Foreign investors and vendors and their representatives will now need to ensure that agricultural land has been the subject of a public sale process for at least 30 days. Also, business exemption certificates are no longer available in relation to the purchase of an agribusiness.
Why more restrictions?
Australia's foreign investment rules are designed to facilitate foreign investment in a manner which protects Australia's national interest. The policy changes express a new, specific, national interest consideration: whether there has been an adequate opportunity for Australians to purchase agricultural land.
The stated object of the policy changes is to "ensure that Australians get every opportunity to purchase agricultural land".
"Openness and transparency of sale process"
As part of FIRB's (and ultimately, the Treasurer's) application of the national interest test to a proposed acquisition of agricultural land, the decision maker will now be specifically required to consider the "openness and transparency of the sale process". Approval will generally not be granted for an acquisition of agricultural land where the sale process does not meet the following requirements:
- a program of public marketing/advertising was undertaken for the sale of the property, using channels that Australian bidders could reasonably access (eg. advertised on a widely used real estate listing site or 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 onus is on the foreign applicant to demonstrate how they became aware that the property was for sale and whether the acquisition was subject to an open and transparent sale process. Foreign applicants will be requested to provide evidence of the sale process.
The exceptions to the sale process requirements include where the foreign 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;
- has a substantial Australian ownership share (ie. 50% 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 (eg. mining buffer zones).
Business and land exemption certificates
Since July 2017 foreign investors have been able to apply for business exemption certificates in relation to a program of investments (avoiding the need for individual FIRB approvals for each asset purchased). The Treasurer's new policy announcement states that business exemption certificates "will no longer be granted for agribusinesses". The language in the FIRB guidance note is not so absolute: it says that "the acquisition of interests in agribusinesses would be unlikely to be covered by any business exemption certificate". But the upshot seems to be that business exemption certificates will no longer be available in relation to the acquisition of the assets of, or interests in the securities of, Australian agribusinesses. This puts agribusinesses in the same class as assets in sensitive areas, such as critical infrastructure.
Land exemption certificates (in relation to a program of acquisitions of land) will still be available in respect of agricultural land. However they will only be able to be used in relation to particular land (whether or not agricultural land) if the land has been offered for sale through an open and transparent sale process, as described above.
Under the policy changes, to prevent land banking, all land exemption certificates in relation to agricultural land which is intended for residential development will be subject to a condition that development be commenced within five years.
The effects of the changes
The concept of foreign investors who are looking to acquire agricultural land needing to show that Australians have had a reasonable opportunity to purchase the land is not a completely new one. That requirement has been State Government policy in Western Australia in relation to pastoral leases for many years. However the extension of such a requirement to the Federal level across all agricultural land in Australia does represent a significant change.
Vendors of agricultural land will need to ensure that their sales process meets the new requirements to ensure that foreign investors are not excluded as potential purchasers through the FIRB process. Vendors and their representatives can expect requests from foreign buyers for details of the sales process employed. Foreign buyers should add checking the sales process to their due diligence checklist.