Is Australia’s current policy approach to foreign investment:
1) opening Australia for business with the international community; or
2) keeping Australian rural assets out of the hands of the international community?
The answer, confusingly, is both. The government has signed historic free trade agreements with China, Japan and Korea, our neighbours in the region which are designed to encourage growing trade engagement with these countries. In contrast, the government has taken steps to protect Australian agribusiness from foreign ownership (and potentially competition) by its recent proposal to change the review thresholds for investment in Australian agricultural land.
The recent changes to the foreign investment review board’s mandate have left the Australian agricultural sector with a complicated two, three or four tier system. Privately owned investors in the agricultural land sector from Chile, New Zealand and the United States (countries with which Australia has a ‘high threshold FTA’) will only be subject to FIRB review when the investment exceeds to $1.094 billion dollars (indexed annually). In contrast investors from our most recent ‘high threshold FTA’ signatories: China, Japan and Korea, will be subject to the new review threshold which kicks in at a $15 million. In addition, Singaporean and Thai investors will require approval after $55 million of investment. The threshold is cumulative based on the investor’s entire holdings within Australia. The same $15 million threshold will apply to all other non-government foreign entities investing into agricultural land (down from $252 million). In addition the government has announced that as of 1 December 2015 a $55 million threshold for review will be introduced for investment into agricultural businesses for investors outside of Chile, New Zealand and the United States. According to the Treasurer legislation will be passed in the spring session to allow the ATO to assist the government in cracking down on investors who fail to follow the new processes.
The government’s changes to FIRB thresholds will increase the regulatory burden on foreign investors, despite the recent FTAs and may cause some investors to reconsider any involvement in Australian agribusiness. All these thresholds are consistent with Australia’s FTA obligations but it highlights that the existence of FTAs adds further confusion to this area and needs to be carefully considered. Adding to the confusion is the fact that these FIRB thresholds stem from a 1 March 2015 policy update (which identifies investment categories that need to be reviewed by the government even if it appears the relevant legislation or regulations do not apply) as well as a 2 May 2015 joint announcement of the Treasurer and Prime Minister. The 2 May 2015 announcement was given shortly after the 30 April 2015 announcement that in light of encouraging amounts of foreign investment “Australia was open for business”. Competitiveness and confusion go hand in hand it seems. Feedback on the threshold changes has been sought and it is hoped this will inform a uniform statement of policy in the upcoming agriculture white paper.
Protecting rural assets from foreign investment will always receive a level of public support in Australia but as the agribusiness industry is one that is poised for growth, a confused policy approach risks putting on the brakes. A white paper into competitiveness in the agriculture sector has been commissioned by the government. Public consultation ended in December 2014 and the white paper is due later in 2015. We but hope that the white paper will provide a clear statement of the government’s policy in respect of the agribusiness industry.