Agricultural Land Register: oils ain't oils, & ag land ain't just land!

By Andrew Hay, Ingrid Costello and Dan Moore

12 Oct 2017

Although there are some acknowledged limitations to the Report, with each passing year the data will stabilise and the aggregate trends reported upon will become more statistically accurate.

The second report on the Register of Foreign Ownership of Agricultural Land, administered by the Australian Tax Office, released on 29 September 2017, indicates significant change in the ownership of Australian agricultural land held by foreign investors over the time since the inaugural report was released one year ago. Is this something that should concern you?

Key insights in Australian agricultural land ownership

Media attention is often given to foreign ownership of agricultural land; however, the big news from this Report is that foreign ownership of agricultural land decreased in the 12 months to 30 June 2017, from that of the immediately preceding 12 months.

Foreign-owned agricultural land holdings in South Australia fell by a massive 32.9% from the holding as at 30 June 2016. Queensland and the Northern Territory both recorded decreases in foreign held agricultural land, 10.8% and 9.8% respectively, and the aggregate percentage of foreign ownership in Australian agricultural land fell from 14.1% (as at 30 June 2016) to 13.6% (as at 30 June 2017). Bucking this trend, Western Australia's percentage of foreign investment in agricultural land increased by 45% between the 2016 reporting date and the 2017 reporting date.

It is certainly the case that foreign ownership of Australian agricultural land has seen an increase in Chinese ownership. China grew from fifth largest investor by country, to the second largest, after the United Kingdom. China's ownership of agricultural land in Australia is now 14.4 million hectares; just 12 months ago the Report had China owning 1.4 million hectares. By any analysis that is a significant change in 12 months.

For some, this represents investors bringing much needed capital into Australia's agribusiness sector, which will drive regional jobs and future exports. To others, it represents the total combined land mass of Switzerland, Belgium and Denmark and a sinister downside to globalisation!

It is worth remembering that China's ownership represents just 2.5% of Australia's total agricultural land, and that only 13.6% of agricultural land in Australia has some level of foreign ownership. The Australian media has made much of foreign interests in agricultural land, though, interestingly this is seemingly more noteworthy when the investors are from China! The fact that the UK and, until recently the USA, held a greater share of this foreign ownership did not seem to raise the same level of attention.

The Report also highlights what should be referred to as the Kidman Effect, which reflects the impact of the sale of the iconic S Kidman & Co cattle properties, in which Chinese investors now hold 33%. The Kidman properties, which are now owned by Australian Outback Beef, constitute some 2.6 million ha, representing 6% of the increase apportioned to Chinese ownership in the Report.

It could be argued that foreign investment is the importation of talent, skill and capital. There are inherent risks in investing in a foreign land. The investment that has occurred in Australia is, in part, a testimony of a nation's balance, and the perception by the foreign investor that they will receive a fair go. The Australian way. It is also indicative of international faith in Australia's significant agricultural capacity.

Moving forward

Sherlock Holmes author, Arthur Conan Doyle, once said "It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts". Governments have to collect data to determine fact, and once fact is known, policies can be developed and informed discussions can take place. It is all too easy for scaremongering to hone onto isolated statistics that then become twisted in the national psyche.

There has been commentary from key industry players that the data collected provides a starting point for discussion, however, the limits of the reported information are acknowledged. Moving forward, to ensure meaningful analysis can take place, additional data and numbers are needed; for instance, breakdowns of revenue from agricultural businesses on foreign owned land, or information in relation to purchase prices paid for foreign owned agricultural land, would be useful to inform discussions and policy-making. However, it is also recognised that the Report is in its infancy, and with each passing year the data will stabilise and the aggregate trends reported upon will become more statistically accurate.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.