Australian rural land – changes to foreign investment thresholds

Articles Written by David Colenso (Partner), Carrie Follas (Partner)

Key takeaways

As predicted, the Federal Government has acted on an election promise to lower the screening thresholds for foreign buyers of Australian rural land effective from 1 March 2015.

The new threshold for foreign purchases of rural land, which will now be subject to approval by the Foreign Investment and Review Board (FIRB), is $15 million, down from the current threshold of $252 million.

The changes are expected to apply to all foreign investors including prescribed investors from China, Japan, South Korea and Chile. The new threshold was included in the recently signed free trade agreements entered into with those countries. The new threshold will not apply to the treaties already in place with the United States and New Zealand where investors from those countries will continue to benefit from the $1,094 million threshold. There are no changes to the foreign government investor regime threshold.


The changes were predicted following the government’s election promise to make it harder for foreigners to buy Australian rural land. The new lower threshold now places the majority of rural land purchases under FIRB scrutiny.

Rural land is “land used wholly and exclusively for the carrying on of a primary production business”. The definition of primary production business is taken from the Income Tax Assessment Act 1997 and refers to production resulting from the cultivation of land; animal husbandry/farming; horticulture; fishing; forestry; viticulture or dairy farming.

FIRB advises that “primary production” for the purpose of the rural land definition does not include hobby farms, 'rural residential' blocks or land used for mining or stock agistment.

Importantly, there will be accumulative threshold test so that once a foreign person owns or is proposing to purchase additional rural land with a total value in excess of $15 million, FIRB approval of the acquisition will be required. This is the first time that a cumulative value threshold has been applied under Australia’s foreign investment regime.

Currently, it is unclear how the cumulative threshold rule will apply. Will it be retrospective capturing the value of all previous purchases of rural land and what happens if land is sold, does the cumulative value of a foreign person’s rural landholding decrease?

Foreign Ownership Register

The government has also announced that it will act on a promise to establish a Foreign Ownership Register of rural land. Interestingly, the Australian Tax Office will have the job of monitoring foreign ownership of rural land and maintaining the register rather than the FIRB. We expect that the existing definition of foreign person under the Foreign Acquisitions and Takeovers Act 1975 will be applied for the operation of the new register.

The government has signalled its intention to lower the thresholds for some time. There were clear pointers to the government’s intention to lower thresholds - the government’s announcement in August 2012, a Senate Committee Report in June 2013 and the recent signing of Australia’s Free Trade Agreements with Japan, South Korea, China and Chile.

How will it affect foreign investors?

There will be a large increase in the number of applications to be considered by FIRB when the new thresholds take effect on 1 March 2015. The lower threshold and the cumulative threshold regime will mean a much larger number of foreign investors will be required to seek approval for their acquisitions of rural land. This will impact on the timing of transactions and will need to be factored into the documentation by parties. An interesting question is whether FIRB will be adequately resourced to cope with the number of extra applications. Time will tell.

What else is proposed?

The government is also considering the recommendations of the Parliamentary Committee, which reviewed foreign investment in the residential sector.  It has flagged tighter scrutiny of overseas buyers and greater enforcement of the current restrictions in this sector. Watch this space.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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