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Foreign Acquisitions Amendment (Agricultural Land) Bill 2010
22-09-2011 03:56 PM
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Foreign Acquisitions Amendment (Agricultural Land) Bill 2010
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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
FOREIGN ACQUISITIONS AMENDMENT (AGRICULTURAL LAND) BILL 2010
(Circulated by authority of Senator N Xenophon)
This Bill seeks to make three key changes to the current Foreign Acquisitions and Takeovers Act 1975 .
It puts into legislation a national interest test, requires any interest in Australian agricultural land greater than 5 hectares to be subject to application to the Treasurer and requires online publication of applications of interest in Australian agricultural land.
Currently, a potential private foreign investor only needs to apply to the Government for consent if the purchase price is over $231 million.
However, this is a very high threshold and there are concerns that significant purchases may be made below this, without the Government being made aware.
Further, there are concerns of potential piecemeal purchases by foreign investors which, by not exceeding this current threshold, may be able to acquire large areas of land over a period of time.
In New Zealand, the Overseas Investment Act of 2005 established an Overseas Investment Office to oversee foreign investments, which requires that a foreign investor must apply for consent from the Government for an investment in rural land if it exceeds five hectares.
That is, New Zealand recognises that non-urban land is unique and therefore there needs to be subject to serious consideration if any interest is made to purchase it by foreign entities.
This Bill will lower the threshold from $231 million to 5 hectares in line with New Zealand's legislation, such that any interest in Australian agricultural land greater than 5 hectares must be subject to application to the Treasurer.
This is to enable more potential foreign investment to come to the attention of the Treasurer so that they can make informed policy decisions about whether or not to approve the application.
There is no denying that foreign investment is an important part of our economy.
Indeed, as at 31 December 2009, the level of foreign investment in Australian agricultural land was valued at $1.897 billion.
This Bill will put into legislation a national interest test, which the Government currently has as 'Guidelines' in its determinations, but which need to go further.
In New Zealand, their legislation sets out specific criteria by which the Treasurer needs to consider applications of foreign investment and by applying these to potential investments in Australia it will enable greater scrutiny to be applied.
Criteria around national security, benefit to the economy and impact on competition will be applied under the national interest test to be enshrined in legislation.
Finally, the Government announced on Tuesday 23 November that it is committed to improving data in this area, and that it will seek information from the Australian Bureau of Statistics, the Rural Industries Research and Development Corporation and ABARE.
This will add much more to the ability of the Government to make informed policy decisions with the current situation better understood.
Under this Bill, the Treasurer will be required to publish on the Treasury website, the online publication of applications of interest in Australian agricultural land, and for the status of these to be updated as the application proceeds.
This process, coupled with the retrospective data the Government will compile, will provide the information needed to make good policy decisions for the future.
Notes on clauses
- Short Title
This clause is a formal provision and specifies that the short title of Bill, once enacted, may be cited as the Foreign Acquisitions Amendment (Agricultural Land) Act 2010.
This Act will commence on the day after which it receives Royal Assent.
This clause states that each Act specified as a Schedule to this Act is amended or repealed as set out in the relevant Schedule.
- Schedule 1 - Amendments about interests in Australian agricultural land
Item 1 inserts definitions into Section 5 of the Foreign Acquisitions and Takeovers Act 1975 .
Currently, there are definitions for Australian rural land and urban land.
Under this Bill, "Australian agricultural land" is defined as "land situated in Australia that is used predominantly for carrying on a business of primary production".
This is to set agricultural land apart from rural land and urban land.
This section also inserts definitions for "Australian agricultural land corporation" and "Australian agricultural land trust estate".
Item 2 adds "Australian agricultural land" into the reference for when a person is proposing to acquire an interest in Australian land.
Item 3 inserts into section 12C a definition for an "interest in Australian agricultural land", detailing that it means either a legal or equitable interest in Australian agricultural land; interest by way of shares in a company that has access, management, oversight of the land or which it makes a profit from; interest as a lessee or licensee which entitles that person to occupy Australian agricultural land; interest by way of arrangement, corporation, trust or a share of a corporation with connections to a trustee.
This section also provides for how a person acquires an interest in Australian agricultural land - whether it is acquired jointly or has previously acquired an interest or it is an increase in the amount of existing interest in Australian agricultural land.
It further states that, for the purposes of this Act, a person shall not be considered to have acquired an interest in Australian agricultural land if the person has done so as security for the purpose of a moneylending agreement, by will or if it has been acquired from the Commonwealth, a State or Territory, a Commonwealth, State or Territory corporation or a local governing body.
Subsection (5) states that, under this Act, where regulations do not apply (with respect to foreign state-owned entities), this Act similarly will not apply, regardless of the land size. That is, foreign state-owned entities continue to be required to apply for investment as per the current regulations.
Item 4 of this Schedule inserts after section 13D further definitions around what constitutes an Australian agricultural land corporation and Australian agricultural land trust estate.
Item 5 inserts into the Act provisions around acquisitions of interest in Australian agricultural land by foreign persons and what considerations the Treasurer must have in relation to investment in Australian agricultural land by a foreign person, which is defined as being either a foreign corporation in which a natural person is not ordinarily a resident in Australia and where two or more persons who are not ordinarily residents of Australia, hold an aggregate substantial interest.
New subsection 21B(2) states that where the Treasurer is satisfied that a foreign person proposes to acquire an interest in Australian agricultural land which is greater than 5 hectares in area, and the proposed acquisition would be contrary to the national interest, the Treasurer may make an order prohibiting the proposed acquisition.
This extends such that the Treasurer may also make an order in relation to the proposed acquirer, directing that that person either as a corporation or individuals associated with that corporation shall not acquire any interest in the land.
Under subsection 21B(4), the Treasurer may also make an order to direct a foreign person to dispose of their interest if the Treasurer is satisfied that Australian agricultural land was acquired contrary to the national interest.
This item also inserts into the Act the national interest test to be applied against proposed acquisitions of interest in Australian agricultural land.
Currently, a national interest test is applied under Foreign Investment Policy as matters to be considered.
This amendment will insert the test into legislation, incorporating the existing guidelines and adding particular criteria to be considered.
Under the new 21C, the Treasurer must have regard to national security issues; any impact on competition and global industry or market outcomes; any impact on Australian tax revenues; any impact on the Australian economy or community; and the character of the investor.
Within these considerations, particular criteria has been applied for consideration, but is not limited to, whether the acquisition will or is likely to benefit Australians by way of the creation of new job opportunities, the introduction of new technology or business skills into Australia or increased processing in Australia of primary products, for example.
This is a more expanded version of the current national interest test which exists in policy guidelines only, and will ensure that the Treasurer must have regard to each of these factors.
Item 5 also inserts the requirement for information about acquisitions of interest in Australian agricultural land to be published and updated on the Treasurer's website.
This information must include the following information:
- details identifying the person intending to enter into the agreement
- the country of residence or place of business of the person
- the amount of the proposed investment
- the sector of the agricultural industry to which the interest in agricultural land relates and;
- any other information as prescribed by regulations.
Items 6, 7, 8, 9 and 10 are consequential amendments, amending numbering in this Act in line with the amendments inserting "Australian agricultural land" into sections of the Act.
Item 11 sets out penalties whereby a foreign person enters into an agreement by which they acquire an interest in Australia agricultural land and did not, before entering into the agreement, notify the Treasurer, that person is guilty of an offence and is punishable, on conviction, by a fine or a period of imprisonment.
Item 12 is a consequential amendment, amending numbering in this Act to refer to "Australian agricultural land".
Under Item 13, a clause is inserted after subsection 35(4A) which relates to orders that may be made by the Courts in relation to the acquisition of Australian agricultural land, including
Item 14 is a consequential amendment, amending numbering in this Act in line with the amendments.