The report considering Australia's foreign investment
framework has finally been released (Report). If
implemented, the Report's recommendations may result in the
most significant changes to Australia's foreign investment
policy since the Foreign Acquisitions and Takeovers Act
(FATA) was enacted.
The Senate Rural and Regional Affairs and Transport References
Committee (Committee) had been tasked with
considering, in particular, the key national interest test and the
regulation of foreign investment in Australian agriculture.
Agricultural Investment has been a particularly focus of public
discussion of late with there being substantial recent foreign
The Committee had previously released an interim report which
highlighted, in particular, areas where reform was required to
reduce tax revenue leakage and gave a high level overview of some
of the reforms that would likely be contained in the final report
which was finally issued on 26 June 2013.
The Committee's investigations were predominantly focussed
on Australia's approach to foreign investment in agriculture.
The Committee acknowledged the significant role foreign investment
has played and is to play in Australia's development but did
find that the FATA "was significantly deficient in effectively
managing a number of key challenges facing Australian
Key recommendations made by the Committee are as follows:
An agricultural land register (Register) be
established which will also monitor divestments and investments. An
initial stocktake should be part of its creation. There will be no
minimum threshold for reporting on the register.
The examination process for foreign investment applications
needs to be more rigorous and transparent and include forensic
the relationship between a foreign government's acquisition
strategy (such as food security) and commercial operations;
compliance with ongoing undertakings.
The FATA should be amended to create more effective compliance
mechanisms and tools (other than forced divestiture) so that
compliance matters can be resolved more efficiently and in
proportion to the severity of the relevant breach.
Ensure and make amendments, where necessary, to the FATA so
that the national interest test provides precise and unambiguous
instruction to prospective foreign investors about their
obligations and also builds confidence both with foreign investors
and Australian based stakeholders that the national interest test
is being rigorously and fairly applied.
The threshold for private foreign investment in agricultural
land be reduced to $15 million and that FIRB approval be required
once cumulative purchases of $15 million have been reached.
Any investment of greater than 15% in an agribusiness valued at
more than $248 million (indexed) or exceeding $54 million require
Greater weight be given to the effect on local economies,
particularly rural communities, be considered when assessing
foreign purchases of agricultural land.
The definitions of rural land and urban land be updated to
The Committee also recommended that the government establish an
independent Commission of Audit into Agribusiness, or similar body,
to develop a comprehensive policy approach to Australian
agriculture. The Committee suggests that this review could further
investigate changes to the Foreign Investment Policy National
Interest Test and improvements to foreign investment compliance
regimes. It may be that the creation of this commission and its
report will delay any of the reforms taking place.
It is worth noting that the final Report was prepared by the
Coalition members of the Committee and that a dissenting report by
the Labour Government Senators was attached as an Annexure. On this
basis, it seems more likely that a change in government at the
upcoming federal election (due before November) will increase the
likelihood that the recommendations made in the Report are
So what does this mean for foreign persons looking to invest in
Australia? The findings set out in the Report bring major reforms
of Australia's foreign investment framework closer to
implementation, particularly in relation to agriculture. With the
federal election approaching, and the likelihood of a change of
government occurring, it may be that foreign investors looking to
acquire agricultural land or businesses are best advised to bring
their plans forward.
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While further changes may be made to the draft amendments, the changes should be in a similar form as the current draft.
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