When it comes to overseas investors converting farmland to forestry, complex foreign investment rules can make it hard to see the forest for the trees.
One of the biggest misunderstandings is that farmland converted to forestry blocks under the special forestry test can be used for permanent forests – often referred to as carbon farms. This is not the case.
Under the Overseas Investment Act 2005, farmland converted to forestry under this test must be used for producing timber, a process that includes planting, maintaining, and harvesting trees within set timeframes. It’s just one of many controls in place to help ensure overseas investments in forestry benefit New Zealand.
In August 2022, the rules for overseas investments in forestry changed, making it harder for foreign investors to purchase New Zealand farmland for conversion to production forestry because they must now meet the stricter benefit to New Zealand test. This measures an investment against factors such as how it benefits the economy and natural environment, plus gives decision-makers discretion to consider factors including the land’s environmental features and how productive it is.
Find out more about the benefit to New Zealand test
The introduction of the special forestry test, and its subsequent removal, has resulted in a number of applications from foreign investors wanting to buy farmland for conversion to forestry – as the table below illustrates. In 2023, we expect to see a slow-down in these types of applications.
Foreign investor applications for farmland to forestry conversions since 2011
| Years | Categorisation | Approved | Total Land Area (ha) | Total new Forestry area (ha) | Total Land Area Net (ha) |
|---|---|---|---|---|---|
| 2011 | Benefit to New Zealand | 5 | 5405.99 | 5405.99 | 5405.99 |
| 2012 | Benefit to New Zealand | 10 | 5973.41 | 5973.41 | 5767.93 |
| 2013 | Benefit to New Zealand | 1 | 695.85 | 695.85 | 695.85 |
| 2014 | Benefit to New Zealand | 3 | 1585.05 | 1585.05 | 1585.05 |
| 2015 | Benefit to New Zealand | 2 | 769.52 | 769.52 | 769.52 |
| 2016 | Benefit to New Zealand | 1 | 381.92 | 381.92 | 381.92 |
| 2017 | Benefit to New Zealand | 2 | 993.47 | 993.47 | 993.47 |
| 2018 | Benefit to New Zealand | 2 | 1469.03 | 1469.03 | 1469.03 |
| 2019 | Benefit to New Zealand | 3 | 4378.70 | 3688.04 | -492.49 |
| 2019 | Special forestry | 15 | 15825.16 | 9031.80 | 15825.16 |
| 2020 | Special forestry | 9 | 5707.38 | 3820.40 | 3931.50 |
| 2021 | Special forestry | 17 | 18658.39 | 11242.27 | 18646.37 |
| 2022 | Special forestry | 31 | 26261.67 | 18035.42 | 17811.80 |
One thing that hasn’t changed is that foreign applications to convert farmland to permanent forestry – for example to earn carbon credits – must meet the farmland benefit test that requires applicants to demonstrate that the benefits are significantly higher than the current state.
Read more about the farmland benefit test
Summary of overseas investment forestry rules
| Old rules | New rules (from August 2022) | |
|---|---|---|
| Existing forests | Special forestry test | Special forestry test |
| Farm conversions for production forestry | Special forestry test | Benefit to New Zealand test |
| Farm conversions for permanent forestry | Farmland benefit test | Farmland benefit test |
Ensuring people play by the rules
Toitū Te Whenua regulates overseas investment in New Zealand’s sensitive land and assets, meaning we’re responsible for ensuring foreign investors play by the rules.
Consent may be granted subject to conditions. For forestry consents, this could include planting trees, maintaining and harvesting the forest, replanting trees after harvest, controlling wilding pines and protecting historic heritage elements.
Breaching consent conditions can result in fines of up to $100,000, and High Court proceedings and penalties against the investor.
Site visits and reporting against plans for planting, forestry management and harvesting help us to ensure compliance with consent conditions. These conditions generally include:
- using land exclusively, or nearly exclusively, for production forestry (not permanent forestry – sometimes referred to as carbon forestry)
- replanting trees after harvest
- protecting habitats for native plants, native animals, and certain game species
- protecting registered historic places and wāhi tapu
- maintaining public access
- maintaining log supply arrangements, protecting the interests of local sawmills
Media contact
Email: media@linz.govt.nz