New foreign investment rules to take effect

Further elements in the Australian Government’s foreign investment framework reforms take effect from 1 December 2015.  The reforms are part of a package which has introduced significant changes to the rural, residential and commercial property markets.

Rural land and agribusiness

On 1 March 2015, the screening threshold for rural land was lowered from $252 million to $15 million (cumulative).  This means that all privately-owned foreign investors require prior approval from the Foreign Investment Review Board (FIRB) for a proposed acquisition of an interest in rural land if the value of the land the foreign person (and any associates) already holds exceeds, or immediately following the proposed acquisition, is likely to exceed, $15 million.  Foreign investors from the United States, New Zealand, Chile, Singapore and Thailand have higher cumulative thresholds.

A $55 million threshold (based on the value of the investment) applies from 1 December 2015 on foreign investments in agribusiness (regardless of the total value of the agribusiness). “Agribusiness” is widely defined to include many downstream businesses such as meat, poultry, seafood, fruit and vegetable processing).  The threshold applies to all private foreign investors, other than those from the United States, New Zealand and Chile who again have a different regime.

In addition the Agricultural Land Register, which was established on 1 July 2015, requires foreign individuals, companies and trustees to report their agricultural land holdings directly to the ATO.  All existing holdings must be reported by 31 December 2015, and the ATO intends to introduce a similar register for foreign-owned residential real estate.

A water licence register?

It is increasingly likely that water licence entitlements will be added to the list of foreign interests which are subject to FIRB scrutiny.  An amendment to the draft Foreign Acquisitions and Takeovers Regulation 2015 Bill, which was agreed to by the House of Representatives on 24 November 2015, will require foreign investors to register their water entitlements with the ATO. Legislation is expected in this area before 1 December 2016.

Other changes

In addition, from 1 December 2015:

  • Fees now apply to all applications for approval of investment to the Foreign Investments Review Board (ranging from $5,000 to $100,000).
  • Foreign investors who breach the rules face stricter penalties.  In addition to existing divestment orders and criminal penalties, new civil penalties and infringement notices will be introduced for less serious breaches of the residential real estate rules.
  • The $5 million threshold for “heritage” commercial real estate has been abolished, and the $55 million threshold now applies to all foreign investments in commercial real estate.

The Page Seager team has extensive experience in navigating the FIRB approval process.  Please contact David Shelley (dshelley@pageseager.com.au) or Dan Morgan (dmorgan@pageseager.com.au) if we can be of assistance.

 

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