The Financial Sector (Shareholdings) Act 1998 limits individual shareholdings in financial sector companies to a 20% stake. 'Financial sector companies' cover so-called authorised deposit‑taking institutions, authorised insurance companies and their holding companies. An investor wishing to exceed 20% equity will need approval from the Treasurer. Approval may be granted if the applicant satisfies the Treasurer that it is in the national interest to do so. What constitutes 'national interest' is not specified in the Act. From 1 April 2019, a higher shareholding cap may also be granted with regard to new or recently established financial sector companies if the applicant is a "fit and proper person" to hold a stake greater than 20% and the certain requirements regarding the value of the total resident assets of the company are satisfied. The provisions of the Financial Sector (Shareholdings) Act apply to both domestic and foreign investors.
When the financial sector company is to be acquired by a foreign investor, the general foreign investment screening mechanism of the Foreign Acquisitions and Takeovers Act 1975 and Foreign Acquisitions and Takeovers Regulation 2015 will also be relevant. Under the Foreign Acquisitions and Takeovers Act 1975, certain 'significant actions' can be prohibited by the Treasury if considered to be contrary to the 'national interest'. These include actions to acquire interests in securities, assets or Australian land, and actions taken in relation to entities (being corporations and unit trusts) and businesses, that have a connection to Australia. In general, a change in control and meeting a monetary threshold test are required for an action to be significant. The national interest, and what would be contrary to it, is not defined in the Act or the Foreign Acquisitions and Takeovers Regulation 2015. Assessments are made on a case-by-case basis. However, a Foreign Investment Policy document states that the Government typically considers the following factors when assessing foreign investment proposals: national security; competition; other Australian government policies, including tax; impact on the economy and the community and the character of the investor. 
Additionally, any 'notifiable action' must be notified to the Treasury before the action can be taken. A notifiable action is a proposed action by a foreign person to acquire a direct interest in an Australian entity or Australian business that is an agribusiness, to acquire a substantial interest (generally at least 20%) in an Australian entity or to acquire an interest in Australian land. Generally, the action is notifiable when a monetary threshold test is met.
The monetary screening thresholds concern either the amount paid for an interest or the value of an entity or assets. The relevant threshold depends on the type of investor and type of action taken. Generally, a higher threshold applies for investors from certain countries with which Australia has free trade agreements when these investors invest in non-sensitive businesses. However, in response to the COVID-19 pandemic, the Australian Government temporarily reduced all screening thresholds under the Act to $0 (effective from 18 April to 31 December 2020) in order to protect the national interest. Since 1 January 2021, the prior tiered threshold regime has been reinstated. For a table of all the applicable thresholds since 2021, see Treasury, "Australia's Foreign Investment Policy" (1 January 2021), Annex 1, pp. 15-16.
From 1 January 2021, amendments to the Act and Regulation introduced, among other changes, the possibility to screen certain investments under a narrower 'national security test' when these investments do not meet the monetary and control thresholds of the already existing mechanisms but nonetheless pose national security concerns. For the purposes of the national security test, two new categories of actions, 'notifiable national security actions' and 'revieweable national security actions', and the concept of 'national security business', were introduced in the Act and Regulation. Examples of national security businesses include responsible entities and direct interest holders of critical infrastructure assets, as defined in the Security of Critical Infrastructure Act 2018, and carriers or nominated carriage service providers to which the Telecommunications Act 1997 applies.
The Security Legislation Amendment (Critical Infrastructure) Act 2021, in force as of December 2021, expands the scope of the Security of Critical Infrastructure Act 2018 to include critical infrastructure entities in a wider range of sectors including: communications; financial services and markets; data storage or processing; defence industry; higher education and research; energy; food and grocery; health care and medical; space technology; transport; and water and sewerage. 
The Security Legislation Amendment (Critical Infrastructure) Act 2022, in force as of April 2022, revisit some of the critical infrastructure assets definitions and introduce enhanced cybersecurity obligations for highly critical assets.
On 1 April 2022, the Foreign Acquisitions and Takeovers Amendment Regulations 2022 came into effect (the Regulations). The Regulations, which amended the Foreign Acquisitions and Takeovers Regulation 2015, clarified certain aspects of the foreign investment review framework and streamlined the process for certain less sensitive types of investment. The Regulations intended inter alia to reduce the regulatory burden for foreign investors that engage in moneylending, invest in unlisted land entities or Australian media businesses, acquire shares or units under rights issues and other pro-rata offers, or transact on behalf of institutional investors as part of a custodian service (through amendments that refine the rules for the notification of these kinds of foreign investments, including raising thresholds and providing broader exemptions from foreign investment screening).
"3 Definitions
 In this Act, unless the contrary intention appears: [...]
financial sector company means:
 (a) an authorised deposit‑taking institution; or
 (b) an authorised insurance company; or
 (c) a holding company of a company covered by paragraph (a) or (b).
[...]
4 Holding companies
 For the purposes of this Act, a company (the first company) is the holding company of another company if the other company is a 100% subsidiary of the first company.
[...]
10 Meaning of unacceptable shareholding situation
 For the purposes of this Act, an unacceptable shareholding situation exists in relation to a particular financial sector company and in relation to a particular person if the person holds a stake in the company of more than:
 (a) 20%; or
 (b) if an approval of a higher percentage is in force under Division 3 in relation to the company and in relation to the person—that higher percentage.
[...]
12 Remedial orders
 (1) If an unacceptable shareholding situation exists in relation to a financial sector company, the Federal Court may, on application by the Treasurer or the company, make such orders as the court considers appropriate for the purpose of ensuring that that situation ceases to exist.
 (2) If an unacceptable shareholding situation has existed in relation to a financial sector company, the Federal Court may, on application by the Treasurer or the company, make such orders as the court considers appropriate.
 (3) The Federal Court's orders include:
 (a) an order directing the disposal of shares; or
 (b) an order restraining the exercise of any rights attached to shares; or
 (c) an order prohibiting or deferring the payment of any sums due to a person in respect of shares held by the person; or
 (d) an order that any exercise of rights attached to shares be disregarded.
[...]
13 Application for approval to exceed 20% shareholding limit
 (1) A person may apply to the Treasurer for approval to hold a stake in a particular financial sector company of more than 20%.
 (1A) The application may be in relation to a company that is not a financial sector company at the time the application is made.
 (2) The application must:
 (aa) specify whether the applicant is seeking for the approval to be granted on the basis of either paragraph 14(1)(a) or (b); and
 [...]
14 Approval of application
 (1) The Treasurer may, by notifiable instrument, grant the application if:
 (a) the applicant satisfies the Treasurer that it is in the national interest to approve the applicant holding a stake in the company of more than 20%; or
 (b) the applicant satisfies the Treasurer that the criteria in subsection 14A(1) are met in relation to the applicant and the company.
[...]
14A Criteria for applications relating to new or recently established financial sector companies
 (1) For the purposes of paragraph 14(1)(b), the criteria are:
 (a) the applicant is a fit and proper person to hold a stake in the company of more than 20%; and
 (b) the company is:
 (i) a company to which subsection (3) or (4) applies; or
 (ii) a holding company of a company to which subsection (3) or (4) applies.
Fit and proper person
 (2) The rules may prescribe matters that must be considered in determining whether a person is a fit and proper person for the purposes of paragraphs (1)(a) and 18(1)(d). However, such rules do not limit the matters that may be considered.
New or recently established financial sector company
 (3) This subsection applies to a company if:
 (a) the company is a body corporate incorporated in Australia; and
 (b) the company has applied for one of the following, but that application has not yet been decided:
 (i) authority under the Banking Act 1959 to carry on banking business;
 (ii) authorisation under the Insurance Act 1973 to carry on insurance business;
 (iii) registration under section 21 of the Life Insurance Act 1995; and
 (c) the value of the total resident assets of the company is less than the assets threshold for the company (assuming the company is granted the authority, authorisation or registration concerned).
 (4) This subsection applies to a company if:
 (a) the company is a body corporate incorporated in Australia; and
 (b) the company is:
 (i) an authorised deposit‑taking institution; or
 (ii) a company that is authorised under the Insurance Act 1973 to carry on insurance business; or
 (iii) a company that is registered under section 21 of the Life Insurance Act 1995; and
 (c) at the time of the application under subsection 13(1), the company has been such an institution, or so authorised or registered (whichever is applicable), for less than 5 years; and
 (d) the value of the total resident assets of the company is less than the assets threshold for the company. [...]
Assets threshold
 (6) If a company is:
 (a) an authorised deposit‑taking institution; or
 (b) registered under section 21 of the Life Insurance Act 1995;
the assets threshold for the company is:
 (c) $200 million; or
 (d) if another amount is determined in an instrument under subsection (8)—that other amount.
 (7) If a company is authorised under the Insurance Act 1973 to carry on insurance business, the assets threshold for the company is:
 (a) $50 million; or
 (b) if another amount is determined in an instrument under subsection (8)—that other amount.
 (8) The Treasurer may, by legislative instrument, determine an amount for the purposes of paragraph (6)(d) or (7)(b).[...]" (Financial Sector (Shareholdings) Act 1998 (Act No. 55 of 1998), last amended by Treasury Laws Amendment (2019 Measures No. 3) Act 2020, Sections 3, 4, 10, 12, 13, 14 and 14A)
------------------------
"5 Interpretation
Definitions
 (1) In this Act, unless the contrary intention appears: [...]
authorised deposit‑taking institution means a body corporate in relation to which an authority under subsection 9(3) is in force [...]
banking business means:
 (a) a business that consists of banking within the meaning of paragraph 51(xiii) of the Constitution; or
 (b) a business that is carried on by a corporation to which paragraph 51(xx) of the Constitution applies and that consists, to any extent, of:
 (i) both taking money on deposit (otherwise than as part‑payment for identified goods or services) and making advances of money; or
 (ii) other financial activities prescribed by the regulations for the purposes of this definition.
[...]
9 Authority to carry on banking business
 (2) A body corporate which desires authority to carry on banking business in Australia may apply in writing to APRA for authority accordingly. [...]
 (3) If an application has been made, APRA may grant the body corporate an authority to carry on banking business in Australia. The authority must be in writing, and APRA must give the body corporate written notice of the granting of the authority. [...]" (Banking Act 1959 (Act No. 6 of 1959), last amended by Treasury Laws Amendment (2019 Measures No. 3) Act 2020, Sections 5 and 9)
------------------------
"51 Legislative powers of the Parliament
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: [...]
(xiii) banking, other than State banking; also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money; [...]
(xx) foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth;[...]" (Commonwealth of Australia Constitution Act, consolidated version in force from 4 September 2013, Section 51)
------------------------
""4 Dictionary of definitions
 In this Act: [...]
foreign person means:
 (a) an individual not ordinarily resident in Australia; or
 (b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
 (c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
 (d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
 (e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
 (f) a foreign government; or
 (g) any other person, or any other person that meets the conditions, prescribed by the regulations. [...]
substantial interest: a person holds a substantial interest in an entity or trust if:
 (a) for an entity—the person holds an interest of at least 20% in the entity; or
 (b) for a trust (including a unit trust)—the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the trust.
[...]
40 Meaning of significant action—entities
 (1) An action is a significant action if the conditions in this section are met.
First condition—kinds of action
 (2) The first condition is that the action is any of the following: [...]
 (b) to acquire interests in securities in an entity;
 (c) to issue securities in an entity; [...]
Second condition—threshold
 (3) The second condition is that the threshold test is met in relation to the entity (see Subdivision B of Division 4).
Third condition—kinds of entities covered
 (4) The third condition (except if paragraph (2)(a) applies) is that the entity is the following:
 (a) for an acquisition of interests in shares or an issue of shares:
 (i) a corporation that is a relevant entity that carries on an Australian business, whether alone or together with one or more other persons; or
 (ii) the holding entity of such a corporation;
 (b) for any other action relating to a corporation:
 (i) an Australian corporation that carries on an Australian business, whether alone or together with one or more other persons; or
 (ii) the holding entity (other than a foreign corporation) of such a corporation;
 (c) for an action relating to a unit trust:
 (i) an Australian unit trust; or
 (ii) a holding entity of an Australian unit trust. [...]
Last condition—action results in change in control
 (6) If any of paragraphs (2)(b) to (e) apply, the last condition is that there would be or has been a change in control of the entity as a result of the action (see Subdivision C of Division 4).
41 Meaning of significant action—businesses
 (1) An action is a significant action if the conditions in this section are met.
First condition—kinds of action
 (2) The first condition is that the action is any of the following:  [...]
 (b) to acquire interests in assets of an Australian business;  [...]
Second condition—threshold
 (3) The second condition is that the threshold test is met in relation to the Australian business (see Subdivision B of Division 4).[...]
Third condition—action results in change in control
 (5) If paragraph (2)(b) or (c) applies, the third condition is that there would be or has been a change in control of the business as a result of the action (see Subdivision C of Division 4).
[...]
47 Meaning of notifiable action—general
 (1) An action is a notifiable action if the conditions in this section are met.
First condition—kinds of action
 (2) The first condition is that the action is any of the following: [...]
 (b) to acquire a substantial interest in an Australian entity; [...]
Second condition—threshold
 (3) The second condition is that the threshold test is met in relation to the entity, business or land (see Subdivision B of Division 4).
Third condition—kinds of entities covered
 (4) If paragraph (2)(a) or (b) applies, the third condition is that the entity is:
 (a) an Australian corporation that carries on an Australian business, whether alone or together with one or more other persons; or
 (b) an Australian unit trust; or
 (c) an Australian entity that is the holding entity of an entity mentioned in paragraph (a) or (b).
Last condition—action taken by a foreign person
 (5) The last condition (whether paragraph (2)(a), (b) or (c) applies) is that the action is or is to be taken by a foreign person.
[...]
51 The threshold test for entities and businesses
 The threshold test is met in relation to an entity or business for a significant action mentioned in column 1 of the following table if the value mentioned in column 2 of the table is more than the value prescribed by the regulations.
 [see the legal source for table] 
[...]
67 Order prohibiting proposed significant actions
 (1) The Treasurer may, by notifiable instrument, make an order under subsection (2) if the Treasurer is satisfied that:
 (a) a significant action is proposed to be taken; and
 (b) taking the significant action would be contrary to the national interest.
 (2) The Treasurer may make an order in accordance with the following table.
Powers of Treasurer to prohibit proposed significant actions
Item | If the significant action is ... | the Treasurer may make an order prohibiting ...
1 | to acquire a direct interest in an Australian entity that is an agribusiness, or an interest in securities in an entity | the whole or a part of the proposed acquisition.
2 | to issue securities in an entity | the whole or a part of the proposed issue of the securities. [...]
5 | to acquire a direct interest in an Australian business that is an agribusiness, or an interest in assets of an Australian business | the whole or a part of the proposed acquisition. [...]
8 | to acquire an interest in Australian land | the proposed acquisition.
9 | to take any significant action prescribed by regulations made for the purposes of section 44 | any thing prescribed by regulations made for the purposes of this item.
[...]
81 Compulsory notice of notifiable actions
 (1) A foreign person who proposes to take a notifiable action must give a notice to the Treasurer before taking the action.
 (2) If a person takes an action by entering an agreement, the notice must deal with each notifiable action covered by the agreement.
82 Limitation on taking significant actions after notice given
 (1) This section applies in relation to a foreign person who gives a notice to the Treasurer stating that a significant action (including a significant action that is a notifiable action) is proposed to be taken.
 (2) The foreign person must not take the action before the earliest of the following:
 (a) the day that is 10 days after the end of the decision period mentioned in section 77;
 (b) if an interim order is made—the end of the period specified in the order;
 (c) the day a no objection notification is given to the person.[...]" (Foreign Acquisitions and Takeovers Act 1975 (Act No. 92 of 1975), last amended by Australia's Foreign Relations (State and Territory Arrangements) (Consequential Amendments) Act 2020 on 10 December 2020, Sections 4, 40, 41, 47, 51, 67, 81 and 82)
------------------------
"5 Definitions [...]
moneylending agreement means: [...] 
(b)  an agreement entered into:
(i)  in good faith and on ordinary commercial terms; and 
(ii)  relating to the purpose of lending money or otherwise providing financial accommodation; and
(iii)  by an entity that was created predominantly for that purpose by a person or entity in the ordinary course of carrying on a moneylending business; [...]
(c)  for a person or entity that:
(i)  is carrying on a moneylending business; or
(ii)  was created predominantly for the purpose of lending money or otherwise providing financial accommodation by a person or entity in the ordinary course of carrying on a moneylending business; or(iii)  is a subsidiary or holding entity of a person or entity covered by subparagraph (i) or (ii);
an agreement to acquire an interest arising from a moneylending agreement (within the meaning of paragraph (a) or (b)).
[...]
27 Moneylending agreements [...]
(1)  The Act does not (subject to subsections (2), (2A) and (3)) apply in relation to an interest in securities, assets, a trust, Australian land or a tenement if: [...]
(b)  the entity that holds or acquires the interest is:
(i)  the entity (the first entity) that entered the moneylending agreement; or
(ii)  a subsidiary or holding entity of the first entity; or
(iii)  a person who is (alone or with others) in a position to determine the investments or policy of an entity mentioned in subparagraph (i) or (ii) [...]
(iv)  a security trustee who holds or acquires the interest on behalf of a person or entity mentioned in any of subparagraphs (i) to (iii); or
(v)  a receiver, or a receiver and manager, appointed by or in relation to a person or entity mentioned in any of subparagraphs (i) to (iv).
[...]
30  Certain interests held by foreign custodian corporations [...]
(1)  The excluded provisions do not apply in relation to an acquisition of an interest (the subject interest) in securities, assets, a trust, Australian land or a tenement by a foreign person if: [...]
(d)  the equitable interests (other than a right covered by subsection (2)) in the securities, assets, trust, land or tenement are not held by the foreign person; and
(e)  if voting rights are associated with the subject interest—the foreign person exercises those voting rights only at, or in accordance with, the direction of:
(i)  another person that is providing custodian services to a person in relation to the holding of the subject interest; or
(ii)  the holder of an equitable interest in the securities, assets, trust, land or tenement that is receiving custodian services that are related to that equitable interest.[...]" (Foreign Acquisitions and Takeovers Regulation 2015 (SLI 2015 No. 217), last amended by Foreign Acquisitions and Takeovers Amendment Regulations 2022 on 31 March 2022, Sections 5, 27, and 30)
Financial Sector (Shareholdings) Act 1998 (Act No. 55 of 1998), last amended by Treasury Laws Amendment (2019 Measures No. 3) Act 2020, Sections 3, 4, 10, 12, 13, 14 and 14A
Banking Act 1959 (Act No. 6 of 1959), last amended by Treasury Laws Amendment (2019 Measures No. 3) Act 2020, Sections 5 and 9
Commonwealth of Australia Constitution Act, consolidated version in force from 4 September 2013, Section 51
Foreign Acquisitions and Takeovers Act 1975 (Act No. 92 of 1975), last amended by Australia's Foreign Relations (State and Territory Arrangements) (Consequential Amendments) Act 2020 on 10 December 2020, Sections 4, 40, 41, 47, 51, 67, 81 and 82
Foreign Acquisitions and Takeovers Regulation 2015 (SLI 2015 No. 217), last amended by Foreign Acquisitions and Takeovers Amendment Regulations 2022 on 31 March 2022
[<a href="https://www.legislation.gov.au/Details/C2020C00315">Act</a>],[<a href="https://www.legislation.gov.au/Details/C2020C00335">Act</a>],[<a href="https://www.legislation.gov.au/Details/C2013Q00005">Act</a>],[<a href="https://www.legislation.gov.au/Details/C2020C00397">Act</a>],[<a href="https://www.legislation.gov.au/Details/F2021C00062">Reg</a>],[<a href="https://www.legislation.gov.au/Details/F2022L00465">Amendment</a>],[<a href="https://foreigninvestment.gov.au/investing-in-australia/foreign-investment-framework">Other</a>],[<a href="https://www.legislation.gov.au/Details/F2022L00465/Explanatory%20Statement/Text">Other</a>],[<a href="https://foreigninvestment.gov.au/guidance">Other</a>]