The first report of the Register of Foreign Investment of Agricultural Land is in. What does it reveal - and what next?
Since 1 July 2015 foreign persons have had to report interests they hold in agricultural land (regardless of value) to the ATO. The data provided is used to create and maintain the Register of Foreign Ownership of Agricultural Land. The ATO is required to publish annual reports on the Register, with the first report published on 7 September 2016.
So how much has been bought?
As at 30 June 2016, foreign persons held 52.147 million hectares of agricultural land, amounting to 13.6% of all agricultural land in Australia. The percentage of foreign ownership was highest in NT (30.1%), followed by Tasmania (21.8%), SA (15.6%), Queensland (13%) and WA (10.9%). NSW/ACT and Victoria came in at 4.1% and 5.1%.
Top investment sources
UK (27.5 million ha, 53% of foreign owned agricultural land) and US (7.7 million ha) entities head up the list of foreign investment sources. They're followed by... the Netherlands (3 million ha) and Singapore (1.9 million ha). China's 5th at just under 1.5 million ha (2.8% of foreign owned agricultural land).
Investment sectors
92% of the foreign owned agricultural land which was characterised by sector is used for livestock (unsurprisingly, considering the large Northern stations). The next most heavily represented sectors are cropping (3%) and forestry (2.8%).
The size of the UK portion of foreign investment is largely down to the interests of UK investors in the largest cattle station aggregations (including Kidman - yes, the Kidman properties are already owned by a foreign person).
Report limitations
The report is reliable - within its scope. Data provided by foreign persons is validated by the ATO, including through the use of data sourced from FIRB and other government agencies and risk algorithms. To protect the privacy of land holders, the details of the identity of the foreign investors cannot be reported.
"Foreign person"
The Register is necessarily limited by definitions. The report concerns ownership by "foreign persons" as defined in the Foreign Acquisitions and Takeovers Act, including Australian registered companies in which a foreign individual, corporation or government holds an interest of 20% or more. So a "foreign person" may in fact be majority owned by Australian investors.
"Agricultural land"
As well as freehold land, the Register includes land which is leased to (and even licensed by) foreign persons, for a term (including options) of 5 years or more. Most of the "foreign owned" land in the Register (82%) is not actually owned by foreign persons - it's leased (or licensed). Having said that, the leased land would predominantly be long-term (and sometimes perpetual) pastoral leases. The report doesn't break down the forms of tenure in any detail.
It's all about size
The Register (and the report) provides general statistics on the area of land owned by foreign persons. The size of the Northern pastoral stations (which tend to be comparatively low value, unproductive land) skews the data.
There is nothing in the report on the value of the land held by foreign persons, or on the value of the investment by foreign investors in agricultural land (and enterprises and infrastructure more generally). That sort of information might provide a more useful indication of how the national interest is served by foreign investment in agricultural land.
Assessment of the report
The Register and the statistics reported from it do increase scrutiny and transparency but the utility of the report is questionable and the transparency could be improved. The Register itself is not publicly accessible and although information on the market value of the land held by foreign persons is collected, no data on value was included in the report.
Reactions to the report have varied within the government, with the Treasurer saying the report provides "a clear picture of foreign ownership" and shows that 85% of Australian farms remained owned by Australians. Agriculture Minister and Nationals leader Barnaby Joyce, on the other hand, described the report as providing basic transparency to "ensure oversight and confidence" and observed that the area of foreign owned agricultural land was "more than two times the size of Victoria" and that the level of foreign ownership has increased from 11% in 2011 to 13.6% now.
Farming groups have welcomed the report, with the National Farmers Federation chief executive Tony Maher saying that the report is an important first step to addressing community concerns about foreign investment in agriculture, which is vital to addressing the severe capital shortfall faced by the sector. However Mr Maher called for greater transparency on the value of foreign investments, the details of buyers and the location of foreign investments.
What happens next?
Another register - water entitlements
The Agricultural Land Register lapses unless legislation to establish the Register of Foreign Investment of Water Entitlements is in place by 1 December 2016. The Water Register will utilise the same regulatory framework as the Agricultural Land Register - similar requirements to notify the ATO of ownership of water entitlements and requirements that the ATO report statistics.
It is proposed that a foreign person who holds a water entitlement on 1 July 2017 will have until 30 November 2017 to notify that interest to the ATO. "Water entitlements" will be defined as an irrigation right and a water access right, but will exclude water access under stock and domestic rights and riparian rights.
Prospect of more detailed reporting
It may be that we'll see more detailed reporting of the information in the Agricultural Land Register, perhaps with some information on the value of foreign investment, in the future.
RELATED KNOWLEDGE
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
