The Commonwealth Government has introduced a national register of foreign agricultural land ownership as part of its wider overhaul of Australia's foreign investment framework. McCabes' Property team has been following these changes closely in recent months.
WHAT IS IT?
The Agricultural Land Register (Register) has been established as part of the government's recent suite of reforms aimed at better monitoring and scrutinising foreign investment. The purpose of the Register is to establish a record of all new and existing foreign interests in Australian agricultural land, regardless of value. This information will be used to publish statistics about the levels of foreign investment in agricultural land in Australia.
New legislation will require foreign persons to notify their land interests, or a relevant change in those interests, to the Australian Taxation Office (ATO) within certain timeframes (see Key Timeframes below). While the legislation is yet to be passed, the Register is already up and running.
DO I NEED TO REGISTER?
The registration requirement will apply to:
- any "foreign person" who had relevant "agricultural land" interests as at 1 July 2015;
- any "foreign person" who, after 1 July 2015:
- acquires a new "agricultural land" interest;
- ceases to have an "agricultural land" interest; or
- has an interest in land which changes in status to or from "agricultural land" ; and
- any person with an interest in "agricultural land" who becomes, or ceases to be a "foreign person" after 1 July 2015.
The key concepts in these requirements are "foreign persons"; "agricultural land", and relevant interests or rights. We will explain these terms below.
WHO IS A "FOREIGN PERSON"?
A "foreign person" includes:
- a natural person not ordinarily resident in Australia ("foreign individual");
- a corporation in which foreign individuals or foreign corporations hold certain interests; or
- the trustee of a trust estate in which foreign individuals or foreign corporations hold certain interests.
The government intends to extend the definition to include foreign governments.
It may not always be obvious whether a person or entity is a "foreign person". If there is any doubt, legal advice should be sought.
WHAT CONSTITUTES AGRICULTURAL LAND?
"Agricultural land" is defined as "land in Australia that is used, or that could reasonably be used, for a primary production business."
This is significantly broader than the definition of "rural land" under existing foreign acquisitions legislation (which is soon to be superseded), which only relates to land that is actually used wholly or exclusively for carrying on a business of primary production. Landholders will need to be mindful of this lower threshold.
WHAT CONSTITUTES AN INTEREST IN AGRICULTURAL LAND?
A relevant interest for the purposes of the Register is either:
- a freehold interest in agricultural land; or
- a right to occupy the land under a lease or licence whose term (including any extension or renewal) is reasonably likely to exceed 5 years. For the purpose of this threshold, the relevant starting point of the 5 year period will depend on the type of event that has caused the change in agricultural land ownership. For example, if a company with a right to occupy agricultural land becomes a "foreign person" because of a change in shareholding, the 5 year period starts from the time that the company becomes a foreign person (not from the time it began to hold the right under the lease or licence). For interests existing as at 1 July 2015, the relevant threshold question is whether the remaining term of the lease or licence was, as at 1 July 2015, reasonably likely to exceed 5 years.
DOES THIS ONLY APPLY TO PROPERTIES OF A CERTAIN VALUE?
No. The requirement to register applies to all foreign agricultural land holdings, regardless of value - not just those investments that would require notification under the Foreign Acquisitions and Takeovers Act 1975 (Cth).
Assuming that the new legislation is passed:
- all existing relevant interests in agricultural land held as at 1 July 2015 must be registered by 31 December 2015; and
- any new interests in agricultural land, or any relevant changes to interests, must be registered within 30 daysof the relevant event occurring (or by 31 December 2015, whichever is later).
HOW DO I REGISTER?
You can register your agricultural land interests through the ATO's website at www.ato.gov.au/aglandregister. The appropriate registration form will depend on whether the foreign person is an individual, partnership, company or trustee. Various details about the foreign person and the agricultural land are required, including a percentage breakdown of land use.
WATCH THIS SPACE
As the government rolls out changes to Australia's foreign investment framework, investors will need to ensure they continue to comply with Australian foreign investment laws. Several new pieces of legislation are set to come into effect in December this year, while a number of other changes have already taken place. The changes affect foreign investment in real estate (including agricultural land) as well as business acquisitions.