On 1 February 2018, the Australian government issued a new guidance which provides that foreign investors may only acquire agricultural land in Australia where there has been an "open and transparent sale process".
This means that before agricultural land can be sold to a foreign investor, the land must have been advertised and marketed to Australians, and Australians must have had the opportunity to bid on the sale.
Agricultural land is defined in the Foreign Acquisitions and Takeovers Act 1975 (FATA) as land that is used, or could reasonably be used, for a primary production business. Under FATA, investments in agricultural land by foreign persons require prior approval by the Foreign Investment Review Board (FIRB) where:
- the investor is a foreign government; or
- in respect of non-government investors (other than those from Chile, New Zealand, Thailand or the United States), the cumulative value of the foreign investor's agricultural land holdings in Australia after the acquisition will be greater than AUD$15 million.
When considering an application, FIRB will consider whether the proposed investment is in the "national interest".
FIRB will advise the Treasurer, who is responsible for making the final decision. The Treasurer may decide:
- to give the investor a "no objection" notification;
- to provide a conditional "no objection" notification, subject to the investor complying with certain conditions imposed by FIRB; or
- that the proposed investment would be contrary to the national interest, and make an order prohibiting the investment.
Under the recent changes, the Treasurer must consider as part of his decision making process whether there was an opportunity for Australians to acquire the relevant agricultural land, having regard to the "openness and transparency" of the sales process.
The foreign investor must demonstrate in its FIRB application that:
- the proposed sale of the agricultural land was publicly marketed and advertised via channels accessible to Australian investors (for example, advertised on a widely used real estate listing site and in the newspaper), for at least 30 days; and
- Australian investors had an equal opportunity to bid on the property while it was available for sale.
The applicant will need to provide evidence to FIRB as to how the land was advertised, how the applicant became aware of its availability for sale, and what constituted the sale process.
The "openness and transparency" requirements do not apply to a foreign investor that:
- is acquiring a property via a private sale that was widely advertised through multiple channels for at least 30 days at some time in the last six months but did not sell, or where the sale fell through;
- already has a substantial Australian ownership share (at least 50%) in the property; or
- is required to make the acquisition to comply with Australian law (e.g. mining buffer zones).
The threshold rules relating to agricultural land do not apply to:
- land that may otherwise be agricultural land but is exempt under the Foreign Acquisitions and Takeovers Regulation 2015;
- investors from Chile, New Zealand, Thailand or the United States (subject to some exceptions);
- certain acquisitions of agricultural land by owners or operators of wind or solar power stations; or
- a program of acquisitions in respect of which an exemption certificate has been granted, as discussed below.
Foreign investors may apply for an exemption certificate to cover a program of acquisitions of agricultural land, so that the investor will not need to seek a separate approval for each individual acquisition (and, therefore, will not need to go through the "openness and transparency" sales process each time).
The Treasurer may decide to grant an exemption certificate where:
- the total proposed value of acquisitions over a three year period is not more than AUD$100 million;
- the regions or localities where the agricultural land is to be acquired are clearly defined; and
- the Treasurer is satisfied that the acquisitions will not be contrary to the national interest.
Generally, any exemption that is granted is subject to conditions, including that the maximum value for any single transaction in the program is not more than AUD$10 million (or such lower amount as is set by FIRB), that the investor agrees to certain periodic reporting conditions, and, if an acquisition is for a residential development, that development begins within five years of the acquisition.