Rural

Rural Land is land that is used wholly and exclusively for carrying on a substantial business of primary production. A 'substantial primary production business' has a commercial purpose or character and is not merely carried on as a hobby or for recreation purposes and is involved in activities related to the cultivation of land; animal husbandry/farming; horticulture; fishing; forestry; viticulture or dairy farming. Primary production for the purpose of the rural land definition does not include vacant land (even if zoned 'rural'), hobby farms, land used for stock agistment or mining.

The definition of primary production is taken from the Income Tax Assessment Act 1936 which states "primary production means production resulting directly from:

• the cultivation of land;
• the maintenance of animals or poultry for the purpose of selling them or their bodily produce, including natural increase;
• fishing operations;
• forest operations; or
• horticulture;

and includes the manufacture of dairy produce by the person who produced the raw material used in that manufacture."

If land cannot be considered rural land then it is defined as urban land. Therefore, acquisitions by foreign interests of 'hobby farms', 'rural residential' blocks, land used for stock agistment and vacant land with rural zoning are included within the urban land category. Most acquisitions of rural and urban land by foreign interests require foreign investment approval.

Generally, where a foreign interest proposes to acquire a business of primary production valued at less than $100 million, the transaction is exempt from requiring foreign investment approval.

Acquisitions of such businesses valued at $100 million or more (or the relevant threshold for US investors or offshore takeovers) require prior approval and are normally approved unless considered contrary to the national interest.

Where the investment is by a foreign government or one of its agencies, foreign investment approval is required irrespective of the size of the investment.

What constitutes a 'substantial primary production business' as per the definition of rural land?

There are no hard and fast rules for determining whether a party's activities amount to the carrying on of a business of primary production. The nature of the activity, the party's intention and the method of operation help determine whether a business of primary production is being carried on.

Indicators that a primary production activity is a business include:

• that it is operating as a significant commercial activity, and not a recreation or hobby;
• it is the intention of the business to make a profit from the activity;
• repetition and regularity of activity;
• activity organised and carried on in a businesslike manner with associated business records and reports;
• reasonably large scale operation; and
• commercial scale of sales of product.

The business should also meet the following criteria:

• the value of the business' urban land should be less than 50 per cent of its total assets; and
• the land on which the business is being conducted should be zoned rural and not residential.

For examples of businesses that do/do not fall into the primary production category see the Australian Taxation Offices ruling on "Am I carrying on a business of primary production?"

How to apply

As noted above, rural land is land that is used wholly and exclusively for carrying on a substantial business of primary production. Should the acquisition not involve the acquisition of an interest in a primary industry business (even if the property is zoned rural), the acquisition would need to be examined under the Urban Land Policy guidelines.

As of January 2008, the Board has moved to electronic record keeping for all foreign investment applications (including business proposals).  Please note that submitting applications electronically (via email or fax) improves processing times – it is not necessary to post originals in addition to electronic lodgement. Applications should be emailed to firbapplications@treasury.gov.au or faxed to 02 6263 2940.

Please include each individual element of the application submitted as separate file attachments to the email.  The preferred format for attachments would be as .pdf or .doc files.  Applicants are requested to avoid attaching multiple individual pages as separate picture files. The email message should also include a webpage hyperlink to the appropriate current web addresses of any other material or information relevant to the application.  Separate attachments would include the following:

• covering explanatory letter;
• statutory notice form 25/26/26A; and
• other supporting documents such as company annual reports and financial statements.

For acquisitions of businesses involving primary production valued at over $100 million (or the relevant threshold for US investors or offshore takeovers):

1. Parties to the proposal:

   Individuals:

   • name;
   • address;
   • nationality; and
   • copy of identification section of passport (showing date of birth and passport number).

   Companies and trusts:

   • name;
   • address;
   • details of beneficial ownership, including nationality of shareholders and country of ultimate control;
   • location of major establishments;
   • major activities; and
   • details of total assets (with relevant balance sheets).

2. Details of the vendor
   • name;
   • address;
   • nationality or details of beneficial ownership of companies, including country of ultimate control;
   • location of major establishments;
   • major activities; and
   • details of total assets (with relevant balance sheets).
3. Details of the property
   • copy of contract including consideration to be paid (for properties to be acquired at auction, while prior approval must still be obtained, a copy of the contract should be forwarded to the FIRB after the auction);
   • address;
   • size;
   • details of any improvements (ie dwelling, sheds, etc.) including approximate size, value and description of the improvements;
   • description of the primary production currently being conducted on the property; and
   • description of the proposed business, including anticipated development details and expenditure.
4. Details of the proposal
   • details of the acquisition (ie shares, assets etc.);
   • consideration to be paid;
   • brief description of the purchaser's future intentions for the business, including amount of any proposed development expenditure.
5. Completed Notice Under Section 25 or Section 26

For acquisitions of urban land see the Urban Land Policy Guidelines.