Acquiring commercial land under the existing foreign investment laws
What is not widely known is that the existing regime defines an acquisition to include both the purchase of land and also certain longer term leases of land.
The entry into a lease of ‘vacant commercial land’ by a foreign person/entity, for a period of 5 years or more including any option period(s), requires FIRB approval. There is no monetary threshold, hence all such proposed leases and agreements to lease must be submitted for approval prior to being entered.
If the lease (of 5 or more years) is in relation to ‘developed commercial land’ (i.e. not vacant) then the obligation to seek the approval of the FIRB is triggered only where the threshold value of $252 million is exceeded. There are sensitive types of land prescribed such as mines and critical infrastructure that have the lower threshold value of $55 million. The acquisition value where the interest is leasehold is derived by reference to the value of the interest in the land being leased.
In relation to the purchase of vacant (non residential) land, the Foreign Investment Review Board (now operating as part of the Australian Taxation Office) will commonly impose the requirement that a foreign buyer commences continuous development of the site within 5 years of the purchase and does not sell the land until the development is complete, as a condition of approving the purchase.
The definitions of commercial land need careful consideration, as will the determination of the nature of the buyer / tenant as a foreign person.
If you would like to discuss any of the above, please telephone Nicholas Prove on (07) 3226 3944.