Australia has almost quadrupled the investment threshold for foreign purchases of commercial real estate.

In the first major change to the country’s foreign investment regime, the threshold before official approval is required has been increased from AUD55m (€38m) to AUD252m, pegged to CPI for office, industrial and other commercial real estate.

Only acquisitions above the so-called screening threshold will require Foreign Investment Review Board approval.

The new regulations became law from this week.

Further legislation to modernise the Managed Investment Trusts (MIT) framework was introduced into the Federal Parliament today.

The government said Australia was “open for business.”

Industry sources told IPE Real Estate that, with many commercial buildings and businesses routinely sold for more than AUD55m – the previous investment threshold – a large swathe of future property transactions would be exempt from having to comply with FIRB rules.

The new regulation give countries with free trade agreements with Australia – the US, New Zealand, Chile, Korea, Japan and soon China – a higher investment approval threshold of AUD1bn.

This applies to non-government investors buying into “non-sensitive” sectors.

The new rules also change the way in which the percentage of foreign investors on the register of listed REITs is calculated.

When a listed REIT in Australia has more than 40% in foreign investors on its register, it must seek FIRB approval for commercial transactions that exceed the screening threshold.

From now on, foreign investors with an interest of less than 5% in a REIT will be excluded from the calculation.

This means that some REITs will no longer be considered “foreign” and will not need to comply with FIRB requirements.

Most of Australia’s largest listed REITs have more than 50% foreigners on their share registers.

Darren Steinberg, chief executive at DEXUS Property Group, told IPE Real Estate the new rules would remove red tape for a number of listed REITs.

DEXUS, one of Australia’s largest listed REITs, has “about 55 to 60%” foreign shareholders on its book, Steinberg said, and previously needed FIRB approval for most transactions.

He described the changes as “a pleasing outcome” that removed unnecessary red tape for the property industry.

Andrew Minho, executive director of international and capital markets at the Property Council of Australia, said: “Increasing commercial property thresholds means government resources are not wasted on routine property transactions.”

He said the government had listened to the market and delivered a slate of reforms that simplified commercial investment, removing unnecessary impediments and clarifying the rules of operation.

On moves to free up the operating environment for MITs, Minho said the legislation “fundamentally overhauls the operation of tax law for MITs to significantly boost Australia’s competitiveness as a world-leading investment destination.

“The flow of global real estate capital is sky-rocketing, and this new MIT framework puts Australia in the best position to maximise opportunities.”

Rules on the purchase of agricultural land in Australia, however, have been tightened.

Explaining the government decision, Australia’s treasurer Scott Morrison said: “While foreign investment in agriculture provides important economic benefits, we have acted to improve scrutiny and transparency around foreign ownership of Australia’s agricultural production.”

Foreigners purchasing agricultural land in Australia valued at AUD15m or more will require official approval and be included in a newly established agricultural land foreign ownership register.