Reference should be made to the Australia country report for further information (see below): -

FATF status

Australia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Australia was undertaken in 2024. According to that Evaluation, Australia was deemed Compliant for 18 and Largely Compliant for 12 of the FATF 40 Recommendations. It remains Highly Effective for 1 and Substantially Effective for 4 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

Mutual Evaluation Report Recommendation Ratings

Conclusions from last follow-up Mutual Evaluation Report (2024)

Recommendations 13 and 17 re-rated from Non Compliant to Compliant

Recommendations 10, 18 and 26 re-rated to Largely Compliant

Recommendation 15 re-rated to Partially Compliant
Key Findings from last Mutual Evaluation Report (2015)

Overall, Australian authorities have a good understanding of most of Australia’s main money laundering (ML) risks but need to develop their understanding further in certain areas. They coordinate very well activities to address key aspects of the ML / terrorist financing (TF) risks but some key risks remain unaddressed, and an underlying concern remains that the authorities are addressing predicate crime rather than ML.

Authorities have a good understanding of TF risks, and are addressing them accordingly. They assess that TF is largely motivated by international tensions and conflicts.

Operationally, national AML/CTF coordination is very comprehensive, but demonstrating its overall success is challenging, although results from national taskforces are showing positive trends. A stronger focus is required on monitoring and measuring success.

Australia develops and disseminates good quality financial intelligence to a range of law enforcement bodies, customs and tax authorities. The amount of financial transaction data in the Australian Transaction Reports and Analysis Centre (AUSTRAC) database, and the fact that that all relevant competent authorities have access to this database and can use its integrated analytical tool, are strengths of Australia’s AML/CTF system. However, the somewhat limited use of AUSTRAC information by law enforcement as a trigger to commence ML/TF investigations presents a weakness in the Australian AML/CTF system.

Australia’s main criminal justice policy objective is to disrupt and deter predicate crime, including if necessary through ML investigations/prosecutions. Australia focuses on what it considers to be the main three proceeds generating predicate threats (drugs, fraud and tax evasion). However, Australia should expand its focus to ensure that a greater number of cases of ML are being identified and investigated adequately.

Confiscation of criminal proceeds, instrumentalities and property of equivalent value is being pursued as a policy objective; mainly in relation to drugs, and in relation to tax by the Australian Taxation Office (ATO). Competent authorities have increased their efforts to confiscate proceeds of crime, particularly since the establishment of the national Criminal Assets Confiscation Taskforce. But it is unclear how successful confiscation measures are across all jurisdictions, and total recoveries remain relatively low in the context of the nature and scale of Australia’s ML/TF risks and have only modestly increased over the past few years.

Australia’s legal framework to combat TF is comprehensive. Australia has undertaken several TF investigations and prosecutions, and secured three convictions for the TF offence. Australia also successfully uses other criminal justice and administrative measures to disrupt terrorist and TF activities when a prosecution for TF is not practicable.

Australia’s legal framework to implement targeted financial sanctions is a good example for other countries. The automatic, direct legal obligation to freeze assets as soon as an entity is listed by the UN and the numerous designations made under the domestic regime are to be commended as best practices for other countries. However, effective implementation of the legal framework is difficult to confirm in the absence of freezing statistics, financial supervision, or supervisory experience and feedback on practical implementation by the private sector.

Australia has not implemented a targeted approach nor has it exercised oversight in dealing with non-profit organisations (NPOs) that are at risk from the threat of terrorist abuse. Authorities have not undertaken a review of the NPO sector to identify the features and types of NPOs that are particularly at risk of being misused for TF. Most designated non-financial business and profession sectors are not subject to AML/CTF requirements, and did not demonstrate an adequate understanding of their ML/TF risks or have measures to mitigate them effectively. This includes real estate agents and lawyers, both of which have been identified to be of high ML risk in Australia’s National Threat Assessment.

The major reporting entities – including the big four domestic banks which dominate the financial sector – have a good understanding of their AML/CTF risks and obligations, but some AML/CTF controls, whilst compliant with Australian obligations, are not in line with FATF Standards.

AUSTRAC has done a good job in promoting compliance with the AML/CTF standards by the vast amount of entities under its supervision. Australia has set up and developed a risk-based approach to supervision, although further improvement is required relating to the risk picture of the supervised entities. In mitigating risks through supervision, Australia should focus more on effective supervision and enforcement of individual reporting entities’ compliance with AML/CTF obligations within the various sectors.

Australia has not conducted a formal risk assessment on TF risks associated with legal persons and arrangements. The majority of legal persons are registered with the Australian Securities and Investment Commission (federal) while others with State or Territory authorities. While the information seems to be largely available to competent authorities and to the public, very limited verification is conducted on the information that is registered. Information on the beneficial owner of legal persons and legal arrangements is not maintained and accessible to competent authorities in a timely manner.

Australia cooperates well with other countries in MLA matters, including extradition. Informal cooperation is generally good across agencies.

Risk and General Situation

Australia has identified and assessed, and has a good understanding of most of, its main ML risks and has mechanisms in place to mitigate them. Domestic and foreign organised crime groups operate in Australia. The main sources of criminal proceeds are illicit drugs, frauds, and tax evasion. Australian drug markets are said to be some of the most profitable in the world, attracting interest from major syndicates in South East Asia and South America. Most laundering involves use of the banking sector, money remitters, and complex corporate structures, facilitated by gate-keepers. Australia is seen as an attractive destination for foreign proceeds, particularly corruption-related proceeds flowing into real estate, from the Asia-Pacific region. Outwards proceeds flows are directed mainly to major financial hubs in Asia and the Middle East, with tax proceeds also flowing to European havens.

Australia has properly identified and assessed, and has a good understanding of, its TF risk, and is addressing it accordingly. Globally, the amounts of funds generated to finance terrorism vary between groups. Funds raised by groups that are part of an international network can be significant in the TF context. These groups have the financial infrastructure to undertake sizeable fundraising and money transfer operations. Small domestic groups and lone wolf terrorists are also a significant TF risk. While the amounts raised by these radicalised groups or individuals are much smaller, their intent to undertake violent acts in Australia can pose a direct threat to the Australian community. The authorities have periodically and successfully disrupted domestic terrorism plots, and the associated funding. Recently, the emerging TF risk has involved some Australians funding travel from legitimate sources to fight in conflict zones. Some funds have also been raised through abusing registered and informal “pop-up” charities linked to humanitarian fund-raising.

All Mutual Evaluation Reports

US Department of State Money Laundering assessment (INCSR)

No longer catergorised a Jurisdiction of Primary Concern however below is the last available report: -

Australia was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

Australia’s well-functioning financial markets include major products, such as money, debt, equities, foreign exchange, and derivatives. While not large compared to equivalent markets in economies such as the United States or Japan, trading activity in many Australian financial market sectors is higher than the size of the economy might indicate. For example, Australia's largest market sector is the foreign exchange market and the Australian dollar is the seventh most actively traded currency worldwide. Australia is also recognized internationally in areas such as infrastructure financing and structured products. As an emerging financial services center within the Asia-Pacific region, the country’s financial sector is supported by a number of government initiatives, such as the implementation of an investment manager regime and measures to provide tax exemption or tax relief for foreign managers. Finance and insurance, significant sectors in the Australian economy, are estimated to annually contribute some A$130 billion (approximately $92 billion) to the Gross Domestic Product, accounting for 9.3 percent of total value added. Australia has one of the largest pools of consolidated assets under management globally, valued at A$2.6 trillion (approximately $1.85 trillion). It is also a major destination for foreign direct investment.

According to the Australian Crime Commission (ACC), financial crimes continue to increase in diversity, scale, and the level of overall harm they cause Australia. The ACC conservatively estimates that serious and organized crime costs Australia approximately A$15 billion each year ($10.67 billion). Money laundering remains a key enabler of serious and organized crime.

The Australian Transaction and Reports Analysis Center (AUSTRAC) – the country’s financial intelligence unit (FIU) and the national anti-money laundering/countering the financing of terrorism (AML/CFT) regulator – identifies key features of money laundering in Australia in its Annual Report: intermingling legitimate and illicit financial activity through cash intensive businesses or front companies; engaging professional expertise, such as lawyers and accountants; the use of money laundering syndicates to provide specific money laundering services to terrorists and domestic and international crime groups; and the “internationalization” of the Australian crime environment, a reflection of the pervasive international money laundering ties of Australia-based organized criminal groups. The report also notes that major money laundering channels are prevalent in banking, money transfer and alternative remittance services, gaming, and luxury goods. Less visible conduits include legal persons and arrangements, cash intensive businesses, electronic payment systems, cross-border movement of cash and bearer negotiable instruments, international trade, and investment vehicles.

Trade-based money laundering (TBML), and its potential role in drug trafficking and importation, is a concern of law enforcement agencies. Australia’s lack of free trade zones is considered to have lowered the risk of TBML.

Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO

Criminalization of money laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Are legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

KYC covered entities: Banks; gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters; electronic funds transferors; insurers and insurance intermediaries; securities or derivatives dealers; registrars and trustees; issuers, sellers, or redeemers of traveler’s checks, money orders, or similar instruments; preparers of payroll, in whole or in part in currency, on behalf of other persons; and currency couriers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 81,074: July 2014 - June 2015

Number of CTRs received and time frame: 4,694,287: July 2014 - June 2015

STR covered entities: Banks; gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters; electronic funds transferors; insurers and insurance intermediaries; securities and derivatives dealers; registrars and trustees; issuers, sellers, or redeemers of traveler’s checks, money orders, or similar instruments; preparers of payroll, in whole or in part in currency, on behalf of other persons; and currency couriers

Money laundering criminal Prosecutions/convictions:

Prosecutions: 99: July 2013 - June 2014

Convictions: 77: July 2013 - June 2014

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Australia is a member of the FATF and of the Asia/Pacific Group on Money Laundering (APG),a FATF-style regional body.

Enforcement and implementation issues and comments:

The Government of Australia maintains a comprehensive system to detect, prevent, and prosecute money laundering. A statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CFT Act), conducted by the Attorney-General’s Department with assistance from AUSTRAC, is underway to examine the objectives and scope of the AML/CFT regime, opportunities for deregulation, the risk-based approach to AML/CFT, and industry reporting obligations. The review is being conducted in the context of the government’s deregulation agenda, and minimizing the compliance burden on industry is a priority. The report of the statutory review will be submitted to Government in the first half of the 2015-16 financial year.

Following amendments to the AML/CFT Act, customer due diligence (CDD) requirements became effective June 2014, which protect Australia’s revenue base through enhanced collection and verification of customer information, and safeguard national security from organized criminals and money launderers misusing the complex business structures to conceal their ownership and controlling interest. A major enforcement tool to reduce money laundering risks inherent in the alternative remittance sector and informal value transfer systems is the ACC-led Eligo National Task Force (ENTF). The ENTF is an initiative involving the ACC, AUSTRAC, and the Australian Federal Police. In 2015, the ENTF resulted in 32 disruptions to criminal entities and identified 112 criminal targets previously unknown to law enforcement. The ENTF-initiated investigations resulted in seizures of more than A$365.5 million (approximately $262 million) in cash and drugs, 39 referrals to partner agencies, 40 financial intelligence reports to the Eligo Taskforce, and nine data mining information reports. As well as disrupting organized crime activities, the ENTF increases professionalism within the remittance sector to make it more resistant to organized crime. U.S. law enforcement agencies continue to collaborate with the ENTF.

AUSTRAC also works with Australian industries and businesses to promote their compliance with AML/CFT legislation. Australia has active interagency task forces, and consultations with the private sector are frequent. AUSTRAC signed seven new financial intelligence exchange agreements in 2015, increasing the number of Australia’s exchange instruments with international counterparts to 72. Australian law enforcement agencies investigate an increasing number of cases that directly involve offenses committed overseas. Australia’s Criminal Assets Confiscation Task Force brings together agencies with key roles in the investigation and litigation of proceeds of crime matters. The task force identifies and conducts asset confiscation matters.

In May 2014, the government announced that the AUSTRAC Supervisory Levy would be replaced with the AUSTRAC Industry Contribution. From the 2014-15 financial year onwards, reporting entities will pay a levy that allows AUSTRAC to recover the costs of its regulatory and financial intelligence. In June 2015, AUSTRAC started preparations for the 2015–16 industry contribution which will commence early in the 2015–16 financial year.

For the third year in a row, Australia observed a notable increase in filings in the suspicious transaction report (STR) category ‘Refusal to show ID/complete cash transaction report,’ which can be attributed to the tightening of third-party currency transaction report (CTR) reporting obligations. Over the last two reporting years, the number of STRs filed with AUSTRAC increased approximately 45 percent. The increase reflects reporting entities’ increased awareness of events occurring overseas that are relevant to Australia.

In 2014, AUSTRAC completed Australia’s first classified National Risk Assessment on terrorism financing. A sanitized report titled “Terrorism Financing in Australia 2014” notes that Australia’s banking and remittance sectors are used more frequently than other channels to send funds to individuals engaged in foreign insurgencies and conflicts. Terrorism financing in Australia varies in scale and sophistication, ranging from organized fundraising by domestic cells which are part of a larger, organized international network, to funds raised by small, loosely organized, and self-directed groups. While AUSTRAC is not currently preparing an updated version of its 2014 report, AUSTRAC disclosed that terrorism-related “suspicious matter reports” had increased threefold from 118 in 2013-14 to 367 in 2014-15.

In May 2015, the Government of Australia announced the establishment of a Serious Financial Crimes Taskforce (SFCT ) to replace Project Wickenby, the cross-agency task force that played a key role in the fight against tax evasion, avoidance, and crime from 2006 until its termination on June 30, 2015. With a broader remit, and operational from July 1, the SFCT is also a multi-agency taskforce that forms part of the Australian Federal Police-led Fraud and Anti-Corruption Center. Drawing together the Australian Taxation Office, Australian Crime Commission, Australian Federal Police, Attorney-General's Department, Australian Transaction Reports and Analysis Centre, Australian Securities and Investments Commission, Commonwealth Director of Public Prosecutions, and Australian Customs and Border Protection Services, SFCT’s primary role is to focus on operational activities, collect and share intelligence, identify reform measures with the aim of removing wealth from criminal activity, prosecute facilitators and promoters of serious financial crime, and deploy deterrent and preventative enforcement strategies.

Australia should require real estate agents, solicitors, and accountants to report suspicious transactions.

2017 APG Yearly Typologies Report

Emerging Trend: Money mules

Money mules from an Eastern European country open Australian bank accounts and receive fraudulently obtained funds from Australian victims via cybercrime. Typically, they withdraw the funds as cash or make electronic transfers to offshore beneficiaries. They may also purchase high value items such as watches.

Money mules from a second Eastern European country typically open multiple bank accounts to receive stolen funds from Australian victims. They often register businesses and open associated bank accounts to avoid detection by banks and law enforcement agencies. The stolen funds are typically washed through their accounts via cash withdrawals, electronic transfers and purchases of foreign currency.

Money mules from a third Eastern European country register an Australian business and open bank accounts with that business name, within two weeks of arriving in Australia. In some cases, they open multiple bank accounts at various financial institutions. They also open personal banking accounts. They use their business and personal bank accounts to transfer funds between each and to make large cash deposits and withdrawals. Some mules are sending funds to the same Hong Kong based companies. The funds appear to be derived from internet banking fraud, malware activity and fraudulent refunds from Australian government departments. Fraud victims include Australian citizens and businesses.

OECD Common Reporting Standard

Australia signed up to the implementation of the OECD Common Reporting Standard in 2018.

Reference should be made to the Australia country report for further information (see below): -

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           N/A

World Governance Indicator – Control of Corruption               N/A

US State Department

Australia maintains a comprehensive system of laws and regulations designed to counter corruption.  In addition, the government procurement system is generally transparent and well regulated.  Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, nor to exporting goods and services to Australia.  Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

Australia is an active participant in international efforts to end the bribery of foreign officials.  Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery.  Legislation explicitly disallows tax deductions for bribes of foreign officials.  At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums.  These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups.  Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary, or required.  The maximum penalty for an individual is 10 years imprisonment and/or a fine of AUD 2.1 million (approximately USD 1.3 million).  For a corporate entity, the maximum penalty is the greatest of:  1) AUD 21 million (approximately USD 13.0 million); 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned.

The legislation covering bribery of foreign officials is the Criminal Code Act 1995.  In 2019, the Commonwealth Government introduced an amendment to the Act that would expand the list of activities considered foreign bribery, but the amendment has not been legislated at the time of publishing.  Information on the amendment can be found at the following link: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1246

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems.  The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

Various independent commissions exist at the state level to investigate instances of corruption. Details of these bodies are provided below.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Australia has signed and ratified the United Nations Convention against Corruption, and is a signatory to the OECD Anti-Bribery Convention.

GAN Integrity Business Anti-Corruption Portal

Corruption is not an obstacle to business in Australia, which is known for its well-functioning and independent judiciary, transparent regulatory climate and overall low levels of corruption. However, corruption risks exist in relation to foreign bribery and the mining industry. The Criminal Code covers bribery of foreign and domestic public officials, while each of Australia's states and territories has its own anti-corruption provisions. Public sector and private sector bribery are addressed, and both individuals and companies can be targeted. Persons convicted of corruption can receive a maximum penalty of 10 years' imprisonment and/or a fine of up to AUD 1.1 million. For a business, the penalty is a fine of up to AUD 17 million, three times the value of the obtained undue benefit, or 10% of the annual turnover of the company during the period in question. Australian political parties commonly receive gifts and hospitality, but there is little information available on gifts and hospitality in the private sector. Provided they are recorded, facilitation payments are legal in Australia. ​

The main economic activities on Christmas Island are the mining of low grade phosphate, limited tourism, the provision of government services and, since 2005, the construction and operation of the Immigration Detention Center. The government sector includes administration, health, education, policing, customs, quarantine, and defense.

Investment Climate - Australia

Executive Summary

Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is by far the largest source of foreign direct investment (FDI) for Australia. According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 170 billion in January 2020. The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment. While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process.

Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years. This continued in 2020 with the passage of the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, which broadens the classes of foreign investments that require screening, with a particular focus on defense and national security supply chains. All foreign investments in these industries now require screening, regardless of their value or national origin. The Foreign Investment Reform legislation commenced in January 2021. Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years, although some U.S. companies have reported greater scrutiny of their investments in Australia.

In response to a perceived lack of fairness, the Australian government has tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas.

Australia has increased funding for clean technology projects and both local and international companies can apply for grants to implement emission-saving equipment to their operations. Australia adopted a net-zero emissions target at the national level in November 2021 although made no change to its short-term goal of a 26-28 percent emission reduction by 2030 on 2005 levels. Australia’s eight states and territories have adopted both net-zero targets and a range of interim emission reduction targets set above the federal target. Various state incentive schemes may also be available to U.S. investors.

The Australian government is strongly focused on economic recovery from the COVID-driven recession Australia experienced in 2020, the country’s first in three decades. In addition to direct stimulus and business investment incentives, it has announced investment attraction incentives across a range of priority industries, including food and beverage manufacturing, medical products, clean energy, defense, space, and critical minerals processing. U.S. involvement and investment in these fields is welcomed.

Openness To, and Restrictions Upon, Foreign Investment

POLICIES TOWARDS FOREIGN DIRECT INVESTMENT

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for designated types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract, and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC. In addition, state and territory investment promotion agencies also support international investment at the state level and in key sectors.

LIMITS ON FOREIGN CONTROL AND RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

Within Australia, foreign and domestic private entities may establish and own business enterprises and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices. See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 11 million) are subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under the Australia-United States Free Trade Agreement (AUSFTA). The current threshold is AUD 1.25 billion (USD 925 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.

The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest.

OTHER INVESTMENT POLICY REVIEWS

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp496_e.htm .

The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location, and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. The 2021 Benchmark Report can be found at: http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .

Australia’s private sector frequently provides policy recommendations to the government, including as part of annual federal budget reviews and ad hoc policy reviews. In 2021 the American Chamber of Commerce in Australia published a report titled “The Opportunity is Now: Attracting U.S. Investors to Australia,” which provides a range of recommendations to government relating to Australia’s investment screening and general investment environment. The report is available via the following link: https://www.pwc.com.au/amcham-pwc-opportunity-is-now.html

BUSINESS FACILITATION

Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The government’s business.gov.au website provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets, and financial services regulator, ASIC’s website provides information and guides on starting and managing a business or company in the country.

In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank “Starting a Business” indicator, registering a business in Australia takes two days, and Australia ranks 7th globally on this indicator.

OUTWARD INVESTMENT

Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. The United States is the top destination, by far, for Australian investment overseas.

Bilateral Investment and Taxation Treaties

Australia is a party to bilateral investment treaties with Argentina, China, Czech Republic, Egypt, Hungary , Laos, Lithuania, Pakistan, Papua New Guinea, Philippines, Poland, Romania, Sri Lanka, Turkey, and Uruguay. It terminated its investment treaties with Hong Kong, Peru and Indonesia in 2020 as these will be subsumed by investment rules under the respective Free Trade Agreements (FTAs). The Australian government commenced a four-year review of its bilateral investment treaties in June 2020.

In addition to the AUSFTA agreement with the United States, Australia has bilateral FTAs in force with Chile, China, Japan, Hong Kong, Indonesia, Korea, Malaysia, Peru, Singapore, and Thailand. Australia has signed but not yet ratified a bilateral FTA with the UK. Australia has multilateral FTAs with: New Zealand and the countries of the Association of Southeast Asian States (ASEAN); it is a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which entered into force in December 2018; and it signed and has passed the enabling legislation for the Regional Comprehensive Economic Partnership (RCEP). It has also signed the Pacific Agreement on Closer Economic Relations (PACER Plus), a trade and economic cooperation agreement with the members of the Pacific Island Forum that entered into force in December 2020.

Australia is currently engaged in bilateral FTA negotiations with the EU and India, and in the following plurilateral FTA negotiations: the Gulf Cooperation Council (GCC); the Pacific Alliance (comprising Chile, Peru, Mexico and Colombia); and the Trade in Services Agreement (TiSA). The U.S.-Australia Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes has been in place since 1982, with amendments made in 2001. In addition to the United States, Australia has income tax treaties with 44 other countries and Taiwan.

In 2014, Australia signed an Intergovernmental Agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA) and improve tax cooperation. Under FATCA, Australian financial institutions are required to submit information on accounts held by U.S. citizens. The Intergovernmental Agreement allows financial institutions to report the information via the Australian Tax Office under existing Australia-U.S. tax treaty arrangements.

The Australian government has moved aggressively to fight tax avoidance schemes by multinational corporations. Australia ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting in September 2018, and it entered into force on January 1, 2019. Australia has used this instrument to modify its tax treaties with several countries, but not with the United States. Australia is a party to the OECD Inclusive Framework on BEPS announced in October 2021. Details of Australia’s corporate and multinational tax regime can be found on the Australian Tax Office’s website: https://www.ato.gov.au/general/tax-and-corporate-australia/a-strong-domestic-tax-regime/ 

Legal Regime

TRANSPARENCY OF THE REGULATORY SYSTEM

The Australian Government utilizes transparent policies and effective laws to foster national competition and is consultative in its policy making process. The government generally allows for public comment of draft legislation and publishes legislation once it enters into force. Details of the Australian government’s approach to regulation and regulatory impact analysis can be found on the Department of Prime Minister and Cabinet’s website: https://www.pmc.gov.au/regulation 

Regulations drafted by Australian Government agencies must be accompanied by a Regulation Impact Statement when submitted to the final decision maker (which may be the Cabinet, a Minister, or another decision maker appointed by legislation.) All Regulation Impact Statements must first be approved by the Office of Best Practice Regulation (OBPR) which sits within the Department of Prime Minister and Cabinet, prior to being provided to the relevant decision maker. They are required to demonstrate the need for regulation, the alternative options available (including non-regulatory options), feedback from stakeholders, and a full cost-benefit analysis. Regulations are subsequently required to be reviewed periodically. All Regulation Impact Statements, second reading speeches, explanatory memoranda, and associated legislation are made publicly available on Government websites. Australia’s state and territory governments have similar processes when making new regulations.

The Australian Government has tended to prefer self-regulatory options where industry can demonstrate that the size of the risks are manageable and that there are mechanisms for industry to agree on, and comply with, self-regulatory options that will resolve the identified problem. This manifests in various ways across industries, including voluntary codes of conduct and similar agreements between industry players.

The Australian Government has recognized the impost of regulations and has undertaken a range of initiatives to reduce red tape. This has included specific red tape reduction targets for government agencies and various deregulatory groups within government agencies. In 2019, the Australian Government established a Deregulation Taskforce within its Treasury Department, stating its goal was to “drive improvements to the design, administration and effectiveness of the stock of government regulation to ensure it is fit for purpose.” The taskforce’s work is ongoing.

Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board (AASB), an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001, and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Australian Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.

Australian government financing arrangements are transparent and well governed. Legislation governing the type of financial arrangements the government and its agencies may enter into is publicly available and adhered to. Updates on the Government’s financial position are regularly posted on the Department of Finance and Treasury websites. Issuance of government debt is managed by the Australian Office of Financial Management, which holds regular tenders for the sale of government debt and the outcomes of these tenders are publicly available. The Australian Government also publishes and adheres to strict procurement guidelines. Australia formally joined the WTO Agreement on Government Procurement in 2019.

Environmental Social Governance (ESG) reporting is not currently mandated for companies in Australia. However, companies are required to disclose any information that shareholders may deem relevant in assessing the performance of value of the company and this may include ESG components. Companies are also increasingly disclosing ESG aspects of their operations in response to shareholder demands and in order to secure an advantage over competitors. Further, financial services companies are required to disclose their exposure to climate risk as part of their standard risk disclosures (see further detail here: https://asic.gov.au/about-asic/news-centre/speeches/corporate-governance-update-climate-change-risk-and-disclosure/ )

INTERNATIONAL REGULATORY CONSIDERATIONS

Australia is a member of the WTO, G20, OECD, and the Asia-Pacific Economic Cooperation (APEC), and became the first Association of Southeast Nations (ASEAN) Dialogue Partner in 1974. While not a regional economic block, Australia’s free trade agreement with New Zealand provides for a high level of integration between the two economies with the ultimate goal of a single economic market. Details of Australia’s involvement in these international organizations can be found on the Department of Foreign Affairs and Trade’s website: https://www.dfat.gov.au/trade/organisations/Pages/wto-g20-oecd-apec 

LEGAL SYSTEM AND JUDICIAL INDEPENDENCE

The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Property and contractual rights are enforced through the Australian court system, which is based on English Common Law. Australia’s judicial system is fully independent and separate from the executive branch of government.

LAWS AND REGULATIONS ON FOREIGN DIRECT INVESTMENT

Information regarding investing in Australia can be found in Austrade’s “Guide to Investing” at http://www.austrade.gov.au/International/Invest/Investor-guide . The guide is designed to help international investors and businesses navigate investing and operating in Australia.

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB) is a non-statutory body, comprising independent board members advised by a division within the Treasury Department, established to advise the Treasurer on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. In January 2021 new legislation, the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, took effect. This legislation tightened Australia’s investment screening rules by introducing the concept of a “national security business” and “national security land,” the acquisition of which trigger a FIRB review. Further details on national security considerations, including the definitions of national security businesses, are available on the FIRB website: https://firb.gov.au/guidance-resources/guidance-notes/gn8.

The Australian Government applies a “national interest” consideration in reviewing foreign investment applications. “National interest” covers a broader set of considerations than national security alone and may include tax or competition implications of an investment. Further information on foreign investment screening, including screening thresholds for certain sectors and countries, can be found at FIRB’s website: https://firb.gov.au/ . Under the AUSFTA agreement, all U.S. greenfield investments are exempt from FIRB screening.

COMPETITION AND ANTITRUST LAWS

The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition, and fair trading, and regulates national infrastructure for the benefit of all Australians. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. The ACCC also engages in consumer protection enforcement and has, in recent years, been given expanded responsibilities to monitor energy assets, the national gas market, and digital industries.

EXPROPRIATION AND COMPENSATION

Private property can be expropriated for public purposes in accordance with Australia’s constitution and established principles of international law. Property owners are entitled to compensation based on “just terms” for expropriated property. There is little history of expropriation in Australia.

DISPUTE SETTLEMENT

ICSID Convention and New York Convention

Australia is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The International Arbitration Act 1974 governs international arbitration and the enforcement of awards.

Investor-State Dispute Settlement

Investor-State Dispute Settlement (ISDS) is included in 11 of Australia’s 13 FTAs and 18 of its 21 BITs. AUSFTA establishes a dispute settlement mechanism for investment disputes arising under the Agreement. However, AUSFTA does not contain an investor-state dispute settlement (ISDS) mechanism that would allow individual investors to bring a case against the Australian government. Regardless of the presence or absence of ISDS mechanisms, there is no history of extrajudicial action against foreign investors in Australia.

International Commercial Arbitration and Foreign Courts

Australia has an established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute resolutions. Australia is a leader in the development and provision of non-court dispute resolution mechanisms. It is a signatory to all the major international dispute resolution conventions and has organizations that provide international dispute resolution processes.

BANKRUPTCY REGULATIONS

Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s states and territories. Only individuals can be made bankrupt, not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Bankruptcy Act though similar provisions (called “administration and winding up”) exist under the Corporations Act 2001. Bankruptcy is not a criminal offense in Australia.

Creditor rights are established under the Bankruptcy Act 1966, the Corporations Act 2001, and the more recent Insolvency Law Reform Act 2016. The latter legislation commenced in two tranches over 2017 and aims to increase the efficiency of insolvency administrations, improve communications between parties, increase the corporate regulator’s oversight of the insolvency market, and “improve overall consumer confidence in the professionalism and competence of insolvency practitioners.” Under the combined legislation, creditors have the right to: request information during the administration process; give direction to a liquidator or trustee; appoint a liquidator to review the current appointee’s remuneration; and remove a liquidator and appoint a replacement.

The Australian parliament passed the Corporations Amendment (Corporation Insolvency Reforms) Act 2020 in December 2020. The legislation is a response to the economic impacts of the COVID-19 pandemic and is designed to both assist viable businesses remain solvent and simplify the liquidation process for insolvent businesses. The new insolvency process under this legislation came into effect in January 2021.

Australia ranks 20th globally on the World Bank’s Doing Business Report “resolving insolvency” measure.

Industrial Policies

INVESTMENT INCENTIVES

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and territory governments similarly offer a suite of financial and non-financial incentives.

The Commonwealth Government also provides incentives for companies engaging in research and development (R&D) and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by government’s AusIndustry program and the Australian Taxation Office (ATO). The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

The Australian government announced a new USD 1.1 billion Modern Manufacturing Strategy in 2020 in response to the COVID-19 pandemic. The Strategy is primarily grants-based and provides funding to businesses to commercialize ideas and scale-up production in six target industries: resources technology and critical minerals processing; food and beverage; medical products; clean energy; defense; and space industry. Further details of the Strategy can be found on the Department of Industry, Science, Energy and Resources’ website:

https://www.industry.gov.au/data-and-publications/make-it-happen-the-australian-governments-modern-manufacturing-strategy/our-modern-manufacturing-strategy 

The Australian government provides a range of incentives for business investments in clean energy technologies, administered by the Clean Energy Regulator within the Department of Industry, Science, Energy and Resources and funded through the Emission Reduction Fund. Details on the Fund and how to apply are available on the Department’s website via the following link: https://www.industry.gov.au/policies-and-initiatives/emissions-reduction-fund . The government also encourages voluntary investment in emission reduction, including through certifying carbon reductions resulting from business investments as part of the Climate Active initiative: https://www.industry.gov.au/regulations-and-standards/climate-active.

FOREIGN TRADE ZONES/FREE PORTS/TRADE FACILITATION

Australia does not have any free trade zones or free ports.

Financial Sector

CAPITAL MARKETS AND PORTFOLIO INVESTMENT

The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic savings. Australian capital markets are generally efficient and able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity, and smaller firms are more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, driving many Australian companies to issue debt instruments in the U.S. market. Foreign investors are able to obtain credit from domestic institutions on market terms. Australia’s stock market is the Australian Securities Exchange (ASX).

MONEY AND BANKING SYSTEM

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance. Total assets of Australian banks at the end of 2020 was USD4.2 trillion and the sector has delivered an annual average return on equity of around 10 percent (only falling to six percent in 2020 during the COVID-19 pandemic, before rebounding to 11 percent in 2021).

According to Australia’s central bank, the Reserve Bank of Australia (RBA), the ratio of non-performing assets to total loans was approximately one percent at the end of 2021, having remained at around that level for the last five years after falling from highs of nearly two percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. The RBA is also responsible for monitoring and regulating payments systems in Australia.

Further details on the size and performance of Australia’s banking sector are available on the websites of the Australian Prudential Regulatory Authority (APRA) and the RBA:
https://www.apra.gov.au/statistics 
https://www.rba.gov.au/chart-pack/banking-indicators.html 

Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market.

FOREIGN EXCHANGE AND REMITTANCES

Foreign Exchange

The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the national currency, has the authority to implement exchange controls, although there are currently none in place.

The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay.

Remittance Policies

Australia does not limit investment remittances.

SOVEREIGN WEALTH FUNDS

Australia’s main sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Governments to discharge unfunded superannuation (pension) liabilities. As a founding member of the International Forum of Sovereign Wealth Funds (IFSWF), the Future Fund’s structure, governance, and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the “Santiago principles”).

The Future Fund’s investment mandate is to achieve a long-term return of at least inflation plus 4-5 percent per annum. As of December 2021, the Fund’s portfolio consists of: 23 percent global equities, 8 percent Australian equities, 25 percent private equity (including 8 percent in infrastructure and 7 percent in property), and the remaining 37 percent in debt, cash, and alternative investments.

In addition to the Future Fund, the Australian Government manages five other specific-purpose funds: the DisabilityCare Australia Fund; the Medical Research Future Fund; the Emergency Response Fund; the Future Drought Fund; and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. In total, these five funds have assets of AUD 50 billion (USD 37 billion), while the main Future Fund has assets of AUD 204 billion (USD 150 billion) as of December 31, 2021.

Further details of these funds are available at: https://www.futurefund.gov.au/ 

State-Owned Enterprises

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is “government business enterprise” (GBE). According to the Department of Finance, there are nine GBEs: two corporate Commonwealth entities and seven Commonwealth companies. (See: https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises.

PRIVATIZATION PROGRAM

Australia does not have a formal and explicit national privatization program. Individual state and territory governments may have their own privatization programs. Foreign investors are welcome to participate in any privatization programs subject to the rules and approvals governing foreign investment.

Responsible Business Conduct

There is general business awareness and promotion of responsible business conduct (RBC) in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being currently the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An NCP Web site links to the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, EFA, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australian companies have very few instances of human rights or labor rights abuses and domestic law prohibits such actions. In 2018 the Australian parliament passed the Modern Slavery Act, new legislation requiring large companies to assess risks of modern slavery in their supply chains and take action to limit these risks.

Australia began implementing the principles of the Extractive Industries Transparency Initiative (EITI) in 2016.

Australia has ratified the Montreux Document on Private Military and Security Companies, and was a founding member of the International Code of Conduct for Private Security Service Providers Association.

ADDITIONAL RESOURCES

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Political and Security Environment

Political protests (including rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

Investment Climate information provided by US State Department