Jurisdiction - Australia
Reports and Analysis
Australia – The Issue of Foreign Investment in Agriculture.

22 February, 2012

The Australian Government has used the release of a report on foreign investment and Australian agriculture as an opportunity to reaffirm its support for foreign investment in the agricultural sector and articulate the issues that it considers when applying the national interest test to proposals for foreign investment in the sector. 
How does it affect you?
  • The Australian Government has announced criteria against which it will assess whether proposals for foreign investment in Australian agriculture satisfy the national interest test. Future applications for foreign investment clearance will need to address these criteria.
  • For sovereign investors, the announcement has created some uncertainty about whether passive investments in agribusinesses below 10 per cent are now subject to approval under Australia's Foreign Investment Policy.
  • A Senate committee is currently examining the national interest test. It is due to report its findings by 14 March 2012. It may recommend legislative and policy changes.
  • While there remains bipartisan political support for foreign investment, the Federal Opposition says that 'current rules for foreign investment are outdated and fail to address Australia's modern food security needs'1. It intends to announce its policy on foreign investment in coming months.
There is a renewed focus globally on investment in agriculture. As an open stable economy with a strong agricultural tradition, Australia is benefiting from an increase in foreign investment flows to its agricultural sector. That has led to heightened public scrutiny, aided to some extent by the current make-up of the Australian Parliament, with the balance of power between the Government and Opposition partly resting on rural independents.
Various political responses to these issues were set in train in late 2010.
  • Senators Nick Xenophon (SA – Independent) and Christine Milne (Tas – Greens) tabled the private member's Foreign Acquisitions Amendment (Agricultural Land) Bill 2010. The Bill, which we first reported on in an earlier Focus article, proposed a lowering of the threshold for foreign investment approval in Australian agricultural land from the current $244 million to $5 million,2 codification of national interest criteria, and the publication of all proposals for investment in agricultural land. The Bill has triggered two Senate inquiries, one concluded and one ongoing.


  • The Australian Government:
    • directed the Australian Bureau of Statistics (ABS) to conduct an Agricultural Land and Water Ownership Survey – the first survey of this nature in almost 30 years;
    • commissioned the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) to report on the role and history of foreign investment in the development of agriculture in Australia, the extent of foreign ownership and factors driving foreign investment; and
    • on 18 January 2012, in conjunction with the public release of the ABARES report, released its Policy Statement: Foreign Investment in Agriculture.
Also, the Government announced3 the establishment of a National Food Policy Working Group to advise it on issues and policies affecting Australia's food chain, including strategic advice on the development of a National Food Plan. Following the release of an issues paper on 23 June 2011 and a round of consultations that closed in September 2011, a green paper is being prepared which may include policy changes4.
Recap of current requirements for foreign investment in Australian agriculture
The Foreign Acquisitions and Takeovers Act 1975 (Cth) (the FATA) and Australia's Foreign Investment Policy are the principal sources for regulation of foreign investment in Australia. The Policy supplements the FATA but has no legal force.
If a foreign investment proposal is subject to the FATA or the Policy, an application for clearance should be made to the Foreign Investment Review Board (FIRB), the body responsible for examining foreign investment proposals and making recommendations to the Government. Proposals are assessed on a case-by-case basis as to whether they are contrary to the national interest.
There are three principal targets for investment in Australian agriculture:
  • agricultural land;
  • agribusinesses; and
  • tradeable water rights.
Since 1989, the FATA has divided Australian land into two categories: Australian rural land and the oddly named Australian urban land. For land to be Australian rural land, it must be used wholly and exclusively for carrying on a business of primary production (eg farming, grazing, forestry). All other land is Australian urban land and so, according to the FATA, the land supporting an active farm is rural land but the abandoned farmland next door is urban land, as are most of Australia's deserts.
While a specific regime exists for regulating foreign investment in Australian urban land, foreign investment in Australian rural land is merely subject to the same rules as foreign investment in businesses generally; namely, an application to FIRB need only be made if the value of the business exceeds $244 million or, in the case of US investors in non-sensitive sectors, $1,062 million5 (these thresholds are indexed annually on 1 January). One notable exception, which we discuss below, is for investments by foreign governments and their related entities.
No special rules have governed foreign investment in agribusiness since 2000 when the lower thresholds that, at the time, applied to agribusinesses with Australian rural land holdings were aligned with the thresholds that applied to all other businesses.
The FATA does not regulate foreign investment in tradeable water rights unless their acquisition would result in an Australian business, whose assets exceed the current $244 million/$1,062 million threshold, becoming controlled by foreign persons.
Australia's Foreign Investment Policy does not include any special rules for foreign investment in agriculture. The Policy does require foreign governments and their related entities to obtain approval before making any direct investment in Australia, regardless of the value of the investment, or starting a new business. All investments of 10 per cent or more are considered direct investments but an investment below that threshold will be considered a direct investment if it can be used to influence or control the target.
Senate inquiries
In June 2011, a majority of the Senate Economics Legislation Committee (comprising Government and Opposition senators) recommended that the Foreign Acquisitions Amendment (Agricultural Land) Bill not be passed6, noting that:
  • it was essential that Australia continue to welcome foreign investment and be an attractive place to invest and any changes to foreign investment policy should be considered in this light;
  • submissions to the inquiry had expressed concerns that current information about foreign investment in the sector was inadequate to support policy decisions;
  • the national interest test should continue to be assessed on a case-by-case and allow a flexible interpretation and application of the FATA;
  • the ABARES report should be examined before any legislative changes concerning the publication of investment proposals are made;
  • the Agricultural Land and Water Ownership Survey by the ABS should be completed before any adjustments to foreign investment approval thresholds are made;
  • the Bill may be inconsistent with Australia's national treatment obligations under various bilateral free trade agreements and the OECD Code of Liberalisation of Capital Movements;
  • the strategic accumulation of agricultural land should be re-examined following the release of the ABARES report; and
  • there is genuine concern in Australia about food security.
However, on 6 July 2011, the Australian Senate, at the suggestion of the Opposition, referred an Examination of the Foreign Investment Review Board National Interest Test to the Senate Rural Affairs and Transport References Committee. Its terms of reference focus on the application of the national interest test to purchases of Australian agricultural land and Australian agribusinesses, food security, foreign sovereign funds and the application of similar tests in countries comparable to Australia. Although the committee is not due to report until 14 March 2012, several themes have emerged from the public hearings that it has conducted, including concerns about:
  • the methodology adopted by ABS for its Agricultural Land and Water Ownership Survey and hence the continuing lack of accurate information about foreign ownership of agriculture in Australia;
  • the application of the high general monetary threshold to foreign investment proposals involving the acquisition of rural land;
  • the aggregation of rural land by foreign investors;
  • the process used by FIRB and the Government to determine and then apply the national interest test to foreign investment proposals, particularly the potential effect on Australia's food supply capability if foreign investors discriminate in favour of their own countries in times of food shortages, rather than supplying global markets on commercial terms; and
  • enforcement, including the extent to which foreign investment activities are monitored to ensure they are consistent with undertakings and representations made by foreign investors to FIRB and the Government.
Australian Government responses and its new policy statement
The results of the ABS ownership survey were released in September 2011 and showed that 99 per cent of agricultural businesses, 89 per cent of agricultural land and 91 per cent of water entitlements were entirely Australian owned.
The ABARES report on foreign investment, which was released on 18 January 2012, is supportive of foreign investment in Australian agriculture, saying that it boosts capacity, improves efficiency and opens new foreign markets7. Having surveyed the measures adopted in Argentina, Brazil, Canada, New Zealand and the United States to regulate and monitor foreign ownership of farmland, it notes that 'any measures that put further barriers in the way of foreign investors and reduce the flow of foreign capital into Australian agriculture would adversely affect the performance of the agriculture sector'8.
When it released the report, the Government also released a policy statement in which it outlined the benefits of foreign investment in agriculture and noted that 'Australia's foreign investment policy strikes the right balance between attracting foreign investment…, and ensuring that investments are not contrary to the national interest'.
In addition to reaffirming its support for foreign investment in agriculture, the Government declared its commitment to ensuring that investments do not adversely affect the sustainability of Australia's national agricultural resources and, in assessing foreign investment applications in agriculture, it typically considers the affect of the proposal on:
  • the quality and availability of Australia's agricultural resources, including water;
  • land access and use;
  • agricultural production and productivity;
  • Australia's capacity to remain a reliable supplier of agricultural production, both to the Australian community and Australia's trading partners;
  • biodiversity; and
  • employment and prosperity in Australia's local and regional communities.
Since 2010, the Government has articulated five factors that it typically considers when assessing foreign investment proposals: national security, competition (both domestic and global), other Government policies, their impact on the economy and the community, and the character of the investor. Applications for foreign investment proposals in agriculture should continue to address these five factors but should also now address these more specific factors and be ready to answer questions from FIRB directed at these issues.
One final aspect of the policy statement that may be the source of some confusion relates to investments by foreign government related entities. The policy statement says that 'all proposed investments by foreign government related entities, including in agriculture, must be examined'. In contrast, Australia's Foreign Investment Policy stipulates that it is only all direct investments that must be notified. This inconsistency appears to us to be the result of imprecise paraphrasing rather than an indication of a change in policy, but it would be helpful if the Government clarified its position by amending the policy statement to refer to all proposed 'direct' investments (ie only those investments by a foreign government or related entity that enable the investor to influence or control the target enterprise).
Is there a breakdown in bipartisan political support for foreign investment?
Both major Australian political parties, the governing Australian Labor Party and the opposition Liberal Party and National Party coalition, recognise the benefits of foreign investment to Australia and foreign investment policy has benefitted from consistent bipartisan support over many decades. That bipartisanship is now under strain, at least at the margins.
The Government has, until now, deferred taking any significant action in relation to foreign investment in Australian agriculture on the basis that it was awaiting the ABS survey and ABARES report. The Opposition largely supported this approach. However, with the survey results and report now released, we are seeing a possible divergence in policy approaches.
For its part, the Government appears to be satisfied with the survey and the report concluding that 'Australia's foreign investment policy strikes the right balance between attracting foreign investment into Australia to support our economy, and ensuring that investments are not contrary to the national interest'. Its formal policy response has been limited to an elaboration of issues that it typically considers when applying the national interest test to foreign investment proposals in agriculture.
In contrast, the Opposition has labelled the ABS survey information 'useless' and the ABARES report a 'whitewash'9. It is yet to announce its own policy on foreign investment in agriculture but Opposition senators have been active participants in the two Senate inquiries.
There are likely to be further occasions in 2012 where the Government and the Opposition will find it necessary to articulate their views on foreign investment in Australian agriculture, including when:
  • the Senate Rural Affairs and Transport References Committee reports on its Examination of the Foreign Investment Review Board National Interest Test;
  • the Government releases a green paper on its National Food Plan; and
  • the Opposition announces its policy on foreign investment in Australian agriculture.
We expect there will be other occasions as well, for example foreign investment in agricultural land has been associated with the growing controversy surrounding land use disputes between farmers and miners because many of the miners acquiring farm land are foreign-owned.
Should foreign investors in Australian agriculture prepare for policy changes?
We don't anticipate fundamental changes to the openness that Australia has shown to foreign investment in its agricultural sector. However, it is likely that issues around foreign investment will continue to attract attention.
Were matters to be left to the Government then foreign investors would simply be advised to anticipate a more sophisticated analysis by FIRB of foreign investment proposals against the national interest test and, consequentially, to be prepared to divulge more information about their proposals and intentions. Foreign investors may also see a more visible focus by FIRB on monitoring compliance with undertakings and representations and questions on foreign ownership of agriculture included in the agriculture census conducted by ABS every five years (the next census is due in 2016).
However, the current Government does not control either house of the Australian Parliament and so potential exists for the Opposition to push for legislative changes if it can garner sufficient support from the Australian Greens and Independents or prompt the Government to adopt some changes to avoid losing control of the policy debate.
In that context, there may be more significant changes to foreign investment policy before or after the next election due in 2013. A lot will depend on the policy approach taken by the Opposition. In particular, we believe foreign investors should prepare for one or more of the following changes.
  • For non-government investors, a lowering of the monetary threshold at which investments in Australian rural land require approval under the FATA. The Opposition, the Australian Greens and some Independents have all criticised the current thresholds. However, any changes will need to comply with Australia's treaty obligations.
  • Establishment of a public register that records foreign ownership of Australian rural land. Currently, Queensland is the only state that maintains a register of foreign-owned land. A number of commentators have noted the public disclosure requirements in the United States under the Agricultural Foreign Investment Disclosure Act of 1978.
  • Increasing pressure on FIRB and the Government to take a more transparent approach to determining and then applying the national interest test to foreign investment proposals. For example, a system where applications for significant foreign investment proposals are announced and public comment openly canvassed in a process similar to that undertaken by the Australian Competition and Consumer Commission when it considers merger proposals.



For further information, please contact:


 Marcus Clark, Partner, Allens Arthur Robinson

[email protected]


Alan Millhouse, Allens Arthur Robinson

[email protected]


Allens Arthur Robinson Corporate/M&A Practice Profile in Australia


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