A crackdown on foreign investors hasn’t translated to a slowdown in transactions in the agribusiness sector, lawyers say.
“Despite the tightening of Foreign Investment Review Board (FIRB) requirements ,we have seen a continued flow of inbound investment from Asia - in particular China and Malaysia - for broad acre farming properties and agribusiness operations over multiple areas,” Allion Legal principal Michael Swift.
“The low Australian dollar and Australia’s high quality of product on offer has continued to attract foreign investors.”
Recent reforms to Australia’s foreign investment regime, including the Foreign Acquisitions and Takeovers Act 1975, came into effect late last year.
And, according to Norton Rose Fullbright’s global head of energy, Simon Currie, they were generally welcomed - on the basis they simplify the application process and clarify some of the ambiguities previously set out in the FIRB’s policies.
“However, the reforms also provide for some increased scrutiny with respect to acquisitions of land and in the agricultural sector, including agricultural land and agribusinesses.
“Additionally, the reforms formalise FIRB’s ability to review acquisitions and investments by foreign government investors.”
So what do the changes mean for the sector?
As of February, all foreign owners of Australian agricultural land had to have registered their holdings with the Australian Taxation Office’s (ATO) Agricultural Land Register.
“The Coalition Government welcomes foreign investment, which plays an important role in the growth and productivity of our agriculture sector,” Deputy Prime Minister and Minister for Agriculture and Water Resources, Barnaby Joyce, said at the time.
“However, we have clearly heard and understood the concerns of the Australian community that the Government should have more thorough oversight and more accurate data in relation to foreign investment in agriculture, to properly ensure that such investments are in our long-term national interest.
“Our agricultural land is one of our nation’s most valuable assets—so it is important that we have a clear and accurate picture of foreign investment levels in our agriculture sector, and that those investments are subject to appropriate consideration and scrutiny,” Joyce said.
Treasurer Scott Morrison added that through the Agricultural Land Register, the ATO would be collecting comprehensive information on foreign ownership of agricultural land, as part of the Government’s commitment to increasing scrutiny and transparency around foreign investment in Australian agriculture.
“This is why we have introduced the foreign land ownership register, along with reducing the threshold for Foreign Investment Review Board (FIRB) scrutiny of private sector foreign purchases of agricultural land from $252 million to a cumulative total of $15 million.”
The tightening of FIRB requirements has had an impact on sentiment, and it remains an issue that foreign investors (particularly Chinese) ask about up front, Allion Legal principal Jon Cane says.
“Although in practice there has been minimal impact on the sector with almost all - with a couple of high profile exceptions - FIRB applications being approved.”
One of those was an application by Chinese investor Moon Lake Investments to buy Tasmanian dairy giant Van Diemen’s Land Company from the New Plymouth District Council (NPDC) - subject to tax conditions - in February.
It was the first application to the first to be subject to new conditions requiring it to comply with Australian taxation law, Australian Taxation Office (ATO) directions to provide information in relation to the investment and to advise the ATO if it enters into any transactions with non-residents to which the transfer pricing or anti-avoidance measures of the tax law may potentially apply, Morrison said in a release.
In forming his view, he said, he had carefully considered “the national interest test and how it applies to this case, including the likely impact on local jobs and increased investment to support economic growth”.
“The national interest test also considers a range of factors, including national security, the impact on competition, the character of the investor, and the impact on the economy and the community."
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