The Overseas Investment Act 1973 and the Overseas Investment Regulations 1995
Until 24 August 2005, the Overseas Investment Commission (the Commission) administered the Overseas Investment Regulations 1995 (the Regulations) [1], which came into force on 15 January 1996.
The Commission was established by the Overseas Investment Act 1973 (the 1973 Act) and comprised 4 members: 2 from the private sector and one each from the Reserve Bank and Ministry of Commerce. The Reserve Bank of New Zealand provided the secretariat for the Commission.
Under the Regulations, an 'overseas person' had to obtain consent under the Regulations to acquire or take 'control' of 25% or more of certain New Zealand assets. The asset classes were:
- businesses or property worth more than $50m [2]
- land over 5 hectares, or worth more than $10m
- any land on most off-shore islands
- certain sensitive land over 0.4 hectares (for example on specified islands, containing or next to reserves, historic or heritage areas which exceed 0.4 hectares, the foreshore or lakes).
The Commission also administered sections 56 and 57 of the Fisheries Act 1996. An 'overseas person' was required to obtain either an exemption under section 56 or a permission under section 57 to acquire or continue holding quota, an interest in quota, annual catch entitlement or provisional catch history.
The Commission operated in accordance with a Notice of Overseas Investment Policy, Delegation and Criteria dated 6 July 2000 [3] which conveyed the government’s general policy approach to overseas investment.
2003 Overseas Investment Act review
A review of the 1973 Act was undertaken in 2003. The review of the 1973 Act led to introduction of the Overseas Investment Act 2005 (the 2005 Act), which came into force on 25 August 2005.
The 2005 Act
The 2005 Act made legislative and administrative changes.
Legislative changes
- The purpose of the overseas investment legislation was clarified.
- The addition of new criteria and factors, including the requirement that sensitive land investments must generally be of 'benefit to New Zealand'.
- Clarification of 'sensitive land' types, including the removal of the $10m monetary threshold that applied to land under the 1995 Regulations.
- The requirement to offer special land (a subset of sensitive land) back to the Crown.
- There was an increase in the significant business assets threshold from $50m to $100m.
- The overseas investment fisheries provisions (in sections 56 to 58 of the Fisheries Act 1996) were redrafted and the language aligned to the 2005 Act.
- Improved monitoring and enforcement tools.
Administrative changes
- The disestablishment of the Commission.
- The transfer of the regulatory function to Land Information New Zealand (LINZ).
As a result of the transfer of the regulatory function to LINZ, a new regulatory unit within LINZ, the Overseas Investment Office (OIO), was created.
A new Directive Letter, dated 1 August 2005, was issued, in accordance with section 34 of the 2005 Act. This Directive Letter came into effect on 25 August 2005 and conveyed the government’s general policy approach to overseas investment.
Strategically important infrastructure – changes to the Overseas Investment Regulations 2005 (2005 Regulations)
On 4 March 2008 the 2005 Regulations were amended by adding a new factor to be taken into account by Ministers considering overseas investment proposals under the 2005 Act. The factor (Regulation 28 (h)) was 'whether the overseas investment will, or is likely to, assist New Zealand to maintain New Zealand control of strategically important infrastructure on sensitive land'.
On 11 April 2008 Ministers released their decision on the Canada Pension Plan Investment Board’s proposed investment in Auckland International Airport Limited.
2009 review
On 17 March 2009, the government announced it would review the 2005 Act and the 2005 Regulations. On 27 September 2010, the Minister of Finance, Hon Bill English, announced the completion and conclusions of the review.
A new Directive Letter dated 8 December 2010 was issued [4] that provided more clarity about the Government's policy on overseas investment in sensitive assets. This provided advice to the OIO about which factors in the 'benefit to New Zealand' test are likely to be more or less important in assessing particular types of investments. The letter clarified that the Government’s overall approach to overseas investment in sensitive New Zealand assets is to achieve a balance between ensuring those assets are adequately protected while facilitating overseas investment that provides benefits to New Zealand.
The Government also agreed to make several changes to the 2005 Regulations. These included two new factors under the 'benefit test to New Zealand' test used to assess investments in sensitive land:
- A new 'economic interests' factor allowing ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted. This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland.
- A new 'mitigating' factor enabling ministers to consider whether an overseas investment provides opportunities for New Zealand oversight or participation - for example, by appointing New Zealand directors or establishing a head office in New Zealand.
These two additional factors came into force on 13 January 2011.
Exemptions for some Australian investors – further changes to the 2005 Regulations
On 1 March 2013 a new Schedule 5 was inserted into the 2005 Regulations. The schedule implemented certain obligations in the Protocol on Investment to the New Zealand-Australia Closer Economic Relations (CER) Trade agreement, which was signed on 16 February 2011. Schedule 5 provides that some Australian non-government and Australian government investors could qualify for increased thresholds for significant business asset acquisitions (these increased thresholds are currently $501m for Australian non-government investors and $105m for Australian government investors).
Overseas Investment Amendment Act 2021
The Overseas Investment Amendment Act 2021 came into force 5 July 2021. It amends the Overseas Investment Act 2005 and the final changes came into force on 24 November 2021.
24 November 2021 changes
Assessment timeframes
New assessment timeframes apply from 24 November 2021.
The timeframes will vary depending on the type of application. The assessment timeframes are end-to-end processing timeframes and apply to all participants.
While the new timeframes are designed to provide more assurance around the time an application consent will take, there will be instances where the timeframe may be paused or extended.
The timeframes will require significant improvements to timeliness at all stages of the process and there will likely be a phasing in period to allow time for the improvements to happen.
Find out more about Assessment timeframes
Farm land advertising
All farm land sales after 24 November 2021 are subject to strengthened advertising requirements.
The land must be offered for purchase by a New Zealander on the open market prior to a transaction being entered into with an overseas person.
- The advertising must occur before the transaction is entered into with an overseas person.
- Two types of advertising will be required – you must advertise on the internet and in a paper publication. The paper publication should be a newspaper-in the property section of 1 edition, or a real estate sales publication-in 1 edition in the area local to the relevant land.
- The land must be advertised for at least 30 working days.
- Advertisements must be published within the 12 months preceding the earlier of either the date the application is made, or the date the transaction that requires consent is entered.
Farm land advertising exemptions can be applied for and are best made in advance of an application for consent. The fee for the exemption can be found in the OIO fees and penalties schedule.
OIO fees and penalties schedule
Find out more about Farm land advertising
Find out more about exemptions from Farm land advertising
Fresh or seawater areas (formerly ‘special land’)
Fresh or seawater areas are any part of the relevant land that is a marine or coastal area, the bed of a lake, or the bed of a river.
If you are applying for a consent to buy sensitive land under the benefit to New Zealand or forestry pathway and the land is, or includes, a fresh or seawater interest, you must notify the Crown. The Crown has the right to acquire the fresh or seawater interest unless a decision is made not to.
Your notification is included in your consent application, and you need to provide the details of the fresh or seawater area in the sensitive land certificate.
Find out more about the Fresh or seawater areas
Information about the former special land regime.
Benefit to New Zealand test
The Benefit to New Zealand test has been simplified with the counterfactual requirement now a comparison of the current state of the assets against what is likely to occur as a result of the investment.
The benefit factors have been streamlined to 7 broad factors:
- Economic benefit
- Environmental benefit
- Public access
- Protection of historic heritage
- Advancing government policy
- Oversight benefit
- Consequential benefit.
There is greater emphasis on how sites of importance to Māori are protected.
The farm land benefit test applies a higher benefit threshold and places greater emphasis on economic benefits and oversight or participation by New Zealanders.
The benefit to New Zealand test applies to applications to acquire fishing quota, replacing the fishing quota national interest test.
Read more about the benefit to New Zealand test
Read more about the Farm land benefit test
Transitional rules
Assessment timeframes, the fresh or sea water provisions, and the new benefit test apply to all applications received on or after 24 November 2021.
The new farm land advertising rules apply to all applications where the agreement is entered into on or after 24 November 2021 (irrespective of when the application is received).
Schedule 1AA, clause 36 of the Overseas Investment Act 2005
13 September 2021 - Changes to the Overseas Investment Office fees
A new fees framework for applications to the Overseas Investment Office applies to all applications received from Monday 13 September 2021.
The changes have been made to reflect the complexity of an application and the amount of work required to process it. More complex applications now have 3 separate payments.
- Lodgement fee – payable when an application is submitted.
- Assessment fee – payable once an application is accepted.
- Monitoring compliance fee – payable before consent can be granted.
Fees that remain as a single payment, although the fee itself may have changed, are:
- Sensitive land: One home to live in – individual
- Sensitive Land: One home to live in – entity
- Sensitive land: Apartment off the plans
- Investor Test: Standalone
- Investor Test: Reassessment
- Variations
- Exemptions.
All other fees require the 3 payments.
Consultation on third party funding for the Overseas Investment Office (OIO)
5 July 2021 - Changes to the who and what requires consent, and other technical changes
The date an application is received by Overseas Investment Office determines whether the new rules apply to that application, regardless of when the transaction is entered into.
- If an application was received before 5 July 2021 then the existing rules apply (namely, the rules not changed by the Overseas Investment Amendment Act 2021).
- If an application was received on or after 5 July 2021 the new rules apply.
The farm land advertising rules that apply depend on the date the transaction is entered into, rather than the date of the application. Transactions entered into on or after the new rules come into force are subject to the new rules.
If you are uncertain which rules apply contact the Overseas Investment Office.
| Removing lower risk transactions | Ways the rules will apply |
|---|---|
| Increases in interests in sensitive land that do not cross ownership or control limits will no longer require consent. | Transactions that result in an ‘overseas person’ increasing their ownership or control interest will only require consent if they cross an ownership or control threshold:
|
| Transactions where the investor is no longer defined as an ‘overseas person’. | The new rules remove certain widely-held bodies corporate that are both NZ-incorporated and NZ-listed from the definition of ‘overseas person’. Managed investment schemes, too, may not be ‘overseas persons’ under the Act if they are:
|
| Lease transactions in sensitive land that are less than 10 years will no longer need consent. | Temporary ‘interests in sensitive land’ now only include interests for a term of 10 years or more (except for land that is solely residential land, where the term remains at 3 years). |
| Scope of national interest assessment is refined. | The threshold of non-New Zealand government ownership of investors triggering a national interest assessment will move from more than 10% to more than 25%. Certain foreign government investors (such as pension funds) may apply for an exemption from the definition of ‘non-New Zealand government investor’. |
| New exemptions available for lower risk transactions. | Investors have available to them new exemptions, or changes to existing exemptions, for:
|
| National interest test exemption for low-risk overseas government investors. | Investors who are, or include, non-New Zealand Government enterprises will have an exemption available from 1 component of the automatic application of the national interest test where they have limited control and influence over the investment. |
| Managing higher risk transactions and assets of significance | Ways the rules will apply |
|---|---|
| Major banks become ‘strategically important businesses’ | Coming into force on 29 July 2021, a change to the regulations means investors investing in major banks are likely to be subject to the national interest test, if other criteria are met and any relevant exemptions do not apply. |
| Simplifying application requirements for investors | Ways the rules will apply |
|---|---|
| Repeat investors who have passed the new investor test will not need to satisfy the investor test each time they apply for consent (provided there are no substantial changes since the last time they obtained consent). | Investors may apply at any time to complete the new investor test. Repeat Investors will have a streamlined investor test assessment (provided there are no substantial changes to the individuals with control or entities involved, that would make the investor unsuitable to own sensitive New Zealand assets). Investors will also be able to apply for a standalone assessment of the investor test in preparation for future transactions. |
| New requirement for applicants | Ways the rules will apply |
|---|---|
| Tax information required for Inland Revenue monitoring and compliance | Applicants will be required to provide tax information when applying for consent to acquire significant business assets |
| Fees for new pathways | New fees have been set for the new application and exemption pathways that come into effect on 5 July 2021. |
Legislation and guidance
For information about our legislative environment, including Ministerial Directive letters and delegations, see Legislation, Ministers and delegated powers.
Footnotes
[1] SR 1995/292
[2] Prior to 9 December 1999, the threshold was $10m (refer SR 1999/389)
[3] This replaced a previous letter dated 19 November 1999.
[4] That letter came into effect on 13 January 2011.