The Rural and Regional Affairs and Transport References Committee's
inquiry into the Foreign Investment Review Board (FIRB) national interest test contended
with a major contemporary challenge facing Australia's agricultural industry:
that is, how to encourage foreign investment in Australian agriculture while
managing it in the best interests of the industry and the nation. The committee
welcomes the significant wealth and job creating benefits that foreign
investments can bring to the Australian economy as well as to the continued
development of the agriculture sector. The committee unequivocally supports
foreign investment in Australia that is commercial in nature, improves local
and national agricultural markets, and competes fairly with domestic
However, the committee also notes the concerns of many of Australia's
rural and regional communities that certain recent trends in foreign investment
in Australian agriculture that may not be consistent with Australia's national
The evidence before the committee suggests that the current community
concerns regarding foreign acquisitions of Australian agricultural assets stem
- the increasing pressure created by the growing global food task;
a lack of transparency about the FIRB national interest test; and
- major information gaps about the levels and types of foreign
investment in Australia.
The global food task appears to be leading to an increasing trend of
foreign governments considering investment in Australia for food security
purposes, while at the same time the lack information about foreign investment
undermines public confidence in how this issue is governed. The inadequacies of
the Foreign Acquisitions and Takeovers Act 1975 (FATA) to deal
with contemporary practices in foreign investment have exacerbated these
Therefore, based on the evidence before the committee, this final report
of the inquiry discusses the key issues of:
- the regulatory framework for foreign investment in Australia and
the international trends in foreign investment regulation;
- the global context of food security and foreign investment;
major information gaps regarding foreign investment in Australian
- the scrutiny and transparency of FIRB's application of the
national interest test;
the foreign investment review threshold; and
- the role of foreign investment in future agricultural
developments through the case study of the Ord irrigation area in northern
The issue of tax arrangements and foreign investment in agriculture was examined
in detail in the committee's interim report which made five recommendations
specifically about Australia's taxation framework.
Although the tax issue will not be discussed in depth in the body of this final
report, because it is an ongoing interest for the committee, it is outlined
In addition, the committee notes that the government introduced a new
visa category called the 'significant investor visa' effective from 24 November
2012. The Department of Immigration and Citizenship notes that the:
...purpose of the visa is to provide a boost to the
Australian economy and to compete effectively for high net worth individuals
seeking investment migration. Migrant investors will be required to invest AUD 5
million into complying investments for a minimum of four years before being
eligible to apply for a permanent visa.
The committee has not had the opportunity to examine the implications of
this visa, however the committee has concerns that it may have the potential to
distort markets. Further information about the visa has been included in Appendix
Conduct of inquiry
On 6 July 2011 the Senate referred the matter of the examination of the
Foreign Investment Review Board national interest test to the Rural and
Regional Affairs and Transport References Committee for inquiry and report. The
terms of reference are available in Appendix 1.
The committee advertised the inquiry in the Australian, on the
committee's website, and invited submissions from peak bodies, government
departments and relevant agricultural companies.
The committee received 35 submissions which are published on the
committee website (see Appendix 2). The committee held public hearings in
Canberra, Perth, Kununurra, and Sydney (see Appendix 3) and conducted
several site visits in northern Western Australia on 10 and 12 April 2013.
Overall, the committee examined evidence from a wide variety of industry
bodies, government departments, small and large agricultural businesses, and
The committee tabled a substantial interim report for the inquiry on
28 November 2012. The interim report focussed on the taxation arrangements
of foreign investment in Australian agriculture and noted evidence received by
that time regarding the global food task and the out-dated nature of the FATA.
The interim report made six recommendations in total: relating to Australia's
tax arrangements for foreign investment (including tax revenue leakage and
transfer pricing, tax on capital gains and passive income, and tax barriers to
domestic capital investment in agriculture); and the need to update the FATA.
These recommendations are reproduced at the beginning of the report.
While the issue of tax arrangements for foreign investment in
agriculture is primarily considered in the interim report rather than this
final report, such tax arrangements remain an ongoing concern for the
committee. Therefore, the committee reiterates its recommendations regarding
the taxation arrangements for foreign investment contained in the committee's
The committee notes and welcomes the recent progress that the Government
has made in this area, including the review of transfer pricing legislation.
The committee notes that tax revenue leakage due to the practices of
multinational companies has been identified as major concern in other
countries. Furthermore, the committee notes that international organisations
including the Organisation for Economic Co-operation and Development (OECD) and
the G20 are seeking to address this issue and that Australia has been actively
engaged in these international processes.
However, the committee considers that tax arrangements for foreign
investment should remain an ongoing priority for the Government and that
significant reforms are still required.
The committee recommends that the government further strengthen
Australia's tax regulations in order to protect against the erosion of Australia's
tax revenue. In particular, the government should develop more rigorous
approaches to prevent tax revenue leakage that may occur due to the business
structures and practices used by foreign investors in relation to:
thin capitalisation; and
- any other relevant tax mechanisms.
The committee also recommends that the government continue to work
towards international reforms to address tax revenue leakage, including issues
relating to transfer pricing. The committee notes the current progress by the government,
the OECD and the G20 in this area and urges the government to continue pursuing
international taxation reforms through these organisations.
The committee acknowledges the many individuals and organisations that
made contributions to the inquiry through submissions, providing briefings, hosting
site visits or appearing as witnesses to the inquiry.
Note on references
References to Committee Hansard are to the proof versions. Page numbers
may vary between the proof and official version of the Hansard.
Previous Senate inquiries
In the years preceding this inquiry there have been two key reviews of
foreign investment in Australia by senate committees that are relevant to the
current inquiry. The first, in 2009, was by the Senate Economics References
Committee which conducted an inquiry into foreign investment in Australia by
sovereign wealth funds and foreign state owned corporations.
The majority report of that inquiry included three recommendations about
foreign investment in Australia. The first recommendation stated that FIRB should
improve its communication of the national interest test.
The result of this was that the government publicly released the Australian
Foreign Investment Policy (AFIP) for the first time in June 2010.
The final recommendation of that report was that the government tighten
the FATA to deal with cases where complex transactions were used to target
strategic assets (below the 15 per cent review threshold) and that FIRB should
'give adequate consideration to the interaction between the various components
of an acquisition'.
Although the government response stated that existing legislation covered the
acquisition of small (less than 15 per cent) strategic assets, the government introduced
amendments which led to the Foreign Acquisitions and Takeovers Amendment Act
2010 to clarify that 'convertible notes and similar instruments will be
treated in a similar fashion to shareholdings for the purposed of the foreign
The second Senate report was tabled in June 2011 as the Senate Economics
Legislation Committee reported on its inquiry into the Foreign Acquisitions
Amendment (Agricultural Land) Bill 2010. The bill sought a number of changes to
the FATA including:
- that the national interest test be formalised in legislation and listing
the factors that must be considered by the Treasurer in conducting a review of
- shifting the threshold of the FIRB review of purchases in
agricultural land from a monetary threshold to a review of any purchases
greater than five hectares; and
- publishing the applications for interest in agricultural land.
Structure of the report
The remaining five chapters of this report discuss the current framework
for foreign investment in Australian agriculture and the evidence presented to
the committee about possible changes to this regime.
Chapter two examines the growing global food task and the international practices
towards the foreign investment in agriculture in order to provide the context
for Australia's management of foreign investment in the future. First, the
chapter notes the benefits of foreign investment for Australian agriculture and
then moves on to outlining the growing issue of global food security based on
future population growth in the coming 50 years. It also discusses the
challenges and opportunities that this provides for Australia's agricultural
industry and national interest and evidence the committee received for a
possible way forward. Second, the chapter outlines regulatory and policy
responses to foreign investment in agriculture for countries that face, or have
been involved with similar issues regarding foreign investment that were
examined in this inquiry. In doing so it outlines the regulation of foreign
investment in agriculture in countries including the United States, New
Zealand, Brazil, Argentina, China and India. This chapter also notes the
possible impacts that international free trade agreements could have on
Australia's regulation of foreign investment.
Finally, chapter two outlines the legislative, regulatory and policy
framework for foreign investment in Australian agriculture. It provides an
overview of the FATA, the Foreign Acquisitions and Takeovers Regulations 1989 (FATR)
and AFIP with particular reference to agriculture.
Chapter three firstly notes the concerns of many stakeholders about the
lack of information regarding foreign investment in the Australian agricultural
sector. The chapter goes onto examine the major attempts to date to improve the
information gaps in this area: the Australian Bureau of Statistics (ABS) agriculture
survey; the subsequent Australian Bureau of Agricultural and Resource Economics
and Sciences (ABARES) report about foreign investment in Australian agriculture;
and the progress to date towards a register for foreign investment in
Chapter four examines the implementation of the legislative, regulatory
and policy framework for foreign investment in Australian agriculture through
the FIRB review process and that of relevant government agencies. It discusses the main criticisms of the process, the support from
some stakeholders for current practice, and the mechanisms of compliance with
FIRB review and conditions. Finally, it examines these issues through two
short case studies of acquisitions by Hassad Australia and the sale of Cubbie
Chapter five discusses the consequences of key aspects of the current
framework governing foreign investment in Australian agriculture. It considers
the relevance of the current threshold for FIRB review of foreign investment in
agriculture, including the related issues of cumulative purchasing and the
potential impacts on local economies that the high threshold level provides. It
also notes that the FATA does not fully cover the foreign investment
relationships for certain company structures. The chapter then focuses on the
definitional issues in the framework relating to direct investment and rural
Finally, chapter six examines the role of foreign investment in major
agricultural developments in Australia's northern regions through the case
study of the Ord irrigation area. The chapter discusses the significant
contribution that future agricultural developments, such as the Ord, can make
for Australia's economy and future food security. In doing so, it analyses the development
challenges due to land tenure, water entitlements and capital and how these
issues can be addressed by encouraging and regulating both domestic and foreign
investment in the national interest.
Navigation: Previous Page | Contents | Next Page