WHO SHOULD READ THIS

  • Foreign investors in the resources sector.

THINGS YOU NEED TO KNOW

  • FIRB is increasing its scrutiny of foreign investment and has introduced a new register for the registration of foreign ownership of agricultural land.

WHAT YOU NEED TO DO

  • Review landholdings and consider exemptions to determine whether registration on the Agricultural Land Register is required

The Register of Foreign Ownership of Agricultural Land Act 2015 (Cth) took effect from 1 December 2015.  Under this legislation, all foreign persons that hold any interest in agricultural land are required to register that interest with the Australian Tax Office (ATO) by 29 February 2016.  Interests acquired by foreign persons after 1 February 2016 must be registered with the ATO within 30 days of the acquisition.

Who is a ‘foreign person’?

Foreign person is broadly defined to include Australian companies in which foreign investors hold a substantial interest (i.e. 20% or more for a single foreign investor together with its associates, or 40% or more in aggregate for multiple foreign investors).

What is ‘agricultural land’?

The definition of agricultural land is very broad, and covers ‘land in Australia that is used, or that could reasonably be used, for a primary production business.’   This can apply to land owned by mining companies, even if the land is not in fact being used for agricultural purposes.

Exemptions relating to mining operations

As part of the recent foreign investment legislative reforms, the federal government also passed Regulations which set out specific exemptions to the definition of ‘agricultural land’.  

Of particular relevance in the resources sector are the exemptions relating to mining operations, however it must be noted that ‘mining operations’ are limited to operations under mining and production tenements, which specifically excludes exploration and prospecting tenements.

The Regulations specifically provide that land will not be ‘agricultural land’ where:

  • the land is used wholly or predominantly for a mining operation, for infrastructure relating to a mining operation or to store waste from a mining operation; or
  • an approval of a government authority (other than mining or production tenement), for example a development consent, is in force that allows a mining operation to be established or operated on the land, or waste from a mining operation to be stored on the land.

More broadly, the Regulations also specify that the following categories of land (amongst others) will not be characterised as agricultural land:

  • land acquired solely, or used wholly or predominantly, to meet a condition of an approval mentioned in paragraph 2 above (e.g. buffer land); and
  • land used wholly or predominantly (under a law or legally binding agreement) for the purposes of the protection or conservation of the environment.

Even if the land fits within one of these categories, the exemption will not be available if the land is in fact being used wholly or predominantly for a business of primary production. For example, if the land was being leased back to a farmer pending the extension of mining operations to that area, that land would still be ‘agricultural land’ and would need to be registered with the ATO.  

Conclusion

The deadline for registration of foreign interests in agricultural land is fast approaching.  Mining companies that fall within the definition of ‘foreign person’ should carefully consider the latest guidance provided on the definition of agricultural land to consider whether their landholdings are subject to compulsory registration with the ATO.