Tougher FDI rules not equally applied

22 Jun, 2015 02:00 AM
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Pre-existing FTAs with Australia allow the threshold ... to be a whopping cumulative total of $1.09b

THIS year's tough new federal government rules relating to scrutiny of foreign investment in Australian agriculture are tougher on some foreigners than others.

The new threshold value, above which overseas investors must get Foreign Investment Review Board (FIRB) approval, was lowered in March to a new combined land asset value tipping point of just $15 million.

Before March, the threshold limit had been $252m for each individual land parcel purchased.

But if you are an investor from the United States, New Zealand or Chile, pre-existing free trade agreements (FTA) with Australia allow the threshold for owning agricultural land to be a whopping cumulative total of $1.09 billion before FIRB investigation kicks in.

While FTAs with US and NZ have been part of Australia's agricultural export, import and investment landscape since 2004 and 1983 respectively, the lesser known Australia-Chile agreement, our fifth FTA and first with a Latin American country, came into force in 2009.

Apart from eliminating tariffs by this year, it also locked both sides into liberal services and investment regimes which, like US and NZ buyers, give Chileans significant insulation from the toughened rural land and agribusiness investment scrutiny by FIRB.

Trade agreements with Singapore (since 1983) and Thailand (2005) also set the threshold bar high - $50m - before investors acquiring a substantial interest in primary production businesses are required to seek FIRB consent.

Definition of 'rural land'

All overseas government bodies must gain FIRB approval before acquiring any interest in rural land, regardless of its value.

Rural land is defined as country used exclusively for primary production, therefore excluding hobby farms, stock agistment land, residential blocks or land used for mining.

From July, the Australian Taxation Office will also oversee a register of foreign owned farmland which will expand to all foreign own land in July next year.

Agribusiness acquisitions will have a $55m screening threshold covering primary production and first stage downstream processing such as meat, seafood, dairy, horticultural and grain or sugar crop manufacturing, and oil and fat extraction.

Meanwhile, new fees also apply to overseas investors buying land after December 1, including $5000 for rural or residential property worth less than $1m, rising in $10,000 increments after $1m for every $1m cost, with a cap in rural land fees set at $100,000.

Fees of $25,000 apply for agribusinesses worth up to $1b and $100,000 for businesses worth more than $1b.

Penalties for individuals caught flouting the new rules will be $127,500 or three years' gaol or $637,500 for companies.

The penalties rise with in line with the Consumer Price Index.

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media

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