Publications / Food and Agribusiness

27 Jun 13
Senate releases final report on ‘national interest’ test for foreign investment

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Since July 2011, Australia’s Senate Standing Committee on Rural and Regional Affairs and Transport (Committee) has been examining the application of the ‘national interest test’ to purchases of Australian agricultural land by foreign entities. The Committee was due to report in late 2011 and after several extensions of time and an interim report in late 2012, the much anticipated final report was tabled in the Senate on 26 June 2013 (co-incidentally just hours before the Rudd and Gillard leadership vote).  In this must read article Partner Janelle Moody examines the final report.


The terms of reference of the Committee included how the national interest test was applied to the acquisition of agribusinesses by foreign entities; the obligations of Government and regulators under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA); Australia’s food security; and how other equivalent countries’ national interest tests work.

The Committee’s interim report recommended the Government review and make amendments to Australia’s taxation regime to capture potential tax revenue leakage, particularly from foreign investment for food security purposes.

Key recommendations by Committee

The final report contains 29 recommendations (together with 6 recommendations from the interim report).   Broadly, these final recommendations fall under the following categories:

  • the review of the regulatory framework for foreign investment in Australia (taking into account the international trends in foreign investment regulation)
  • the global context of food security and foreign investment
  • the need for a register to plug information gaps regarding foreign investment in Australian agriculture
  • the scrutiny and transparency of FIRB in applying the national interest test, and
  • changing the foreign investment review thresholds for private investors.

The Essentials

If these recommendations are adopted, Australia will continue to welcome foreign investment.  However we think the essentials for foreign investors to consider are:

  • that FIRB approval will continue to be a process to be addressed and managed at an early stage as part of the overall transaction planning.  The form and content of applications will need to be revised and tailored for each transaction to ensure transparency and to address key areas including transaction structure, purpose of the acquisition, commerciality and the effect on community and economy
  • for government owned investors there are no changes to the thresholds - approvals will still be required for direct investments in Australia (including agricultural land and businesses) regardless of value
  • new definitions of ‘rural land’ and ‘urban land’ combined with reduced monetary thresholds and the proposed new requirement to seek approval once cumulative acquisitions reach $15 million will affect more acquisitions by private investors and particularly mining companies purchasing a number of parcels of agricultural land (such as those typically made for land access, buffer zones and environmental offsets)
  • the new register may require disclosure of complex company structures through to the ultimate owners, and
  • changes to the tax legislation to address tax revenue leakage (with perhaps greater information sharing and consultation between FIRB and the Australian Taxation Office).

Australia’s regulatory framework and the international trends

The Committee appreciated that foreign investment has been an important feature of Australian agriculture, providing a key source of capital for growth of the sector. Foreign investment is essential to ensure further development of Australian agriculture and will greatly assist Australian businesses to make the most of future opportunities in the Asia Pacific region.  The Committee believes that with the right agricultural policies, the agricultural sector and the whole Australian economy can benefit greatly.  In order to achieve this, the Committee recommended the establishment of an Independent Commission of Audit into Agribusiness to develop that policy.

The Committee undertook a review of the regimes for foreign investment in agriculture in countries including the United States of America, New Zealand, Brazil, Argentina, China and India. It also considered the possible impacts of international free trade agreements on Australia’s foreign investment regulations (as they often grant higher thresholds, such as those with the USA and New Zealand). The Committee found that Australia’s current framework as per the FATA, related regulations and policy, required a comprehensive update to address the key findings in their report and effectively manage a number of key challenges facing Australian agriculture.

In particular, the Committee considered that the definitions of ‘rural land’ and ‘urban land’ in the FATA require updating to match common meanings of the terms and that in their current form, the definitions have led to the inappropriate classification of land that may be considered for FIRB review. 

Food security

While the Committee noted that genuine commercial foreign investment is always welcome, the growing global food task appears to be leading to a trend of foreign governments and associated entities considering investment in Australia for food security purposes. There is also a concern (as expressed in the interim report) that foreign government owned companies and multinational businesses can use complex structures to minimise their tax liabilities in Australia and erode Australia’s revenue base.

The Committee recommended that the government commission an independent and wide ranging review of Australia’s foreign investment regulatory framework to examine ways to ensure investments in agriculture are made on a genuine commercial basis; do not distort the capital market or the trade in agriculture products; and compete fairly with domestic Australian farms and agribusinesses. 

Information gaps

One of the key findings of the report was the significant lack of details and accurate information regarding foreign investment in the Australian agricultural sector. The Committee noted the Government had made some progress towards a register for foreign investment in agricultural land (although since seeking submissions in November 2012 nothing further has been released by Treasury). The Committee strongly supports the register and sets out in the final report several recommendations as to the scope and features to be included in that register. They decided an initial stocktake of foreign ownership of agricultural land, agribusiness and water entitlements is required. It needed to also take into account complex company structures including foreign trusts, ‘shell companies’, foreign mining companies, debt structuring and ultimate liability.

The Committee hopes that publication of the register will provide a more informed debate and assist to address some myths surrounding foreign investment in Australia. It was noted however, that the definitional aspects of ‘rural land’ would need to be finalised in order to implement an effective register. It was also considered that participation in the register would need to be a legal requirement with mechanisms for failure to comply, but that there should be no minimum threshold for reporting however,  data should be collected in a way that can be appropriately categorised.

Scrutiny and transparency of national interest test

The Committee found shortcomings in the transparency of the FIRB process and in the scrutiny of the national interest test. The Committee was of the view that compliance mechanisms for dealing with any conditions placed on approvals needed strengthening. Case studies on Hassad Australia and Cubbie Station are provided as examples in the report where it was the actions and initiatives of the companies themselves, rather than the FIRB oversight process that helped determine how rigorously the national interest test was applied to the proposed investment.

In line with this, they considered the Government should develop a stronger, more rigorous and transparent system to examine foreign investment cases with forensic examination of:

  • company structures (including management relationships in joint Australian/foreign ventures)
  • the relationship between a foreign government’s acquisition strategy (such as food security) and the commercial operation of their subsidiary businesses in Australia, and
  • ways of setting clear and auditable ongoing undertakings that are in the ‘national interest’.


The Committee was of the view that the current investment threshold for the review of private foreign investment in agriculture was far too high at $248 million. It was also noted that FIRB has limitations to monitor cumulative purchasing strategies (such as those by mining companies for land access, buffer zones and offset areas) which may result in large aggregate holdings of agricultural land. Given the high threshold, the Committee was concerned that potentially large impacts on local economies may fall outside of the FIRB review process. The Committee recommended the policy be updated to define the interests of local economies and communities. Further, they thought that the following thresholds should be implemented:

  • a lower threshold of $15 million for private foreign investment in agricultural land
  • once cumulative purchases of $15 million of private investment in agricultural land has been reached by a private business or associated entities, any further investment by that business or entity be required to receive FIRB approval regardless of value
  • any proposed foreign acquisition of an agribusiness would require approval where investment exceeds 15% or more in an agribusiness valued at $248 million (indexed annually) or exceeds $54 million, and
  • the zero trigger required for the purchase of agricultural land or an agribusiness by a state owned enterprise continue to apply.

The future - what to expect…

As there is an impending election, it is unlikely that the Government implements any of the Committee’s recommendations. However, given the timing of the report, it is likely to be an election issue that will need to be addressed in the respective policy announcements of the major political parties.  It will be a matter for each party to address the need to balance foreign investment in Australian agricultural land and businesses for the benefit of the Australian economy with the management of national interest concerns.

Interestingly, the report is broken down into the majority recommendations of the Committee (covered by this alert), the dissenting report of Government Senators, a minority report from the Australian Greens and comments by Senator Nick Xenophon.  Therefore it would seem the respective policy directions of the various political parties are demonstrated by the report.

Given the increased media attention on FIRB decisions (such as the proposed Graincorp takeover) and the impending election, there remains a strong likelihood of changes in this area after the election. 

We will continue to monitor new developments and foreign investors should ensure they obtain advice regarding any proposed transactions over the next few months. We are able to assist foreign investors navigate the FIRB approval process to ensure it is addressed and managed at an early stage as part of the overall transaction planning. In any event, foreign investors requiring approvals should note that the federal government enters into ‘caretaker’ mode a few weeks prior to the election. FIRB will continue to process applications however some pending decisions by the Treasurer during this period may potentially be delayed.  This potential may need to be factored into the timetable for any proposed transactions and consideration given to lodging at an earlier stage of the acquisition process. 


Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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