Christopher Back (WA, Liberal Party) Share this | Hansard source

I congratulate Senator Whish-Wilson and associate myself with many of the comments he has made in this debate, and I rise to support the Foreign Acquisition and Takeovers Legislation Amendment Bill 2015, the Foreign Acquisition and Takeovers Fees Imposition Bill 2015 and the Register of Foreign Ownership of Agricultural Land Bill 2015.

I want to concentrate mainly on the third of those three bills, except to summarise initially that the bills will, firstly, transfer responsibility for regulating foreign investment in residential real estate to the Australian Taxation Office, further enabling stronger enforcement, audit and compliance of those rules. Secondly, the bill will introduce additional and stricter civil and criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules. Those intermediaries, of course, are real estate agents, lawyers and others associated with those transactions. That is something that people need to be well aware of. Thirdly, the bills will introduce fees on foreign investment applications from 1 December this year so that the costs associated with processing these applications do not fall to Australians but fall to the foreign party seeking to invest.

I come to the question of the register of foreign ownership of agricultural land, which will complement the changes by establishing and improving a register of foreign ownership, operated this time by the Australian tax office. It is interesting to note that foreign investors will be required to register essential information about existing holdings as well as any subsequent acquisitions, if they wish to make them. This in turn will provide greater transparency around foreign investment.

Following on from Senator Whish-Wilson, and from Senator Heffernan who is sitting here beside me, I make the point that back in 2009-10 we had an inquiry into foreign ownership of agricultural land and water in Australia through the Rural and Regional Affairs and Transport Committee. At the time that the parties reported to us—and Senator Heffernan will remember this—there were three glaring omissions.

The first question was in relation to trapping information and data on foreign acquisitions of leased land. The officers at the table did not have any idea what we were talking about, and at the time I mentioned that 90 per cent of all pastoral land across the north of Australia, and probably 99 per cent in WA, is leased. I can provide the answer to the Senate now in response to that. It will be the case that leased land will be included in the register of foreign acquisitions. Any interest in any rural land that could be used for agricultural purposes will be caught in the registration process. I congratulate the drafters for that.

The second question that was asked, and I think it was asked by Senator Heffernan, was: if an overseas entity wanted to buy what was an agricultural property but not use it for the purposes of agriculture—in other words, coalmining—would it be captured? At the time no-one seemed to know the answer. I can confirm here today that it is still foreign investment in agricultural land and will have to be registered. In fact, it goes on to state that any land that might reasonably be used for agriculture will need to be registered with the Australian tax office, even if it is to be used for another purpose.

The third question that was placed at the time without being satisfactorily answered was: what if a state-owned entity trading through an international bank then engaged an Australian company or partnership or two upstanding people—like Heffernan and Back Enterprises? If there were scrutiny of ownership it would appear that the property was owned by two people in Australian names and so, therefore, would not attract foreign investment scrutiny. The answer to that question is: if an enterprise was purchased for those purposes and its beneficial owner is an entity which is an overseas entity, then it must be captured in the registration net. Very strict anti-avoidance rules will apply. Each of those three points is interesting and important in gaining complete data.

I want to put into perspective some information regarding foreign investment in Australia. There has been foreign investment in Australian agriculture since 1788, and had there not been we would all still be stuck around Botany Bay or Sydney Cove in lap-laps. Let me make the point that the scale of foreign investment in Australia—and these figures are now two or three years old—was a total of $170 billion, of which 2.2 per cent or $3.6 billion was associated with agriculture. The vast majority was in mining, $50 billion; manufacturing, over $30 billion; and services, in excess of $20 billion. So understand this: the level of foreign investment into agriculture in Australia is pitifully small—and, in my view, it needs to be greater.

Who are the countries that are investing in Australian agricultural assets? They include Canada, 25 per cent; United Kingdom, 22 per cent; America, 12 per cent; the United Arab Emirates, five per cent; New Zealand, 4.3 per cent; and China, which was mentioned by Senator Whish-Wilson. About 0.5 of one per cent of foreign investment in agricultural land in this country is by Chinese investors. We know that perhaps the figures will be updated as we get more and better data, but about 99 per cent of all Australian agricultural properties are Australian owned, and 89 per cent of Australian agricultural land is owned by Australians.

There is always the concern, of course, about the burgeoning demand, and it is one that we need to keep under control. But we are talking about very small figures. It will be a requirement for the purchase of agricultural land that the limit comes down from $252 million to $15 million, and I urge Senator Whish-Wilson to be satisfied for the moment with that level of $15 million for the purchase of property. If, indeed, at some time in the future it is seen to be necessary to reduce it further, let's have a look at that then.

For agribusinesses, it will be if the purchase figure exceeds $55 million. For all state owned enterprises, the Foreign Investment Review Board must review it from dollar No. 1.

I have a concern with regard to state-owned enterprises, particularly if the purpose of their purchase is to actually produce a product, a crop or whatever, that they would then send offshore—for example, if it were a wheat crop, it would go offshore, be milled into flour, turned into bread and given to their poorest citizens without there ever having been a price applied to the item. Technically, at the moment, under transfer pricing—and the gentleman on my right, Senator Heffernan, knows far more about transfer pricing than I do—it would not attract any taxation in Australia if in fact the scenario I presented were the case. I believe there is a solution to this, because that state-owned enterprise has used Australian land, Australian expertise and Australian water, and also our infrastructure system—our ports et cetera. I am of the view that the way to solve this is to treat it not unlike a mineral: there should be a royalty charged on the value of that product, consistent with its value in the Australian market, on the wharf, on the day that it transfers across the port into a vessel to go. So, in other words, if that state-owned enterprise was producing something in Australia for which there was going to be no commercial value, and therefore there would otherwise not be a tax applied, we could apply a royalty, based on the value of the product on the day that it transfers out of Australia.

In the few minutes left to me, I just want to reflect on the benefits of foreign investment in Australian agriculture. What does it and has it and will it continue to do? It will provide us with access to new technology. It will grow the Australian skills base in agricultural and agribusiness production. It will provide us with greater links to global food chains. It will provide us with access to new capital to expand agricultural production. And it will increase the scale of operations to create critical mass for trade development. If I can put one more point: now, as a result of the free trade agreements that have been negotiated, it will open the doors for Australian agricultural and related investors to actually invest into the countries with whom we are trading. I have recently come back from leading a parliamentary delegation to Indonesia, and there is no doubt at all that there is enormous scope for Australian agriculture and Australian agribusinesses to invest more into Indonesia and for them to invest here in Australia. It is pitifully small at the moment.

I am often asked about foreign investment, and I use the example of the south-east coast at Esperance. The Americans came into the Esperance region and found beach sand, basically. It is very, very light land farming along that Esperance strip. In the 1950s, the US came into the market at Esperance with their own expertise, and they failed. They came back again in the 1960s and 1970s, where they mainly and largely used Australian expertise. The Esperance Land and Development Company—which was substantially owned by American factors the Chase Manhattan Bank—had a program with the Western Australian government where they developed 100,000 acres of land a year, of which they retained 50 for farming, and 50,000 acres was divided into 2,000-acre conditional purchase blocks and made available to young people from throughout Australia to get into farming in the Esperance area. From my own experience there, as a student and as a veterinarian working with my older brother, who was the livestock manager for ELD, I know that the vast majority of those farmers who got onto those 2,000-acre CP blocks—it was light land farming; there were trace element deficiencies and all sorts of problems associated with nitrogen-rich clovers—faced an enormous number of problems along the south-east coast of Western Australia at that time. I can say to you without fear of contradiction that those problems would not have been solved had it not been for the capacity of the Americans, with Australian expertise; they brought in expertise from the United States on trace element deficiencies et cetera to actually develop.

The good news story is: this year, in the harvest season in Western Australia, the Esperance plains will be far and away the biggest wheat producer. Farmers who I have met in the last few weeks will be, for their third consecutive year, averaging in excess of five tonnes to the hectare for wheat. That is unprecedented in Western Australia.

I make this point: when the Americans left—which indeed they did; they eventually sold out—what did they take with them? Did they take the soil? Did they take the land? Did they take the fences or the water points? They did not. That whole south-east coast of Western Australia today is a prime example of the value of overseas investment in agricultural assets.

In conclusion, I commend the legislation. I do say—and I agree with Senator Whish-Wilson and others—that the more information we have the better, at all times. But this is the right direction for us to be going in. I believe so, in the case of urban real estate, but I am more committed in relation to agricultural land.