Key Points
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The Register of Foreign Ownership of Agricultural Land (Register) has been introduced as a means of increasing the scrutiny and transparency of foreign investment in agricultural land in Australia. |
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It is compulsory for a foreign person as defined below who owns agricultural land to lodge details of that ownership on the Register. Failure to do so by 31 December 2015 will incur penalties. |
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The definition of agricultural land is broad and far-reaching. It includes all land that could reasonably be used for a primary production business. |
This Alert provides further information on the Register and what foreign investors need to be aware of when purchasing agricultural land in Australia. Please click here to view our previous Alert on this topic.
Introduction
The Register was established by the Commissioner of Taxation (Commissioner) on 1 July 2015. It seeks to increase the scrutiny of foreign investment in agricultural land and increase the transparency on the amount of foreign investment in agricultural land in Australia. The Register will achieve this through the collection and publication of statistics relating to foreign investment in agricultural land in Australia.
The Commissioner requires that the following interests in agricultural land held by a foreign person be registered from 1 July 2015:
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newly acquired agricultural land interests, within 30 days of completion of the acquisition; |
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all existing agricultural land interest by 31 December 2015; and |
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within 30 days of an entity ceasing to have an interest in land. |
Foreign Person
The definition of a foreign person is provided for by Australia's Foreign Investment Policy.
A foreign person includes:
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an individual not ordinarily resident in Australia (foreign individual); |
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a corporation in which a foreign individual or a foreign corporation holds a controlling interest; and |
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a corporation in which two or more persons, each of whom is either a foreign individual person or a foreign corporation, hold an aggregate controlling interest. |
Agricultural Land
The Commissioner requires that all interests in agricultural land held by foreign persons be recorded on the Register. Agricultural land is defined as all land that is used, or could reasonably be used for, the use of primary production. It is important to distinguish agricultural land from rural land. The definition of agricultural land has a much broader scope than the definition of rural land ,which only captures land that is wholly or exclusively used for the purposes of primary production.
The concept of agricultural land has a much lower threshold test as it includes land that could reasonably be used for a primary production business. This means that, although land may not currently be used for primary production purposes, if it could reasonably be used for primary production purposes, then the interest holder has an obligation to lodge that interest on the Register.
When considering whether land could reasonably be used for a primary production purpose business, the following factors are taken into account:
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primary uses allowed on the land under its zoning; |
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land use history; |
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land characteristics; and |
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lease or licence limitations. |
Land includes a building or part of a building that is used, or could reasonably be used, for a primary production purpose.
Primary production refers to production resulting from the cultivation of the land. This includes animal husbandry/farming, horticulture, fishing, forestry, viticulture or dairy.
An Interest in Agricultural Land
An interest in agricultural land refers to:
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acquiring a freehold interest; or |
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obtaining or agreeing to enter into a lease or licence where the term, including options to renew, which is likely to exceed five years. |
The Commissioner requires that all interests in agricultural land be registered, regardless of the value of the interest acquired or obtained.
Costs and Penalties
There are no government fees associated with lodging an interest on the Register.
The penalties for failing to register an interest have not yet been finalised.
No penalties will apply from 1 July 2015 to 31 December 2015.
It is important to note that penalties associated with the Register are separate to those associated with Foreign Investment Review Board (FIRB) approval. The normal FIRB rules apply to foreign investment in addition to this new requirement to lodge interests on the Register.
Source: Baker&McKenzie 11/9/15
