The Federal Treasurer has today announced material changes to Australia's foreign investment regime, which will significantly impact transactions undertaken by foreign persons of Australian land (particularly agricultural land) and agribusinesses. Partner Wendy Rae and Senior Associate Nick Kefalianos examine these important changes.
A copy of the Treasurer's announcement is available here.
Given the Federal Government's concern with ensuring Australians are afforded an opportunity to participate in sales of agricultural land holdings (a concern that manifested during consideration by the Treasurer of the recent sale of S. Kidman & Co Limited), the Treasurer will now (as part of the national interest assessment) consider whether, for transactions involving agricultural land, Australians were given an opportunity to acquire the relevant land. Approval will generally not be granted for acquisitions by foreign persons of agricultural land unless there has been an 'open and transparent sale process', requiring:
- the land being offered for sale publicly and marketed widely (ie advertised on widely used real estate listing websites, or in regional or national media) for a minimum of 30 days; and
- an equal opportunity for bids or offers to be made for the land while available for sale.
Where a foreign person seeks the approval of the Treasurer to acquire agricultural land, they will need to demonstrate how they became aware that the land was for sale (including evidence of the sale process) and that the sale was subject to an open and transparent sale process.
Exemptions to the requirement for an open and transparent sale process will exist where:
- the property was the subject of an open and transparent sale process in the previous six months, but did not sell;
- the applicant has a substantial Australian ownership (being 50 per cent or more), as this constitutes an opportunity for Australian bidders, despite the foreign ownership share; and
- the applicant is required to make the acquisition to comply with state or federal law.
Under Australia's foreign investment regime, foreign persons can apply for pre-approval for a program of business acquisitions, in the form of a business exemption certificate. This is intended to address the regulatory burden and cost arising from having to seek multiple approvals.
The Federal Government has clarified that acquisitions of interests in agribusinesses are unlikely to be covered by any business exemption certificate, on the basis that such businesses are 'sensitive' from a national interest perspective.
This may have a practical impact on foreign owners of Australian agribusinesses seeking business exemption certificates to expand their Australian operations.
Like business exemption certificates, foreign persons can seek land exemption certificates covering a program of land acquisitions in Australia.
The Federal Government has confirmed that conditions will be imposed on land exemption certificates going forward, to ensure that any land acquisition undertaken under an exemption certificate has been acquired pursuant to an open and transparent process (the requirements of which were set out earlier).
It is unclear how the imposition of such conditions will work in practice, particularly in the context of exemption certificates relating to licences, easements and other land interests that are not freehold interests. We are hopeful that a list of practical exceptions will be developed in consultation with Treasury.
If you would like to talk to an expert about these changes, please contact one of the Partners listed below.