In brief On 1 February 2018, the Australian Treasurer announced important updates that will impact how foreign investors can acquire agricultural land (whether freehold or leasehold with a term over five years) in Australia, where approvals from the Foreign Investment Review Board (FIRB) are required. This LegalTalk Alert provides a summary of the Treasurer's announcement and the subsequent guidance note provided by FIRB, with a takeaway of the key elements of the change, impacts and interpretation of the need for land to be `marketed widely'. The new rules will have the greatest impact on the ability to consummate a deal off market with a foreign investor, one which has traditionally been favoured by farmers and investors alike.

In detail On 1 February 2018, the Australian Treasurer announced important changes that will affect how foreign inv estors can acquire agricultural land in Australia where Foreign Investment Review Board (FIRB) approval is required for the acquisition.

The key element of the change will require a foreign investor to demonstrate to FIRB, as part of the application process, that the property proposed to be acquired has been marketed widely, allowing Australians an equal opportunity to participate in the sale process.

Following the Treasurer's announcement, FIRB has issued a guidance note in relation to the changes. Key takeaways from the guidance note include:

The property must be `marketed widely' which means: public marketing/advertising was undertaken for the sale of the property, using channels that Australian bidders could reasonably access (for example, advertised on a widely used realestate listing site, or in a large regional/national newspaper); the property was marketed/advertised for at least 30 days; and there was equal opportunity for bids or offers to be made for the property while still available for sale.

The guidance note also lists some exceptions to the new `marketed widely' requirement, including where the applicant:

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 substantialAustralian ownership share (i.e. 50 per cent or more), as this constitutes an opportunity for Australian bidders, despite a foreign ownership share; or

is required to make the acquisition to comply with state or commonwealth law e.g. mining bu ffer zo ne s.

The changes apply immediately, including to applications currently being considered by FIRB, as wellas those to be submitted in the future.

Implications of the policy change

In light of this announcement, it is worth recapping the high level rules around foreign investment in agriculturalland, including:

FIRB approval will generally be required for proposed investments in agricultural land by foreign persons (excluding foreign government investors)where the cumulative value of a foreign person's agriculturalland holdings exceeds AUD15million. Ex ceptions apply to investors from Australia's trade agreement partners (Chile, New Zealand, Thailand and the United States), which hav e higher thresholds. All acquisitions of agriculturalland by foreign government investors require approval.

Separate to the FIRB approval process, allacquisitions of interests in agricultural land by foreign persons, regardless of whether they require FIRB approvaland regardless of v alue, must be notified to the Australian Taxation Office Register of Foreign Ownership.

The theme of the 1 February policy change, that Australians be given the opportunity to participate in the sale process of agriculturalland where foreign persons are the ultimate acquirer, is not entirely new. FIRB has been raising this issue in its assessment of foreign investment applications in relation to agriculturalland in a number of applications PwC has been involved with in recent times.

Clearly, pressure has been applied through public channels by local interests in relation to the threat, whether realor perceived, of v aluable Australian agricultural assets favouring foreign buyers in off market transactions.

There are many legitimate reasons why a vendor would choose not to opt for a public sale process of an asset, including for political, reputational, commercial, privacy and timing reasons. Clearly , such a vendor could still choose not to market their property `widely' however, their potential source of buyers would therefore exclude foreign persons if FIRB approval is required, thereby arguably limiting the ability for a true market value being achieved for the asset.

Similarly, there may be good reasons why a foreign buyer may not wish to participate in a public sale process. Take for example an existing foreign agricultural land owner who wishes to acquire a neighbouring property to expand operations. The ability to privately approach the neighbouring ow ner and consummate a dealoff market will be compromised where FIRB approvalis required.

The takeaway

Vendors, foreign buyers and their respective advisers willneed to factor in these new FIRB rules when planning for the sale and purchase of agriculturalland in Australia. Our experience shows that there is significant, growing appetite for Australian agriculturalland assets and we await to see how this latest policy change may impact the market for agriculturalland.