (OIO).

The usual consent threshold in the Overseas Investment Act 2005 (Act) for overseas investment in “significant business assets” is NZ$100 million. However, for “Australian non-government investors” (Australian citizens and Australian incorporated entities carrying on substantial business in Australia, i.e. excluding SPVs) and “Australian government investors”, the threshold is calculated and adjusted annually according to a formula set out in the Overseas Investment Regulations 2005 (Regulations) which is based on the movement of the GDP price deflator index and refers to a base value of 2012.

The New Zealand government has now announced that the adjusted thresholds for Australian investors, which will apply from January 1, 2022 to December 31, 2022, are:

A competitive advantage for Australian non-governmental investors?

The higher threshold for Australian non-government investors may provide Australian bidders an advantage in competitive transactions where the Australian bidder can rely on it to avoid the conditionality and timing implications associated with the requirement to obtain consent of the WIO, but the other bidders cannot. However, the definition of ‘Australian non-government investor’ in law and regulations is complex.

Certain transaction structures, including where there are foreign government owned or controlled entities in the upstream ownership structure and/or newly incorporated entities are used to make the investment for tax, financing or others, may prevent the Australian investor from relying on the upper threshold.

Therefore, while the higher threshold for “Australian non-government investors” is, in theory, helpful in helping investment out of Australia (as our closest trading partner), in practice it is rarely used due to its technical requirements. It is recommended that you obtain specialist New Zealand legal advice before seeking to rely on the upper threshold.

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