Implementation and drafting considerations
This chapter looks at the criticism of the bill by the Scrutiny of Bills
Committee and the Department of Treasury.
Scrutiny of Bills Reports
Possible severe penalty
The Scrutiny of Bills Committee identified two areas of concern with the
- a possible severe penalty for those who acquire agricultural land
without approval; and
- insufficiently defined administrative powers assigned to the
Treasurer to make an order prohibiting acquisitions greater than five hectares
that are deemed contrary to the national interest.
Senator Xenophon responded to the committee's concerns and outlined that
the penalty provision applied in the bill (under item 11) is consistent with
Section 26A of the Foreign Acquisitions and Takeovers Act 1975 (FATA)
where a person acquires 'Australian urban land' without approval. In regards to
the administrative powers assigned to the Treasurer, Senator Xenophon outlined
that the provisions in the bill are consistent with the FATA as applied to
'Australian urban land' in Section 21A.
Technical aspects of the bill and drafting considerations
Treasury raised a number of drafting issues with the bill: regulatory
exemptions; the definition of Australian Agricultural Land (AAL); the creation
of a second national interest test within the same legislation; powers of the
Treasurer and notification requirements relating to AAL transactions; and other
more minor technical issues relating to the inconsistent use of language within
the bill and the FATA.
The FATA provides a varying degree of screening sensitivity according to
the category of investment once a notification occurs. Under section 26A,
foreign investors must notify all interests in Australian urban land. The FATA
does, however, provide for specific notification exemptions under the Foreign
Acquisitions and Takeovers Regulations 1989 (the Regulations). The list of
regulations is lengthy, and includes exemptions that are closely linked to the
activities of Australians such as spousal joint tenancy acquisitions where the
corporate owners are Australians but not ordinarily resident in Australia.
Treasury highlights that the bill appears to 'remove the possibility of
regulatory exemption for all rural land transactions above the 5 hectare
Definition of Australian
The FATA uses the concept of 'rural land' defined as land that is used wholly
and exclusively for carrying on a business of primary production. Land that
is not considered as AAL is defined as Australian urban land (AUL) and assessed
under the FATA accordingly.
Treasury highlighted how the new definition of AAL could be problematic:
Amendment 1 introduces a new definition of Australian
Agricultural Land (AAL) as being land situated in Australia that is used
predominantly for carrying on a business of primary production. This
distinction is problematic. It creates an obvious overlap between AAL and AUL,
the latter of which is regulated differently within the FATA; AUL would not be
subject to the same national interest test or publication requirements as is
proposed for AAL.
Powers of the Treasurer and
notification requirements relating to AAL transactions
Treasury raises the same concerns as the Scrutiny of Bills Committee in
relation to insufficiently defined administrative powers of the Treasurer in
the bill. Treasury acknowledges that section 21B is very similar to section 21A
of the FATA relating to AUL (as discussed in Senator Xenophon's response to the
Scrutiny of Bills Committee). Treasury, however, detail possible issues with
the proposed administrative powers of the Treasurer:
The restriction in s 21B(2)(a) that the Treasurer can only make
an order prohibiting the proposed acquisition where the agricultural land is
greater than 5 hectares seems inconsistent with the ability of the Treasurer to
make an order directing a foreign person to dispose of an interest under s
21B(4), which is not limited to interests in AAL greater than 5 hectares. If the
intention is that the Treasurer's powers only apply to acquisitions greater
than 5 hectares then s 21B(4) may need to be changed to reflect this.
Likewise, the requirement to give notice under the new s 26B
proposed by the Bill does not appear to be limited to applications relating to
the acquisition of interests in AAL greater than 5 hectares. The result is that
the Treasurer would receive notices of acquisitions of less than 5 hectares but
would not be able to make an order prohibiting them. If the intention is that notices
would not be necessary for acquisitions less than 5 hectares, s 26B would need
to be changed to reflect this.
Transitional provisions and
Treasury outlined that section 12D(1)(c) of the bill, defining an interest
as a lease greater than five years, appeared to be redundant:
Section 12D of the Bill appears to be modelled on, and is
very similar to s12A of the FATA, which relates to AUL. Subsection 12D(1)(a) does
not contain an exception for a lease or licence as s 12A(1)(a) does. The effect
is that all leases or licences of Australian agricultural land will be covered.
Treasury also drew attention to the need to examine transitional
provisions relating to the proposed amendments of the FATA, and general issues
in the bill relating to drafting convention:
There are a number of other examples where the Bill seeks to
mirror the treatment given to AUL in the FATA in various provisions relating to
AAL. This is not unreasonable in principle, given the structure of the existing
legislation and the way it has provided for urban land as separate from
business acquisitions. However, there are a number of instances where problems
have arisen in the drafting.
The committee is concerned with the issues raised by the Scrutiny of
Bills Committee and Treasury. The committee recommends that the Explanatory
Memorandum and the bill be amended to sufficiently define the powers of the
Treasurer, and address any inconsistencies with the FATA before further consideration
by the Senate.
4.11 The committee recommends that the bill not be passed.
Senator Annette Hurley
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