The Foreign Acquisitions Amendment (Agricultural Land) Bill 2010 (the Bill) was introduced into the Commonwealth Senate as a private members bill on 24 November 2010.
The Bill seeks to change the way that foreign investment in Australian agricultural land is dealt with under the Foreign Acquisitions and Takeovers Act 1975 (FATA).
The three key amendments proposed by the bill are:
- acquisitions of interests in Australian agricultural land greater than 5 hectares will now require approval by the Treasurer
- this approval will be subject to a national interest test, and
- details of agricultural applications will be made publicly available online.
Purchasing interests in agricultural land
Under the current FATA, a foreign person intending to acquire an interest (directly or indirectly through companies or trusts) in Australian urban land must first obtain the approval of the Treasurer (except in limited circumstances). However, where Australian agricultural land is being acquired, the Treasurer only needs to be notified where the value is over AU$231 million (AU$1005 million for US investors).
Using the New Zealand foreign investment regime as a model, the Bill proposes to change the approval criteria from a monetary threshold of AU$231 million to a flat 5 hectares of agricultural land. “Australian agricultural land” is Australian land used primarily for the business of “primary production”. “Primary production” refers back to the definition in the Australian Income Tax Assessment Act, and includes, among other things, the activities of dairy farming, horticulture and forestry. The Bill also introduces the new concepts of "Australian agricultural land corporation" and "Australian agricultural land trust estate".
Essentially, a “foreign person” must make an application to the Treasurer prior to a proposed acquisition of an “interest in Australian agricultural land”. The relevant “interests” include:
- legal or equitable interests in Australian agricultural land interests in a share or units in Australian agricultural land corporations or trust estates (and interests in certain trust companies)
- interests in certain shares in a company (that owns Australian agricultural land) that entitle the holder to a right to access, manage, oversee, make decisions in relation to or profit from the land
- certain interests in leases or licences giving rights to occupy Australian agricultural land for a term of five years or more (including extensions), and
- interests in arrangements that involve the sharing of profits or income from Australian agricultural land. The current tracing provisions, which apply to acquisitions of “substantial interests” in corporations and trust estates (broadly 15 per cent or more of the voting power), should also apply to indirect acquisitions of interests in Australian agricultural land.
The current tracing provisions, which apply to acquisitions of “substantial interests” in corporations and trust estates (broadly 15 per cent or more of the voting power), should also apply to indirect acquisitions of interests in Australian agricultural land.
Importantly, the Bill provides that the Treasurer may prohibit an acquisition by a foreign person or may make an order directing a foreign person to dispose of an interest in Australian agricultural land to an approved person where the acquisition would be against the “national interest”. Failure to comply with the notification requirements carries a penalty of up to 500 penalty units and imprisonment of up to two years.
National Interest Test
The Bill codifies the elements that the Treasurer must consider when determining whether an acquisition of an interest in Australian agricultural land is in the “national interest”. It is noteworthy that this proposed test is limited to Australian agricultural land, and does not apply to other acquisitions that are subject to a “national interest” test (such as acquisitions of Australian urban land).
The matters to be considered by the Treasurer include:
- national security issues
- any impact on competition and global industry
- any impact on Australian tax revenues
- any impact on the Australian economy or the community, and
- the character of the investor.
Publication of interests in Australian land
The Bill introduces measures that require the Treasurer to publish various details of Australian agricultural land applications on the Treasury website. The status of these applications is to be updated as the application proceeds.
The published information will include:
- details identifying the person intending to enter into the agreement and their country of residence/ place of business
- the amount of the proposed investment
- the sector of the agricultural industry to which the interest in agricultural land relates, and
- any other prescribed information.
The Bill was initiated in the Senate and has been read for the second time. It has yet to pass the Senate and proceed to the House of Representatives. Given that this is a private members bill, there have been some questions as to whether the Bill can attract the necessary support to pass the Senate. However, given the current make-up of Federal Parliament, and the topical nature of foreign investment into the agricultural sector, the Bill is likely to at least generate debate on the sufficiency of the current regulatory regime.