Land ownership just the start in foreign investment debate

Water is just as critical as land for farms like Cubbie Station. Cubbie/AAP

Prime Minister Tony Abbott has announced long-promised changes to the rules for foreign land purchases and ownership in Australia. There are two key changes. First, the Foreign Investment Review Board (FIRB) threshold will be reduced from A$252 million to A$15 million and be applied to cumulative purchases. Second, the Australian Taxation Office (ATO) will be tasked with creating a “stocktake” of foreign-owned agricultural land, which may lead to a national register.

Media reports of this week’s announcement have largely focused on the merits of lowering the FIRB’s screening threshold. But the foreign-owned land stocktake and register should be equally scrutinised.

Spearheaded by high-profile land (and water) sales to non-Australians, such as Cubbie Station, the issue of foreign investment in agriculture has generated much discussion in recent years. Central to this sensitive issue is that no one knows exactly how much agricultural land foreign companies and governments own. And while there is uncertainty, the public debate seems locked to a dualism between “we are selling the family farm” and “overseas capital can only benefit agriculture”.

Last year, my colleague and I called for better national data sets that clearly document who owns agricultural land and at what rate it is changing hands. A land register documenting foreign ownership of agricultural land would likely address this data deficiency, but only partially.

Details of what the ATO will produce are yet to be delivered. But, it seems the ATO will start to record new foreign land purchases from 1 July 2015 (irrespective of value). This may then be matched with the development of a national foreign-owned land register that draws on the land titles registers kept by state and territory governments.

It’s not just about land

So far, media reports indicate the register will be focused on land. But what about investment in agricultural businesses separate from direct investment in land? In the most recent Agricultural Land and Water Ownership survey, the Australian Bureau of Statistics reported that almost 90% of farmland was fully Australian owned and just under 99% of farm businesses were fully Australian owned.

Although that survey was widely criticised, the distinction remains important if efforts to document foreign land ownership are to prove as useful as possible. This is because although land ownership and the ownership of farm operations may or may not align, each is shaped by the other.

So, a register of foreign-owned land addresses only part of the huge data deficiencies related to foreign investment in the Australian farming sector. Despite the difficulties of untangling business structures, the ATO is perhaps best placed to align data collection and reporting on foreign ownership of both agricultural businesses and land.

What about water?

Australia’s water market and the legal separation of land and water titles further complicate the issue. It’s unclear whether a comparable register for foreign water ownership will be part of the ATO’s mandate.

Questions about who owns water access rights and at what rate they are changing hands are equally – or perhaps more – significant. This is especially in light of the Australian Bureau of Statistics’ results that showed agricultural water entitlements with some degree of foreign ownership increased by 55% between 2010 and 2013. In contrast, Australian land with some degree of foreign ownership remained largely unchanged.

Like land, the state and territory governments manage their water registers, so similar integration between the state/territory systems and any national register would be required.

It’s time to broaden the debate

The debate about foreign ownership of agricultural land and the means used to document it need to be broadened.

Whether it’s ownership of land, water or agricultural businesses, non-Australian sources of capital are only part of the picture. The foreign ownership debate needs to evolve to – or be merged with – a broader debate about the future of the agricultural sector.

Too often the future of agriculture is reduced to a binary logic of family farmers and corporate farms. However, the reality is there are many different ways to organise agricultural business and production.

Foreign investment is only one of the drivers of change. Australian institutional investment or private equity partnerships and their relationships with land and water ownership are also shaping the agricultural sector and rural communities. How these alternative business models may be changing will slip through the gaps of any land register focused exclusively on foreign ownership.

More data will not resolve the issue of foreign ownership. It also won’t magically set the future direction of agriculture. But, good data sets that capture the full spectrum of agricultural business and asset ownership models can better inform these debates.

If the ATO stocktake of foreign-owned land becomes a formal register, the prime minister’s announcement is a positive step. But it doesn’t go far enough. It’s time to move beyond the foreign- versus Australian-owned dichotomy. Expanding a national foreign-owned land register to include other agricultural assets and ownership changes among domestic investors will enable more informed discussion on what Australians really value about economic development, land and water resources and food production.