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Australia – Policy Update: New Rules For Acquiring Agricultural / Rural Land.

12 March, 2015


What You Need To Know

 

  • Australia’s Foreign Investment Policy has been updated with the introduction of new rules for acquiring an interest in rural land which lower the notification and approval threshold to a cumulative AUD 15m.

 

The 2015 edition of Australia’s Foreign Investment Policy (the Policy) contains new rules for acquiring agricultural / rural land. As highlighted in our previous Foreign Investment Update, the changes to the Policy were expected following the Australian Government’s announcement on 11 February 2015 of increased scrutiny of foreign investment in agriculture through the introduction of a lower threshold for screening by the Foreign Investment Review Board (FIRB) of acquisitions of interests in Australian agricultural land.1

 

Under the new rules set out in the Policy, foreign persons must notify and get prior approval from FIRB for a proposed acquisition of an interest in rural land where the value of the acquisition, combined with the value of interests in rural land already held by the investor, exceeds or is likely to exceed AUD 15m. When calculating the value of existing landholdings, a reasonable approach must be taken having regard to the market value of the land (including buildings or other structures on it).

 

The Policy specifically states that an interest in rural land includes interests acquired both:

 

  • directly (eg by acquiring a legal or equitable interest); and
  • indirectly (eg by acquiring a substantial interest in a corporation or trust where more than 50% of the assets of the corporation or trust comprise rural land – this is analogous to the requirement for FIRB approval for an indirect acquisition of urban land through the acquisition of shares in an urban land corporation, ie a corporation where more than 50% of its assets comprise urban land).

 

For consistency with the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), the Policy adopts the definition of rural land used in that act. Broadly, rural land is land used wholly and exclusively for carrying on a business of primary production. The use of the term “rural land” in the new rules set out in the Policy clarifies the Government’s 11 February announcement which referred generally to acquisitions of interests in “agricultural land” for the purpose of the lower FIRB screening threshold.

 

Adopting a pragmatic, purpose driven approach, the Policy includes a pre-approval regime for certain non-agricultural acquisitions of interests in rural land. Pre-approval from FIRB may be sought for a programme of acquisitions of interests in rural land that are incidental to an activity other than agriculture (eg acquiring interests in rural land for easements for a pipeline).

 

The pre-approval regime for such programmes will be limited to an as yet unspecified monetary value and be provided for periods no greater than 12 months. Investors will also be required to report to FIRB every three months with details of each acquisition made during the preceding three months.

 

FIRB approval will not be required for all acquisitions of interests in rural land as the Policy sets out certain exemptions. The Policy provides that FIRB approval is not required where an interest in rural land is acquired:

 

  • by will or devolution by operation of law;
  • from the Commonwealth, State, Territory or local Government or from a statutory corporation formed for a public purpose; or
  • solely to hold as security, or by way of enforcement of security, for the purposes of a money lending agreement.

 

Again, these exemptions reflect some of the exemptions under FATA to the requirement for FIRB approval for acquisitions of interests in urban land.

 

The Policy also makes it clear that, consistent with Australia’s commitments under certain free trade agreements, the cumulative AUD 15m threshold will not apply to private investors from the United States, New Zealand, Chile, Singapore and Thailand. Where an investor from these countries acquires a substantial interest in a primary production business valued above the following non-cumulative thresholds, FIRB approval will be required:

 

  • AUD 50m for Singaporean and Thai investors; and
  • AUD 1,094m for US, NZ and Chilean investors.

 

Although Australia recently entered into free trade agreements with Korea and Japan and has signed a Declaration of Intent to do so with China, investors from these countries do not receive the benefit of a higher screening threshold for investments in agricultural land. In these free trade arrangements, Australia specifically reserved the right to lower the threshold for acquisitions of interests in agricultural land to $15 million with no exemption for the counterparty nation.

 

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For further information, please contact:

 

Rupert Lewi, Partner, Ashurst

rupert.lewi@ashurst.com 

 

Bruce Macdonald, Partner, Ashurst

bruce.macdonald@ashurst.com 

 

Tiffany Barton, Partner, Ashurst

tiffany.barton@ashurst.com 

 

Stuart James, Ashurst

stuart.james@ashurst.com

 

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