Australia’s Foreign Investment Policy (Policy) has been updated to include a lower monetary threshold for Foreign Investment Review Board (FIRB) scrutiny of foreign investment in Australian agricultural land.
Effective from 1 March 2015, FIRB has revised the Policy to provide that privately-owned foreign investors must obtain prior approval for a proposed acquisition of an interest in rural land where the cumulative value of rural land held by the foreign investor, including the proposed acquisition, exceeds A$15 million (reduced from A$252 million).
The foreign investment approval process in relation to foreign government investors in rural land remains unchanged, although the Treasury has also released an Options Paper proposing some changes including the introduction of some potentially significant applications fees (please click here to read more on this).
What is an ‘interest in rural land’?
An ‘interest in rural land’ includes interests acquired both directly and indirectly in land used wholly and exclusively for the carrying on of a primary production business. The production must result from the cultivation of land, animal husbandry/farming, horticulture, fishing, forestry, viticulture or dairy farming and the business must be substantial and have a commercial purpose or character.
Rules and Exemptions
FIRB has indicated that the new arrangements will only apply to contracts entered into from 1 March 2015  and not to contracts entered into prior to that date.
The rules provide that the value of existing landholdings should be calculated on a reasonable basis having regard to the market value of the land (including buildings or other structures on the land). If the foreign investor holds a substantial interest in a corporation or trust that holds rural land, the value of that interest is also to be included in the calculation. Foreign investors should document their calculations and provide them to FIRB if requested .
Approval will not be required for an interest in rural land acquired:
- by will or devolution by operation of law
- from the Government or statutory corporation formed for a public purpose
- solely to hold as security, or by way of enforcement of a security, for the purposes of a money lending agreement.
Consistent with Australia’s free trade agreement commitments, privately-owned investors from the United States, New Zealand, Chile, Singapore and Thailand remain subject to the following non-cumulative investment thresholds:
- Singaporean and Thai investors will require prior approval if acquiring a substantial interest in a primary production business valued above A$50 million
- United States, New Zealand and Chilean investors will require prior approval if acquiring a substantial interest in a primary production business valued above A$1,094 million.
The updated Policy also provides that pre-approval may be sought for acquisitions of interests in rural land that are incidental to an activity other than agriculture. Pre-approval will be limited to a certain monetary value and provided for periods of no more than 12 months. Under the program, investors will only be required to report to FIRB every three months the details of each acquisition made during the preceding three months. The Policy does not specify how the pre-approval program will be administered.
Importance of obtaining approval
FIRB has indicated that the Government’s intention is to amend the Foreign Acquisitions and Takeovers Act 1975 to give effect to the new arrangements and that it intends to apply these amendments retrospectively back to 1 March 2015. Consequently, foreign investors who do not comply with the requirements in the Policy may be required to divest,  assuming that the relevant legislation is passed.
Ron Eames, Partner
T: +61 7 3135 0629
Trent Taylor, Partner
T: +61 7 3135 0668
William Khong, Partner
T +61 3 9321 9883
SydneyAlistair Salmon, Partner
T: +61 2 8083 0467
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed above.