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 investment.

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 agriculture".

Key recommendations made by the Committee are as follows:

  1. 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.
  2. The examination process for foreign investment applications needs to be more rigorous and transparent and include forensic examination of:
    1. company structures;
    2. the relationship between a foreign government's acquisition strategy (such as food security) and commercial operations; and
    3. compliance with ongoing undertakings.
  1. 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.
  2. 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.
  3. 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.
  4. Any investment of greater than 15% in an agribusiness valued at more than $248 million (indexed) or exceeding $54 million require approval.
  5. Greater weight be given to the effect on local economies, particularly rural communities, be considered when assessing foreign purchases of agricultural land.
  6. The definitions of rural land and urban land be updated to remove anomalies.

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 implemented.

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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