CHANGES TO TREATMENT OF WIND AND SOLAR POWER STATIONS UNDER FIRB
Changes to the Foreign Acquisitions and Takeovers Regulation 2015 (FIRB Regulations)1, sought to clarify the treatment of agricultural land used in connection with wind and solar power stations. An acquisition of an interest in Australian land is a notifiable action that will require FIRB Approval if the consideration payable meets certain thresholds.2
Following the changes, land comprising wind and / or solar power stations are now treated as developed commercial land3 rather than vacant commercial land or agricultural land.4 Consequently, the relevant monetary threshold for the acquisition of such land will either be $57 million or $261 million5 (as applicable, please download our table summary for further information). Approval under the Foreign Acquisitions and Takeovers Act 1975 (FIRB Approval) will only be required where the value of the acquisition exceeds the relevant monetary threshold.
However, these higher thresholds will not apply to greenfield or shovel ready projects, where the thresholds of $0 (if the land is characterised vacant commercial land) or $15 million (if the land is characterised as agricultural land) will still apply.
Importantly, the rules relating foreign government investors (FGIs) have not changed. Accordingly, FGIs are required to notify the Australian Government and obtain prior FIRB Approval before making certain investments in Australia, regardless of the value of the investment.
The Australian Government has also recently released new guidance providing that, as a general rule, FIRB Approval will only be granted for acquisitions of agricultural land where it has been offered for sale publicly and marketed widely for a minimum of 30 days in the prior six months. This will be relevant for acquisitions of land that may be considered agricultural land, even though the purposes of the acquisition is for a completely different use, such as for use as a wind or solar power station. Acquisitions of leasehold interests for a wind or solar farm development are exempted from this requirement, although freehold acquisitions and acquisitions on interests in agricultural land entities are likely to be subject to these requirements.
CLASSIFICATION OF LAND
Download our table, which summarises how land will be classified going forward, in light of these changes to the FIRB Regulations.
1 Effective from 1 July 2017.
2 FIRB Guidance provides that the consideration for a lease is sum of any up-front initial payments (other than taxes and regulatory charges), periodic rental payments over the term of the lease, any amounts likely to be paid for an extension or renewal of the lease (if prescribed under the lease agreement) and the value of any interest in a wind or solar power station on the land.
3 For completeness, the FIRB Regulations use the phrase "commercial land that is not vacant", however the FIRB Guidance Notes refer to this type of land as "developed land". For the purpose of this article, we will use the term "developed land".
4 Certain land will still be categorised as agricultural land, see table below.
5 The monetary thresholds were indexed on 1 January 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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