Australia: Increasing development potential of NT pastoral lease land

The Northern Territory Government is considering amendments as a first step to rectify immediate shortfalls in relation to pastoral land in the Territory.

The Pastoral Land Legislation Amendment Bill 2017 was introduced into the NT Parliament on 18 October 2017 and proposes to amend the Pastoral Land Act and its Regulations.

It is understood that the main purpose of the amendments is to "allow pastoral lease holders in the NT to diversify their business enterprises and boost the economy through further supporting diversification and investment in the pastoral estate".

The Bill includes amendments to:

  • give the Minister the ability to grant subleases on pastoral land for a range of non-pastoral purposes;
  • change the rent calculation methodology to the estimated carrying capacity of the pastoral land;
  • allow for an increase in the number Pastoral Land Board members; and
  • rectify and clarify other minor aspects of the Pastoral Land Act.

Non-pastoral purposes

Currently under the Act an application for consent to sub-let pastoral lease land (in whole or in part) can be made to the Minister. However, the Minister cannot consent to the subletting unless it is a condition of the sub-let agreement that the land will be used only for pastoral purposes, for the purposes of the Territory or for a prescribed purpose.

Pastoral purposes is currently defined under the Act as the pasturing of stock for sustainable commercial use of the land on which they are pastured or agricultural or other non-dominant uses essential to, carried out in conjunction with, or inseparable from, the pastoral enterprise, including the production of agricultural products for use in stock feeding and pastoral-based tourist activities such as farm holidays, but does not include a use which is declared by the Board not to be a use for pastoral purposes.

The Pastoral Land Regulations currently limit prescribed purposes to:

  • generating electrical power on the land and transmitting or distributing electrical power to, from, through or across the land;
  • supplying or conveying to, through or across the land gas, liquid fuels or water or other liquids in such a form as to be capable of conveying energy;
  • establishing and housing facilities for telecommunications;
  • housing surveying and scientific measurement equipment and associated infrastructure;
  • establishing and operating a commercial tourist enterprise; and
  • keeping and breeding animals (other than stock).

The Bill proposes to amend the Regulations to expand the above prescribed purposes to include:

  • forestry;
  • agriculture;
  • horticulture; and
  • aquaculture.

The Bill also provides that the lessee must ensure that a lease transaction 1, which includes a sublease, is registered under the Land Title Act.

It is understood that the rationale for these amendments is to allow lessees to secure investment from third parties in line with the 2014 amendments to the Pastoral Land Amendment Act 2013 (which commenced on 1 January 2014), which allowed the Board to grant a lessee a permit upon application to use all or part of the lessee's pastoral land for a non-pastoral purpose.

Pastoral rent

Under the Act pastoral rent for a financial year is currently calculated as the percentage of the unimproved value of the leased land determined by the Valuer-General under the Valuation of Land Act every three years.

Based upon concerns raised in relation to the potential fluctuating nature of rental calculations and the need to establish a framework for an efficient, predictive and objective process during an industry-led pastoral rent review working group, a methodology based on the pastoral property's estimated carrying capacity is proposed.

In the Bill, the estimated carrying capacity will be determined by the Department of Environment and Natural Resources and is the number of animal equivalents that an area of pastoral land can sustainably support, with animal equivalent being equal to one 450kg non-breeding beast.

It is proposed that the Department may conduct a review of the estimated carrying capacity at any time, but no more than 10 years after the previous determination.

Other minor amendments

The Bill also proposes the following minor amendments to:

  • rectify an anomaly regarding calculating interest for late payment of pastoral rent by relying upon the statutory interest rate2. The Act currently refers to using a rate of 1% above the Commonwealth Bank of Australia standard overdraft rate, which is unobtainable;
  • align the payment periods for pastoral rent with standard government terms for receivables, being 30 days from invoice date. The Act currently provides that a pastoral lessee shall pay the rent due and payable in respect of the relevant quarter for his or her pastoral lease:
    • in respect of the first quarter of the financial year - within 40 days after the date of the rent notice; and
    • in respect of each subsequent quarter - within 28 days after the commencement of the quarter;
  • require the Minister's consent in relation to lease transactions to ensure all proposals to transfer ownership or a controlling interest are assessed. Currently, consent is only required in relation to the transfer of a pastoral lease or a pastoral lease sublease, or to sub-let the pastoral lease land; and
  • allow for an increase to the number of Board members. Currently, the Act provides that the Board is to consist of five members and requires a quorum of four. Amendment is proposed to provide that the Board is to consist of at least five members. This will allow for an increase in member numbers to enable the quorum of four to more easily be obtained and decisions made in a more timely manner in the event of some members being unavailable.

Next steps

It is understood that the Bill is aimed at addressing the immediate shortfalls which the Government has identified in relation to pastoral land, however the Minister for the Environment and Natural Resources, Lauren Moss, has stated that an overall review is necessary and the Government is committed to such a review and will continue to work with industry and other stakeholders to further modernise legislation.

RELATED KNOWLEDGE

Footnotes

1 A lease transaction is defined in the Bill as being any one of the following:

  1. transfer of a pastoral lease;
  2. sublease of all or part of the land the subject of a pastoral lease;
  3. transfer a sublease;
  4. variation or extension of a sublease;
  5. any other transaction that results in a pastoral lessee or sublessee otherwise parting with possession of pastoral land

however, the ability to register on title only applies to (b), (c) or (d).

2 The term statutory interest rate in the Bill has the meaning given to it under section 35(1) of the Taxation Administration Act.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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