On 1 February 2018 the Treasurer announced new policy requirements that foreign investors must satisfy when seeking Foreign Investment Review Board approval.
The process now requires a foreign purchaser to demonstrate that the agricultural land has been part of an open and transparent public sales process, requiring a ‘widely marketed’ campaign unless exceptional circumstances apply. The effect of the change is that, if a seller does not want to go to the public market to sell their land then, unless exceptional circumstances apply, foreign investors will be unable to participate in negotiations to acquire the land.
In the release, the Treasurer states that concerns around the ability of Australians to participate in the sale process has been a factor in previous decisions, including the S. Kidman & Co sale of 101,000 square kilometres of agricultural land.
The FIRB guidance note on agricultural land investments provides that an open and transparent sale process means:
- public marketing/advertising was undertaken for the sale of the property, using channels that Australian bidders could reasonably access (e.g. advertised on a widely used real estate listing site or large regional/national newspaper)
- the property was marketed/advertised for at least 30 days
- there was equal opportunity for bids or offers to be made for the property while still available for sale.
The guidance note also provides that exceptions include acquisitions where the buyer:
- is acquiring a property via a private sale that was marketed/advertised in the above manner in the last six months but did not sell or where the sale fell through; or
- has a substantial Australian ownership share (i.e. 50 per cent or more), as this constitutes an opportunity for Australian bidders, despite a foreign ownership share.
- is required to make the acquisition to comply with state or commonwealth law e.g. mining buffer zones.
Business exemption certificates, which were introduced in July 2017, are not relieved from the transparency obligations, with applicants to demonstrate the potential benefits of the proposed investment. Business exemption certificates will no longer be granted for agribusiness.
The new obligation applies to all FIRB approvals made by Treasury from 1 February 2018 and are likely to impact transactions where an application for FIRB approval has been made, but not determined, and new FIRB applications.