DON’T expect the newly announced rules for foreign investors buying into farmland to mean a clamp down on overseas buyers flocking to Australia.

Farm sector analysts and advisors say the only notable potential hurdle ahead for overseas buyers hunting for hectares is the increased workload facing the Foreign Investment Review Board (FIRB) and the Australian Taxation Office.

Unless there are some notable changes planned for FIRB’s national interest test assessment, farmers can probably expect just as many land and agribusiness sales to offshore owners after March 1 as beforehand.

“FIRB has never knocked back an agricultural land sale to overseas buyers on national interest grounds, as far as I’m aware,” said Australian Farm Institute executive director Mick Keogh.

“Some people see the government’s changes to its scrutiny of investors as a restriction on foreign buyers, but I don’t see much changing unless components in the national interest test are tightened up.”

National interest categories considered by FIRB can range from assessing the character of a potential investor or business (for example has it been identified with money laundering or ill-gotten gains) to whether it may have a negative impact on local market competitiveness or defence sensitivities.

Last week Prime Minister Tony Abbott confirmed the national interest test was broad-ranging and rarely led to applications being rejected.

“Nevertheless, it is important that we ask ourselves: is this in the overall national interest?” Mr Abbott said.

“That question may embrace things like does this involve more jobs, more tax revenue, does it involve better utilisation of our country for Australia’s benefit as well as for the benefit of the foreign investors?”

Mr Keogh felt the long-promised foreign investment register of overseas owners of farmland in Australia was likely to be a more interesting and useful development, assisting the government and agribusiness to better understand the foreign investment issue.

His sentiments were shared by director with strategic business research, restructure and insolvency business PPB Advisory, Ben Craw, whose firm guides many rural sector sales to local and offshore investors.

“If the data collected by the ATO is transparent to the public it will be very important in highlighting trends and patterns and sources of investment in different areas of the industry,” he said.

“I think there may be a lot of surprises about who is actually investing – for example quite a bit more activity from Korea, the US and private business money from China than people expect.”

Mr Craw said the extra work involved in compiling the asset register should not disrupt investment activity, but he hoped the extra FIRB processes would be receive appropriate resources.

“If a transaction is awaiting approval it could impact on the availability of capital or have implications on debt management – you want to get your capital working as quickly as possible.”

He said off-shore farm sector investors had tended to fall into three categories.

Asian investors were more likely to be trade sector buyers wanting direct access to milk or meat production and processing operations, while notable North American interest came from hedge funds and European and UK investors were likely to be sovereign funds and family trust groups.

But regional director with valuation and market advisory firm CBRE Agribusiness Danny Thomas believed pension and endowment funds and family trusts may be deterred from investing in land in Australia because of potential additional risks and uncertainty around completing a transaction swiftly.

“The FIRB approval process already extends sale and settlement periods and there is now a real risk for vendors in an exclusive arrangement with a foreign purchaser under the new approval regime,” he said.

“It’s difficult to see who of the active and aspirational foreign investors will view this change as anything other than dispositive, particularly in light of the meagre threshold which has been adopted.

“A $15 million limit will capture a high proportion of transactions, so this new threshold will be viewed as a sovereign risk issue, which historically had been our advantage over other countries.”

Partner with international law firm King and Wood Mallesons, Malcolm Brennan said the new land valuation threshold was as expected, but he was “watching with interest” to see more detail about the agribusiness threshold, likely to be $53m.

“The changes will mean a significant uplift in the number of applications to the FIRB so it will be important they are properly resourced to manage this,” he said.

“This is particularly important as FIRB is likely be given an additional policing role following the recommendations of the recent inquiry into foreign investment in residential real estate.”

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