How To Buy Agricultural Land In Australia

How to buy agricultural land in Australia and who can buy agricultural land in Australia? It is defined in section 4 of the Foreign Acquisitions and Takeovers Act 1975 as agricultural land used for basic productive business or can be used rationally. Agricultural land also includes land that may be covered with water from time to time (for example, farm dams or streams). However, agricultural land does not include land where only the basic productive business for which the land is available or can be reasonably used, is the basic productive business related to submerged plants and animals. For example, rivers and bays will not be considered agricultural land for fish farming or oyster beds in estuaries and bays.

Australian agriculture is known worldwide for its variety and volume of production, dry seasons, and extreme climatic conditions. The landscape of the countryside is also fascinating: from the beautiful eucalyptus forests to the open fields, there is a range of natural wonders in the palm of your hand, depending on the location of your field. However, as a foreigner, owning and running a farm in Australia can sometimes seem like an impossible goal. It is also difficult to grasp all the information, given how incomprehensible and divisive government policies and legislation can be.

A guide to How to buy agricultural land in Australia and who can buy agricultural land in Australia, can foreigners buy agricultural/farmland in Australia

General conveyancing procedures are followed for agricultural property transactions, including vendor disclosure and appropriate buyer precautions. What is special about the transaction of agricultural property is the complexity of the subject matter of the transaction. Whether the asset is being offered for sale, due diligence in disclosing obligations to the seller, and due diligence on the part of the buyer can lead to a complex terms sheet for a business. To prepare and negotiate a complex set of transaction documents for lawyers. It is not always easy to convert a commercial terms sheet into a legally enforceable, robust, and prepared transaction document, especially with the growing number of cases affecting rural land transfers.

FIRB definition of farm or agricultural land

Agricultural land can sometimes host other types of land-related buildings or structures. For example, agricultural land may host a residential dwelling (for example a farmer’s residence), or wind turbines as part of a wind farm. In Australia, approximately 53% of the total land area was used for agricultural purposes. Tasmania had the smallest proportion of arable land (24% of state territory), while Queensland had the largest (81% of state area). Agriculture covers more than half of our land area and provides direct employment to about 304,000 people on about 86,000 farms.

Land characteristics (e.g., climate, crop yield, land size, remoteness, soil quality, storage capacity, topography, vegetation, and water availability) – Land size should be sufficient Stand-alone basic production business could be allowed to run. Land distance from key agricultural service providers, along with transportation of goods and other infrastructure, may mean that land cannot be used rationally for basic productive business, unless such Infrastructure and/or services may not be available for the area.

Matters to consider about agricultural property transactions include;

Due diligence and disclosure obligations;
Land tenure, access, and convenience;
Dividing fence;
Water rights, including water access licenses, dam licenses, and bore licenses;
Stock and crops;
Plant and machinery including depreciation;
Third-party rights, including agistment agreements and share farming;
Forward delivery agreement;
Administrative responsibilities during the transaction period;
Warranties relating to environmental issues, including disclosure of protection agreements or notices regarding hazards of acidic soil and contamination;
Work safety issues and employment law; and
The assurance of the terms of the trade being considered by the purchaser to the vendor.

The FIRB definition of farm or agricultural land refers to Australian land that can be used for some agricultural use. This generally applies;

Land that has local zoning rules that allow for basic business activities.
Land that was previously used for basic production.
Land that is large enough for basic business is located in the countryside and away from basic transport services and infrastructure.
Lease or license terms on land that allows basic business.

Why do foreigners invest in agricultural land in Australia?

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Innovation in Australian agriculture, in general, has significantly increased productivity to meet the ever-declining agricultural conditions of trade. Innovation, through improved land management practices, has also increased the potential of agriculture to reduce threats to soil, water resources, and biodiversity. Land management practices can make the necessary changes to the sustainable use of Australian landscapes. For example, crop protection helps improve soil carbon, reduce soil erosion and nutrient loss, and increase cost savings and other product benefits.

Australia has a wide range of agricultural landscaping soils, ranging from older, deeper, and barren soils to smaller and more fertile soils. Understanding the value of agriculture is important for everyone in the agribusiness, especially for farmers. The Australian Farmland Values Report tells the story of the performance of national and regional farms. There is no specific piece of legislation in Australia regarding agricultural property transactions. The acquisition and disposal of rural land follow the procedure of buying and selling houses, commercial buildings, shopping centers, and other real estate assets. Real estate transactions are handled by the relevant Real Property Act in each state.

There are many reasons to increase agricultural investment but of course, you should seek your independent financial advice before making any major financial decision. These reasons include;

Being able to use the agricultural land for life if used sustainably.
Demand for meat, dairy, and produce is growing, especially in the Asian region, so investors are willing to pay a premium for good crops.
New industries such as biofuel production are also increasing the demand for land.

Considerations for buying agricultural land in Australia

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Farm Land in Australia — Farm Land ( pic credit: pixabay)

Farmland ownership

The ownership of the farm is usually held in the personal names of farmers or graziers for a family-run rural institution, a private proprietary limited company, or a private discretionary trust. Appropriate tax and accounting advice should be sought to develop the best land ownership structure for the business. It is then common for the farmer or herdsman to set up an operating company (again, a privately owned limited company or a private discretionary trust) that will continue the agribusiness business from real estate. This results in a property entity and an operating entity. The reasons for separating the two entities are tax, accounting, and risk reduction. There will generally be an agreement between these entities regarding land use and risk, liability, and profit-sharing. Succession planning is also an influential factor in these structures. For large corporate investments in rural enterprises, the corporate entity in which the farmland will be placed is usually run with tax and accounting considerations.

Land tenure

The usual concepts of land tenure in Australia are freehold and leasehold. Each state and territory manages the creation and ownership of land titles under applicable laws for that state or territory. Large rural properties often have a combination of leasehold and freehold lands. In Australia, the model of tenant farming by private landlords is unusual. Farmland is usually purchased freehold by a farmer or herdsman or, where the freehold is not available, leased from the Crown or the government. The Torrens title system for land title creation and registration is available in all states and territories of Australia. Under this system, the interests of freehold and private leasehold lands are created and managed. Its primary function is to make the title impractical to the registration of interest in land, under the laws of the relevant state or territory. The interests of the leasehold land in Crown or government-owned land are governed by the laws of the respective state, territory, or Crownland.

Agricultural land or freehold land ownership of land for agribusiness is considered common and well-understood. This is similar to freehold land ownership for houses and commercial buildings. The difference is the zoning rules applied to this parcel of land. Zoning rules, either based on state or territory or at the local council level, define the permitted use of this parcel of land and whether to change, modify or vary that use. In some states there are;

Perpetual Leases – These are perpetuity rents of an annual rent that can be converted into freeholds in certain places with rights.

Pastoral Leases – This is a special type of leasehold term that allows the Crown to be used for grazing land.

Crown Roads and Enclosure Permits – These relate exclusively to the right to use land tracks that were previously stock routes or crown roads, and

Western lands lease or lease with environmental restrictions – The main purpose of these leases is to ensure proper land management and land management, as the land is usually in a very fragile and sparsely populated area.

According to international standards, the land under the NSW (New South Wales) Western Lands Lease is regulated by one of the oldest pieces of resource management legislation and specifically deals with land resources management.

Native Title

Native title in Australia should also be considered when assessing the ownership and use of agricultural property. The native title recognizes the rights and interests of Indigenous Australians and Torres Strait Islanders in land and water matters in Australia. Before 1992, Australian common law did not recognize local titles in Australia. However, the Mabo case resulted in the recognition of land rights from the time of European settlement. It is interesting to note that the Australian High Court did not specify what the local title was: it stated that these rights may exist where the natives have maintained their traditional relationship with the land and where an act their land rights have not been taken away.

Native titles allow Indigenous Australians to follow their own traditional rules and customs. However, it can only be present in areas where it has not been extinguished before. It is not possible to usurp someone else’s legitimate rights for local titles, so privately owned land (including residential and commercial land), some other lands and leases, and other public areas, such as schools and streets, have local titles removed. has been given. Local titles may exist in areas such as vacant state land, forests, beaches, leases of certain types of pastures, and reservoirs.

In most cases where a successful native title is requested, the land subject to the application will be shared by the native title holders and other occupants. The native title does not necessarily affect all primary producers and rural areas. The High Court’s decision in the Wick case stated that the local title does not necessarily end with the pastor’s lease and may co-exist with the rights of some leaseholders. Some leases may be ‘special’ leases and will therefore remove the local title. If the lease is not special, the land can be claimed in a local title application. However, local title claimants cannot claim exclusive possession of the leased area. If there is a conflict between the rights of the local title and the rights of the lessee, then the rights of the leaseholder prevail. In transportation, it is always a matter of precaution to check the local title register of the National Native Title Tribunal to find out if there is any land claim on the subject land.

Share farming

Share farming is a license to consider the use of agricultural land, often share farming agreements, adjustment agreements, private or private leases or acquisition arrangements, and so on. Many share farming or private lease agreements are verbal and are considered regular tenancy. Therefore, these agreements should be made in writing between the parties to be sure of the conditions required. If the buyer is informed about the arrangements for share farming or agricultural tenancy which is not in writing, the buyer may be given priority (with appropriate assignment clauses) before entering into the transaction document or, In any case, before completion.

Agricultural tenancies can be used for;

Grazing;
Dairying;
Pig farming;
Poultry farming;
Viticulture;
Orcharding;
Beekeeping;
Horticulture;
Cultivation of vegetables or any other crop of any kind;
Forests or
Any combination of these activities.

Agricultural tenants may include;

A written lease or license;
A tenancy at will;
Share farming agreement; Or
Any other arrangement by which a person who does not own the farm has the right to occupy or use it.

The basis of the share farming agreement is that the owner will provide the land and assets, but perhaps not the machinery. The participating farmer provides labor, expertise, fertilizer if required, and machinery and marketing for the sale of produce if required. The appeal in this type of agreement is that the landlord benefits from earning income without any physical work. If the weather or prices are bad, the shareholder farmer, as well as the owner, will face a decrease in income. Generally, the term of a share farming agreement is at least 12 months and often longer, but a short-term agreement is possible (for example, Lucerne is the baling season).

Can a foreign citizen buy land in Australia?

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A foreign citizen can buy Australian farmland. Anyone can buy agricultural land for up to AUD 15 million (Australian dollars). Once an individual owns farmland worth AUD 15 million, he or she must obtain approval from the Foreign Investment Review Board before purchasing more land.

Will the Australian authorities levy any tax on the buying and selling of farms by foreigners?

When you buy land, you have to pay stamp duty which is usually about 4%. In addition, when you sell, you may be liable for capital gains tax. No visa is required.

Foreign Ownership of Agricultural Land Report in Australia

Under the Foreign Ownership Legislation for Agricultural Land Report, foreigners who purchase Australian agricultural land are required to register their interest on the Foreign Ownership Register of Agricultural Land.

Also, need to notify us if;

You are no longer a foreigner.
You became a foreigner by occupying agricultural land.
You no longer have agricultural land.
As long as you are occupying it, the land is not agricultural.
To register or update changes to your situation, fill out the Land and Water Registration Form. Your initial purchase must be recorded with us within 30 days from the date of purchase. Further events must be recorded with us within 30 days of the event.

FIRB rules for buying agricultural land in Australia

Foreign Investment Review Board – It is no secret that Australian agriculture is highly valued by many foreign investors. The government is scrutinizing agricultural land purchases through foreign buyers, some acquisitions need the green light from the Foreign Investment Review Board (FIRB) before they can proceed.

You need to notify FIRB and you should not have any objections as a foreigner before you can proceed to purchase a farm. However, this only applies to certain types of foreigners and if the agricultural land itself meets certain limits and characteristics. No matter what, it is important to do your homework before applying for a farm loan.

FIRB Policy – Whose approval is needed?

The current financial limit for informing the FIRB of the purchase of agricultural land is a total of $ 15 million. This means that FIRB approval will not be required for any purchase of less than 15 million. The cumulative aspect of the purchase means that if you have previously acquired land worth 12 million which did not require FIRB approval, and acquire additional land worth $ 5 million, you must notify FIRB. You will need to describe your potential and current land ownership.

Also, keep in mind that this limitation is about the value of the land, not just the value of the property you are considering. These two figures cannot be perfectly aligned, and this is the value of the agricultural land to which the FIRB belongs.

Eligibility, Permits, and Exemptions – You must obtain FIRB approval before taking out a loan or purchasing land. You can apply for FIRB approval through the FIRB Application Portal. Be sure to use this checklist to find all the documents you will need, and if you have any questions, you can check out these reference guides. Once you have received FIRB approval, you must also register your land with the Australian Taxation Office (ATO) within 30 days of the sale being completed.

Agricultural land register in Australia

The Register of Foreign Ownership of Agricultural Land (Agricultural Land Register) provides details of the foreign ownership of agricultural land in Australia.

If you are a foreigner and intend to invest in Australian agricultural land;

You may need to apply for approval before investing.
Make sure to register on the Agricultural Land Register.

Before Investing – Before investing in Australian farmland, you may need to apply to the Foreign Investment Review Board (FIRB). Applying for approval depends on;

The value of the investment,
Even if you are an investor in one of our trade agreement partners.
Even if you are a foreign government investor.
Even if you have a close relationship with Australia.

Registration after your investment – Register your interest on the Agricultural Land Register after investing. To register, you will need to complete the Land and Water Registration Form unless there is a waiver on your circumstances after your investment.

How to Register – To register, you must complete the Land and Water Registration Form. For registration, you will need to provide the below information;

Entity Details
FIRB Approval Number (if any)
Land Location, Size, and Use Details
Land Title Information
Percentage of Interest on Land by Registering Institutions
Date of event (e.g., settlement)
Price of land
Current types and land use percentage of the property.

Compliance Activity – We’ve recently launched a compliance campaign for foreign investors that;

Occupy agricultural land
Have not registered interest in its agricultural land.

Statistics and Reporting

The Taxation Commissioner reports to the Treasurer on the application of the Register of Foreign Ownership of Water or Agricultural Land Act 2015. They also publish aggregate foreign ownership statistics. Reported statistics include;

The proportion of foreign agricultural land in Australia,
The level of foreign interest in agricultural land by territory or state
How agricultural land is used.
We only include aggregate data in the report. Privacy restrictions prevent us from publishing information that could identify an individual or entity.

Tips for buying agricultural land in Australia

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Key Points for Small Farmers – No one should buy a small farm at will. Whatever your reasons for buying a small farm – whether it be a retreat, weekend, protection or self-sufficiency block, or investment or working form, you want to consider some important things first.

Use a reputable agent – Use an agent who is familiar with the local area and has accurate knowledge of farmland. Most agents specialize in residential real estate. When choosing an agent, look for one that provides clear answers for council rates, land size and use, soil type, water availability, and other aspects that are important to small farmers. If the process is taking too long, write a wish list (necessary, unnecessary, and desirable) and send it to several other local agents.

Check planning restrictions and legal responsibilities – Buying farmland involves several legal responsibilities, including;

control of harmful weeds and pests,
animal welfare,
chemical use,
boundary fencing (along public roads) and
fire preparation.

The three levels of government – federal, state, and local – enforce these and other laws. Check with the local government authority before buying a small farm to make sure the zoning of the property is suitable for its intended use.

Proper zoning would be general agriculture, rural residential, or rural smallholdings. Also, to find out the title of the property, look for a Convenience Agreement (i.e., the right to use the property for a specific purpose), Carbon, Conservation, or Heritage Caveats ((third party rights over the property) or covenants that means a written agreement between the seller and buyer restricting land use are in place.

Inspect the farm infrastructure – Farm infrastructure mainly includes houses, sheds, drains, yards, water supply (tanks, dams, pipes, troughs), and power supply (location, single or three-phase). The infrastructure should match your plans for the form and if it does not exist or fit, you will need to consider the cost of implementing or improving it. Understand local council building requirements about development approvals and restrictions (e.g., one dwelling per farm). Ensure that the relevant farm infrastructure involved in the sale is marked on the first page of the sales contract.

Check access to markets and services – Farmland and its distance from markets can greatly increase the cost of farming and the cost of selling goods. If the markets are far away, explore opportunities to collect and sell similar products with other small farmers in the area. Not all rural areas generally have easy access to modern life-related services and facilities, such as health care, education, electricity, water, internet, and phone connection. Make sure the farm has access to all seasons (wet and dry) and if access is by dirt road, find out who is responsible for its maintenance.

Understand the land and the water – The type of soil on-farm will directly affect the extent of the crops that can be grown and the land is suitable for its intended purpose. Before buying farmland, you should apply for soil tests (or get previous test results) and use them with an onsite inspection to assess the suitability of the soil. Inspect the field for signs of soil erosion (food, erosion, and chemical contamination), as they can be expensive to repair. Estimate field water (quality and quantity) for domestic, fire control, livestock, and irrigation purposes. If agricultural land is irrigated, contact the relevant government authority regarding water rights and restrictions.

Consider weeds and pests – Inspect the farm for pests and weed infestations. If you are not sure about the local herbs, consult an agronomist for the correct identification. Identify possible sources of herb and pest infection, including railroads, neighboring land, waterways, state forests, and access roads. Weed control declared on private land is the responsibility of the owner and is a legal requirement of land ownership.

Assess natural resources – Natural resources including remnant vegetation and wildlife habitat – can be important environmental and farm assets. Work affecting native plants will need a permit, which can be expensive and time-consuming.

Meet with neighbors and review the effects of land use – It’s important to meet your neighbors in the countryside, especially if you are an absentee owner. If you are buying a small farm, ask your neighbors about their land use so your ideas are safe. Investigate whether your intended use of land will affect neighboring farms and whether it has the potential for conflict.

Be realistic about form skills and knowledge – If you do not have the skills or knowledge to run a farm, check to see if there is any other help available (i.e., contractors) and/or where you can go to improve your farming skills and knowledge.

Do I need FIRB approval to buy agricultural land in Australia?

The easiest way to find out is to ask these three important questions;

Are you a non-resident?

The following mentioned people do not need FIRB approval.

Australian Citizens
Australian ex-pat. Although they are non-residents, they are still considered Australian citizens.
Permanent residents. Although you are not a citizen, you are living in Australia on a long-term basis on a working visa.
The form may be in the possession of the owner or for purely investment purposes.

The following people may need FIRB approval;

Temporary resident
Foreign investors

You may still need FIRB approval if you are a non-resident but your spouse or business partner is an Australian citizen or vice versa to purchase a residential property. Even if you do not require FIRB approval, your non-resident business partner or spouse is still classified in the eyes of the government as the beneficiary of your investment.

Is your investment over $15 million?

Before that, the FIRB had a $252 million threshold for your intent to purchase agricultural land. Today, the limit is 15 million, which means that if the value of the land exceeds that, you may need to submit an online FIRB application informing the Treasury of your purchase. This is true if you are considered a temporary resident or a foreign investor. If it’s less than $ 15 million, you won’t need FIRB approval at all. The threshold test of FIRB is cumulative. This means that the FIRB will take into account the value of any agricultural land you currently own (or are interested in). For example, if you have already acquired $ 10 million worth of agricultural land, you will not need to notify FIRB. However, if you plan to purchase another piece of land valued at $ 7 million, you will exceed the 15 million threshold and you will need to report this purchase and the details of your existing land ownership to the board.

Are you from FTA country?

If you are a temporary resident or foreign investor and the acquisition costs $ 15 million or more, you can avoid the need for FIRB approval.

You still need to register with ATO – Foreigners who own or are interested in Australian agricultural land are required to report their interest to the Australian Taxation Office (ATO), Foreign Ownership of Agricultural Land Act 2015. Then, these requirements are for foreign investors who;

Have an interest in agricultural land till 1 July 2015 or get interested or change this interest after this date.
Plan to buy $15 million or more agricultural land.

Conclusion

If you live in Australia and plan to buy Agricultural land, this article may help you to understand the process of buying Agricultural farmland in Australia.

Disclaimer

For accurate information on agricultural policies and laws, contact the nearest local agricultural authorities.

2 COMMENTS

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Sanjay Kumar May 22, 2023 At 9:07 am

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