Trans-Tasman business investment has become significantly easier with the enactment of the Overseas Investment (Australia) Amendment Regulations 2013 which came into force on 1 March.
The regulations implement an obligation under the Protocol on Investment to the New Zealand-Australia Closer Economic Relations Trade Agreement, which was signed by New Zealand Prime Minister John Key and Australian Prime Minister Julia Gillard on 16 February 2011. The text of that Protocol is available here.
What has changed?
Prior to the implementation of these regulations Australian investors were subject to the same rules as all other overseas investors. Under New Zealand's Overseas Investment Act 2005 any overseas investor wishing to obtain, directly or indirectly, a 25% or more ownership or controlling interest in a 'significant business asset' (such as shares, plant and equipment) worth NZ$100 million or more is required to obtain approval from the Overseas Investment Office.
Now the regulations are in place, the screening threshold for certain Australian investors (referred to as Australian non-Government investors in the regulations) has moved to a 25% or more ownership or controlling interest in business assets worth NZ$477 million or more. This change is expected to result in over half of all new Australian investment in New Zealand being exempt from screening.
If the investor is an 'Australian Government investor' the threshold for investments in a 'significant business asset' is NZ$100 million or more.
Under the regulations, the thresholds for both Australian non-Government investors and Australian Government investors will be adjusted each year based on an inflation-based formula.
Investments do not qualify for the exemption if, as a result of the transaction, an associate of the Australian investor that is not itself an Australian investor will acquire a 25% or more ownership or control interest of a type governed by the Overseas Investment Act. However, different rules apply where the Australian investor is a subsidiary of an overseas person.
Who is an Australian non-Government investor?
In general terms, an investor qualifies as an Australian non-Government investor under the regulations if:
- the investor is an Australian individual; or
- the investor is located in Australia and carries on substantive business operations in Australia; or
- the investor is more than 75% owned or controlled by Australian individuals or New Zealanders.
The investor must not be owned or controlled by the Australian Government or a foreign Government.
When is an investor an Australian Government investor?
Generally, an investor qualifies as an Australian Government investor if the investor is either the Australian Government or an entity or a branch located in Australia and 25% or more owned or controlled by the Australian Government. The investor must not be a foreign Government or 25% or more owned or controlled by a foreign Government.
The rules remain the same for investments in sensitive land and fishing quota
Australian investors continue to face the same rules as other overseas investors under the Overseas Investment Act for investments in sensitive land or fishing quota, and are also subject to the same rules where the proposed investment in a 'significant business asset' includes sensitive land and/or fishing quota.