The Foreign Investment Review Board (FIRB), in conjunction with the Australian Taxation Office (ATO), recently released the annual reports on the ‘Register of foreign ownership of agricultural land’ (Agricultural Register) and ‘Register of foreign ownership of water entitlements’ (Water Register) as at 30 June 2021.
The reports publish aggregate statistics of foreign ownership on the Agricultural land register and Water register, respectively, and includes registrations made by foreign persons since the establishment of the relevant register to the end of the most recent financial year.
The registers were established pursuant to the Register of Foreign Ownership of Water or Agricultural Land Act 2015 (Cth) (Register Act). In accordance with the Register Act, the ATO is responsible for administering the registers. The purpose of the registers is to provide greater transparency about the level of foreign ownership of Australia’s land interests.
Given the interconnected nature of the registers,1 it is appropriate to consider the reports together.
Different treatment for the Agricultural sector
The rules that apply to holders of agricultural interests are similar to the treatment of Australian assets in sensitive areas, which is significantly different compared to other types of Australian land. This reflects the political significance placed on the agricultural sector.
Foreign persons proposing to acquire interests in agricultural assets will be subject to, among other things, lower monetary thresholds, tighter restrictions and more onerous approval and reporting conditions. Further, agricultural land is given quite an expansive definition.2 This is designed to ensure that the FIRB rules facilitate foreign investment in a manner which protects Australia's national interest.
Since the registers were established,3it has been mandatory for foreign persons to notify the ATO of the following:4
Notifications require a significant volume of information and so priority should be given to timely reporting. The Register Act does not provide the ATO (or any other body) the power to grant exemptions from the notification requirements or to extend the 30 day notification periods.
Failure to adhere to the reporting requirements set out in the FIRB approval conditions are treated as breaches of law, and non-compliant foreign persons risk incurring significant penalties, including infringement notices, civil and criminal penalties, unwinding of the transaction and/or divestment of the interest acquired.
Key findings of the reports
The report advises:
The report advises:
Foreign capital plays an important role in the growth of all Australian sectors. The reports show that, in the midst of an uncertain global economy, foreign investors maintain an appetite for Australian assets, in particular, agricultural interests.
Given the sensitive nature of the agricultural sector, foreign persons that have or wish to acquire agricultural interests should be alive to the FIRB approval and reporting requirements.
We regularly advise clients on FIRB compliance issues in a range of asset classes. If you require any assistance on these matters, please do not hesitate to contact us.
James Hoey, one of the law graduates in the Property and Leasing team, provided valuable input in the preparation of this article.
1 According to the 30 June 2021 reports, 93.6% of persons who have interests registered on the Water Register will also have an interest registered on the Agricultural Register.
2 Agricultural land is defined as land that is used, or could reasonably be used, for a ‘primary production business’. The FIRB regime adopts the meaning under the Income Tax Assessment Act 1997 (Cth) for the term ‘primary production business’, being production resulting directly from:
The definition of agricultural land is expansive (particularly as a consequence of the inclusion of ‘potential use’) and includes land that is partially used for a primary production business and/or where only a portion of the land could reasonably be used for a primary production business.
3 The Register of foreign ownership of agricultural land was established on 1 July 2015. The Register of foreign ownership of water entitlements was established on 1 July 2017.
4 There are exemptions from the notification requirements in respect of the enforcement of a security held solely for the purposes of a moneylending agreement.
5 The drop is due to the impact of natural disasters on agricultural activities; drought and flooding experienced in New South Wales and Queensland; and bushfires experienced in New South Wales, Queensland and Victoria