The Commonwealth Government has announced a reduction to the Foreign Investment Review Board’s (“FIRB”) screening threshold for investments in agricultural land in a bid to increase scrutiny of foreign investment in Australia’s agricultural sector. From 1 March 2015 foreign purchases of agricultural land will be subject to FIRB screening when the cumulative value of agricultural investments by the foreign investor reaches the threshold of $15 Million, including the proposed purchase.
This is a significant reduction from the current screening threshold for agricultural land which is $252 million.
The current FIRB Foreign Investment Policy which includes the 'Policy Statement: Foreign Investment in Agriculture' refers to foreign investment in ‘Rural Land’ which is defined as “land used wholly and exclusively for the carrying on of a primary production business”. The definition of primary production business is taken from the Income Tax Assessment Act 1997 and refers to production resulting from the cultivation of land; animal husbandry/farming; horticulture; fishing; forestry; viticulture or dairy farming. Primary production for the purpose of the rural land definition does not include hobby farms, 'rural residential' blocks or land used for mining or stock agistment. A new definition of Agricultural Land will need to be included in the revised policy which is yet to be released.
In the joint media release announcing the changes on 11 February 2015 the Prime Minister the Hon Tony Abbott MP and the Minister for Agriculture, the Hon Barnaby Joyce MP also stated that the Australian Tax Office would commence a stocktake of existing agricultural land ownership by foreign interests regardless of value. This is perhaps with a view to introducing further measures if the Government forms a view that that the levels of foreign investment are too high.
Relevantly Australia’s recent Free Trade Agreements (“FTAs”) with Japan, Korea and China all make provision for the $15 million screening threshold for agricultural land investments. The FTAs also make provision for a $53 million screening threshold for foreign investment in agribusiness which is below the $252 million default threshold for foreign investment in agribusiness.
Details of the revised policy are yet to be released however banks, investment managers and the property sector will be keen to see how these announced changes are implemented.