This section contains information on how we assess the proportional nature of the benefit assessment when considering applications

This commentary provides an overview of how we assess the proportional nature of the benefit assessment when considering applications under the Overseas Investment Act 2005 (“Act”). This is the second in our series of technical commentaries.

This commentary is intended to assist both applicants and their advisors when they are preparing applications under the Act. This commentary does not address our approach to the weighting of individual factors in the benefit test.

The benefit test under the Act:

The benefit to New Zealand test is set out in section 16A of the Act.1 If the relevant land is or includes non-urban land that, in area (either alone or together with any associated land) exceeds 5 hectares, this benefit needs to be, or must likely be, substantial and identifiable.

Proportionate approach to application assessment:

Whether the benefit to New Zealand is sufficient to meet the benefit test2 or the substantial and identifiable benefit test3 is assessed on a proportionate basis relative to the investment.

Section 3 of the Act acknowledges that it is a privilege for overseas persons to own or control sensitive New Zealand assets. It is a greater privilege for an overseas person to own or control high value sensitive New Zealand assets than lower value sensitive assets. We therefore consider that the higher the value of the assets being acquired (and the greater the privilege it is to own and control those assets), the greater the level of benefit that is required to meet the benefit tests.  For example, more benefit is required to acquire a 1,000 hectare orchard than a 50 hectare orchard, all other factors being the same.

Some points to consider when determining the value of the sensitive New Zealand assets being acquired, include:

  • the size of the land;
  • the monetary value of the land;
  • the public interest in the land;
  • whether the land includes or adjoins features such as the foreshore or historic heritage;
  • the number of sensitivity factors in the Act that apply;
  • the infrastructure that is present on the land;
  • the business being run on the land;
  • whether the land contains any strategically important infrastructure;
  • the degree of ownership or control of/over the interest in the land that is being acquired;
  • the nature of the interest being acquired (temporary or permanent).

These considerations are not exhaustive and no particular consideration is determinative. Rather, each investment is assessed on its own merits and the specific facts that relate to it.

 

1 Sections 16(1)(e)(ii) and (iii) for transactions entered into prior to 22 October 2018.

2 Section 16A(1)(a) or section 16(1)(e)(ii) for transactions entered into prior to 22 October 2018.

3 Section 16A(1)(b) or section 16(1)(e)(iii) for transactions entered into prior to 22 October 2018.

Last Updated: 8 April 2019