Most Read Contributor in Australia, September 2016
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 1 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 2.
Approval will not be required for an interest in rural land
by will or devolution by operation of law
from the Government or statutory corporation formed for a
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, 3
assuming that the relevant legislation is passed.
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
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