What is a discretionary exemption?
A discretionary exemption may be granted by a decision-maker after considering the circumstances of the applicant and transaction. It lets the decision maker respond to unexpected or unusual circumstances that may not otherwise be provided for under the Overseas Investment Act. In many situations it would be more appropriate to for the applicant to apply for consent.
A discretionary exemption can apply to the:
- need for consent
- definition of overseas person, associate or associated land.
It can be granted for any:
- transaction
- person
- interest
- right
- asset.
We publish all exemptions on our website, including a statement of the reasons for the exemption.
Register of discretionary exemptions
Section 61D Overseas Investment Act 2005
Purpose of exemption
An exemption may be granted if it:
- provides flexibility where compliance with the Act is impractical, inefficient, unduly costly or unduly burdensome
- allows for exemptions that are minor or technical
- allows for exemptions related to the 9 specified purposes listed in section 61B of the Overseas Investment Act.
Overseas Investment Act 2005, s61B
Assessment criteria
Section 61E of the Overseas Investment Act sets out the criteria for discretionary exemptions. The decision-maker can only grant an exemption if they consider that:
- there are circumstances that mean that it is necessary, appropriate or desirable to provide an exemption to achieve the purposes of exemptions set out in section 61B(a)-(c)
- the extent of the exemption is not broader than reasonably necessary to address those circumstances.
In considering whether these criteria are met, section 61E requires the decision-maker to consider:
- the purpose of the Act
- ownership and control factors
- any other relevant factors.
Overseas Investment Act 2005, section 61E
Overseas Investment Act 2005, section 61B
Exemptions for fundamentally New Zealand entities
The exemptions for fundamentally New Zealand entities are primarily intended to allow persons, transactions, rights, interests or assets that are majority-owned and substantively controlled by New Zealanders, but still fall within the definition of an overseas person, to apply for a discretionary exemption.
Factors we consider
When considering applications for an exemption of this type we will consider why the relevant entity is an overseas person.
The ownership and control thresholds in section 7 of the Act are likely to be relevant to whether a discretionary exemption should be granted. For some entities, we also consider the ownership and control thresholds in Annex One of the Ministerial Directive Letter dated 6 June 2024.
We will also consider other factors as required by section 61E(2) of the Overseas Investment Act, including:
- the extent of ownership by a foreign government or its associates
- the applicant’s record of compliance with the law.
Exemptions for residential land
Since 22 October 2018, overseas persons have been unable to acquire interests in residential land in New Zealand without consent. This law change aimed to restrict foreign ownership of New Zealand housing to ensure housing remained available for New Zealanders.
The change also introduced restrictions on:
- overseas persons who owned residential land prior to 22 October 2018
- overseas persons whose overseas person status has changed since acquiring residential land.
In limited circumstances, the decision-maker may grant a discretionary exemption to affected persons.
Factors we consider
In addition to the assessment criteria outlined above, the decision-maker may consider:
- whether the interest was acquired prior to 22 October 2018, particularly when the transaction is one that a person might have reasonably expected to be able to complete before the restrictions
- the impact of the restrictions on New Zealanders, including New Zealanders involved in the transaction
- how long the property has been owned
- the extent to which the transaction is due to matters beyond the overseas person’s control
- the overseas person’s connection with New Zealand, including New Zealand-based family, employment and investments, or a long period of residence in New Zealand
- the extent of existing ownership, in particular where the existing owner holds at least 25% ownership
- the likely impact on the availability of housing, compared to the status quo.
Not every case which meets one or more of the factors above will be eligible for an exemption. The case for an exemption will be stronger if more than one factor is met, or if one factor is met strongly.
The extent to which a discretionary exemption application may be appropriate will depend on the facts of each case.
Example
If a residential development needs its unit plan to be updated to adjust common areas, the unit owners may acquire an interest in a slightly different area of residential land. Any of the unit owners who are overseas persons would require consent under the Overseas Investment Act to complete the redevelopment.
The factors that may be relevant to consider in this situation include:
- whether the transaction is one that an owner would reasonably expect to be able to complete
- whether the restrictions would have an impact on the other owners, who may not be able proceed with the redevelopment without the overseas person
- whether the transaction is out of the overseas person’s control
- the extent of existing ownership
- any impact on availability of housing compared to the status quo.
For further examples of discretionary exemptions for residential land, see the register of discretionary exemptions. Toitū Te Whenua publishes all discretionary exemptions on the register, including the reasons why exemptions were granted.
Register of discretionary exemptions
Apply
Before applying for an exemption, we recommend that you:
- seek expert legal advice as early as possible
- contact us to organise a pre-application meeting.