Changes to Foreign Investment Rules for Agricultural Land
According to the Treasurer's Media Release of 1 February 2018 the Federal Government has acted to ensure Australians will get "every opportunity to purchase agricultural land holdings". The Treasurer in his Media Release says this has been done by "introducing tough new rules that mandate vendors to advertise and market agricultural land to Australians first".
To achieve this the Federal Government through the Foreign Investment Review Board (the FIRB) has released new changes to the Guidance Notes clarifying the foreign investors processes for investment in agricultural land. A key part of the changes is that a foreign investor can ". . . only acquire agricultural land where there has been an open and transparent sale process".
The following FIRB guidance notes have been affected:
- Agricultural land investments (Guidance Note 17)
- Land exemption certificates (Guidance Note 21)
- Business exemption certificates (Guidance Note 26)
Where a foreign person (excluding a foreign government) is seeking to invest in agricultural land they will generally require approval where "the cumulative value of a foreign person’s agricultural land holdings exceeds $15 million". Exceptions apply to investors from Australia’s trade agreement partners.
In the case of acquisitions of agricultural land by foreign government investors, approval is always required. Further, all acquisitions of interests in agricultural land by foreign persons, regardless of whether they require approval and regardless of the value are required to be notified to the ATO Register of Foreign Ownership.
Significant Notifiable Action
To be a "significant and notifiable action" the acquisition of an interest in Australian agricultural land must be by a foreign person and meet a threshold test in relation to the land. That threshold test is met where the total value of all interests in agricultural land held by the foreign person (including associates) and the consideration for the acquisition of the interest in the agricultural land is more than $15 million. Entering into such an agreement is a notifiable action and the foreign person must notify the Treasurer before entering the agreement.
Open and Transparent Sale Process - 30 Day Ad Requirement
Under the Guidance Notes a decision maker is to consider whether there was "... an opportunity for Australians to acquire a given parcel of agricultural land". In doing this decision maker is required to have regard to the openness and transparency of the sales process.
Approval, according to the Guidance Notes, will not be granted for any acquisition of agricultural land that was not offered for sale publicly and "marketed widely" for a minimum of 30 days. The 30 day advertising requirement is to ensure that Australians have had sufficient opportunity to bid in any sale process for the agricultural land.
The sales process is considered "open and transparent" when:
- public marketing/advertising was undertaken for the sale of the property, using channels that Australian bidders could reasonably access (for example, advertised on a widely used real estate listing site or large regional/national newspaper);
- the property was marketed/advertised for at least 30 days; and
- there was equal opportunity for bids or offers to be made for the property while still available for sale.
The FIRB places responsibility on the applicant for demonstrating how they became aware that the property was advertised for sale and whether the acquisition was subject to an open and transparent sale process. As a result applicants may be requested by the FIRB to provide evidence of the sale process.
Exceptions to these requirements include acquisitions where the applicant:
- is acquiring a property via a private sale that was marketed/advertised in the above manner in the last six months but did not sell or where the sale fell through;
- has a substantial Australian ownership share (that is, 50 percent or more), as this constitutes an opportunity for Australian bidders, despite a foreign ownership share; or
- is required to make the acquisition to comply with State or Commonwealth law, for example, mining buffer zones.
Reaction and Comment
The ABC News reports the changes as the "latest regulation to be added to Australia's foreign ownership laws in as many years". In 2015 the Federal Government lowered the threshold for scrutiny of agricultural land sales from $240 million to $15 million.
Australia's biggest commercial real estate agency is quoted by the ABC News as saying, that the laws already favour local buyers and the proposed changes:
The oppositions agriculture spokesman has attacked the announcement, calling it:
Interestingly, the changes come in the light of the sale of the Kidman cattle empire to the Gina Rinehart-led Australian Outback Beef consortium - a transaction which according to the ABC News increased Chinese investment in Australian farmland by 2.6 million hectares. After that deal Chinese investors now own a third of the Australian Outback Beef consortium, elevating China from the fifth-largest owner of Australian farmland in 2016 to the second largest in 2017. The UK remains in first place, with the USA in third. Figures from the FIRB indicate that overall foreign investment in Australian farmland fell from by under 1 percent (14.1 to 13.6 percent) in the year to 30 June 2017.
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