Publications / Taxation
WHO SHOULD READ THIS
- Foreign investors (both private and public) who hold or plan to acquire Australian landholdings.
THINGS YOU NEED TO KNOW
- Further legislative guidance has been released in relation to the definition of agricultural land, which impacts on whether a foreign investor is required to register their interest with the Australian Tax Office.
WHAT YOU NEED TO DO
- Consider whether these changes mean that you are required to notify the Australian Tax Office of your agricultural land holdings.
The Register of Foreign Ownership of Agricultural Land Bill 2015 was passed by parliament on 11 November 2015 and is expected to take effect from 1 December 2015. This legislation seeks to implement the changes to the Australian Foreign Investment Policy introduced in June 2015 by the Foreign Investment Review Board (FIRB).
Under the new Bill all foreign persons that hold any interest in agricultural land are required to register that interest with the Australian Tax Office (ATO) by 31 December 2015. Interests acquired by foreign persons after 1 December 2015 must be registered with the ATO within 30 days of the acquisition.
What is ‘agricultural land’?
The registration requirements apply to ‘agricultural land’, a concept newly introduced and defined in the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 (Act) as ‘land in Australia that is used, or that could reasonably be used, for a primary production business’. This is an extremely broad definition and could be interpreted to extend to land that would not ordinarily be considered agricultural land, including land relating to mining and exploration. However, as part of a suite of foreign investment legislative reforms, the government has also released an exposure draft of the Foreign Acquisitions and Takeovers Regulations 2015 (Regulations), which seeks to provide further guidance on what constitutes agricultural land by specifying certain kinds of land that are not considered agricultural land.
Types of land that do not constitute agricultural land
Under the exposure draft of the Regulations (which has not yet been adopted, but is also expected to come into force on 1 December), land will not be considered agricultural land if:
- it is not being used wholly or predominantly for a primary production business; and
- it falls within one or more of the exempt land categories set out below.
Land whose zoning requires approval for primary production businesses
The exemption applies to land, if the use of that land for a primary production business requires the approval of a government authority (including the Commonwealth, a State or a Territory, a Commonwealth, State or Territory body or a local governing body). If there are one or more primary production uses which do not require government approval, the land remains agricultural land.
Similarly, the exemption also applies to land:
- where an application has been made to a government authority for:
- the land to be rezoned as land which does not allow use for a primary production business;
- approval for a mine, oil or gas well, quarry or other similar operation under a mining or production tenement to be established on the land; or
- approval for waste from a mining operation to be stored on the land; and
- where the application has not been finally determined and the application has not been withdrawn.
Land used in relation to mining operations
The exemption applies to land:
- used wholly or predominantly for a mining operation or to store waste from a mining operation; or
- where an approval of a government authority (other than mining or production tenement) is in force that allows a mining operation to be established or operated on the land, or waste from a mining operation to be stored on the land.
Land used for protecting or conserving the environment
The exemption applies to land that is:
- used under a law of the Commonwealth, a State or a Territory or a legally binding agreement, wholly or predominantly for the purposes of the protection or conservation of the environment; or
- wholly or predominantly used for the purposes of a wildlife sanctuary or for rehabilitating animals.
Land within industrial estates
The exemption applies to land that is located within an area that has been approved by a government authority as an industrial estate (such as for manufacturing, assembling, repairing or renovating goods, undertaking industrial trades such as selling, leasing or servicing goods or materials for industrial, agricultural, or construction purposes, or other similar purposes).
Small areas of land
The exemption applies to land that has an area of one hectare or less.
Tourism, education and outdoor recreation facilities
The exemption applies to land that has been approved by a government authority for use as a tourist facility, an outdoor education establishment or an outdoor recreation facility (such as a golf course or equestrian facility).
Primary production businesses relating to submerged plants and animals
There is also a general exemption, which provides that land used for various forms of aquaculture will not constitute agricultural land.
The deadline for registering agricultural land interests with the ATO is looming. Foreign investors should carefully consider the latest guidance provided on the definition of agricultural land to consider whether their landholdings are subject to compulsory registration with the ATO. As a starting point, thought should be given to whether particular land is ‘agricultural land’ for the purposes of the Act or could fall within one of the exemption categories set out in the Regulations.
It is also important to understand the implications of characterising land as ‘agricultural land’ for the purposes of the proposed new FIRB notification and approval regime that is expected to commence on 1 December 2015.
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.