On the back of several high-profile land (and water) sales to non-Australians, such as Australia’s largest cotton farm, Cubbie Station, the issue of foreign investment in Australian agriculture is generating heated debate. One of the central themes in this debate has been that, historically, no one knows exactly how much agricultural land foreign companies and governments own.
Further, public debate seems divided between the fear of “selling the family farm” to overseas interests, and the positive outcomes generated to the Australian economy through foreign investment.
The Australian Government has demonstrated a commitment to create increased transparency around foreign investment in ‘agricultural land’ by introducing a national Foreign Ownership of Agricultural Land Register (“Register”). The Register will be administered by the Australian Taxation Office (“ATO”) and registrations can be processed at www.ato.gov.au/aglandregister.
The Register was implemented by Australia’s Foreign Investment Review Board (“FIRB”) updating Australia’s Foreign Investment Policy (“Policy”) to include additional obligations on foreign investors who currently hold, or will in the future hold, interests in agricultural land in Australia. This follows from a recent reduction of the threshold above which FIRB has to scrutinise purchases of “rural land” by foreign entities – from $252 million to $15 million.
From 1 July 2015, the Policy requires that:
The obligation to register interests in Australian agricultural land applies irrespective of the value of the land and whether or not the acquisition was (or is) subject to FIRB approval.
Agricultural land is defined very broadly in the Policy as “land in Australia that is used, or that could be reasonably used, for a primary production business“.
This definition extends wider than the definition of rural land under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”) which requires the relevant land to be used wholly and exclusively for carrying on a business of primary production.
It is expected that the Australian Government will introduce supporting legislation in respect of the Register by 1 December 2015. In the meantime, however, the requirement to register only applies as a matter of policy.
There is currently no penalty for failing to register an existing or new interest. However, it is expected penalties will be imposed when the policy changes are incorporated into legislation.
A survey conducted by the Australian Bureau of Statistics (“ABS”) titled “Agricultural Land and Water Ownership June 2013” found that just under 99% of Australian farm businesses are fully Australian owned and just under 90% of farmland is fully Australian owned. Further, while there has been an increase in the area of farmland owned by businesses with some level of foreign investment, by far the majority remains Australian owned.
In addition, it is not currently possible to review or search the Register, and no set date has been announced for activation of such a feature.
Consequently, we question whether the Register, designed to ‘improve transparency and better inform public debate and policy making’ will achieve its aims, or whether the costs of establishing and maintaining the register could have been better spent in educating agribusinesses on investment opportunities and in promoting Australian agriculture as a source of food for Asia.
For example, commentators, including Primary Producers SA Chair, Rob Kerin, are calling for Australian farmers to have an open mind in relation to foreign investment. Mr Kerin was quoted in The Advertiser on 6 July 2015 as saying “We grow and produce excellent food and wine, but the two things we lack are investment money to grow businesses to their full potential and markets to sustain them in the long term.”
While not advocating entirely selling out to overseas interests, Mr Kerin is encouraging those in agribusiness to consider the “value of co-investment that will allow producers to continue doing what they do best while the investors themselves secure the markets for our quality products.”
While the Register may provide marginally better data on foreign ownership of Australian agricultural land, in our view agribusinesses would be better served focusing on opportunities to work with foreign investors, rather than concentrating on the perceived threat.
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.