Recent changes to overseas investment into NZ forestry laws

The Overseas Investment (Forestry) Amendment Bill has recently been adopted as law with the purpose of requiring overseas investors to meet the more stringent 'benefit to New Zealand' test rather than the previous 'special forestry' test when planning to convert New Zealand land to forest.

Where an overseas investor is buying more than 1,000 hectares of forestry rights per year, they will need to satisfy at least one of the following three tests (depending on the circumstances) to obtain Overseas Investment Office consent.

Benefit to New Zealand test

The 'benefit to New Zealand' test will be applied to investors wishing to convert land into forest. In considering whether an overseas investor meets the test, the Overseas Investment Office (OIO) will examine whether the investment will, or is likely to:

▪ Result in economic benefits for New Zealand (e.g., the creation or retention of jobs, the introduction of technology or business skills, and increases in productivity)

▪ Result in benefits to New Zealand's natural environment

▪ Result in continued or enhanced access by the public to sensitive features of the land (e.g., if the land contains historic heritage)

▪ Result in continued or enhanced protection of historic heritage (e.g., through the form of a heritage covenant or compliance with existing covenants)

▪ Give effect to, or advance, a significant Government policy

▪ Involve oversight or participation in the investment by locally based New Zealanders.

Conversion of farmland

A higher threshold test applies if the land being converted to forestry includes farmland exceeding five hectares. The investment must provide a higher level of economic benefit and oversight and participation by local New Zealanders to ensure the investment is of a size or nature that is of substantial benefit to New Zealand.

But the higher threshold test can be avoided if:

▪ The transaction is minor or technical; or

▪ The transaction does not materially change the level of ownership or control that the overseas investor has over the assets; or

▪ The farmland has limited or no productive capacity and will be used promptly as a result of the investment for:

— industrial or commercial development

— the construction of one or more buildings that will together consist of at least 20 residential buildings.

If the higher threshold test is avoided, the general 'benefit to New Zealand' test must still be met.

Investment into existing forestry

For an investment in existing forestry land, the 'special forestry' test applies. The test will be met where:

▪ The land will be used exclusively (or nearly exclusively) for forestry activities

▪ The land will not be used for residential purposes (except to provide accommodation for workers); and

▪ Whenever a crop of trees is harvested, a new crop will be replanted.

The Toitū Te Whenua Land Information New Zealand guidelines provide that investors must implement and maintain certain existing protocols relating to logging arrangements, public access and protection of native plants, animals and historic places.

Investors planning to purchase existing forestry land may apply for a standing consent, allowing them to obtain consent without identifying the land they intend to buy. Standing consents are for investors with a proven track record and detailed business plans.

It is important to note that consent will not be required for Australian citizens or entities (in certain circumstances) nor investors buying less than 1,000 hectares of forestry rights per calendar year.

As agents, if you have vendors selling more than 1,000 hectares of forestry rights, you should recommend they take legal advice from a lawyer experienced in the Overseas Investment Act area.