Find guidance on making a counterfactual submission as part of your application for consent.


As a result of Tiroa E[1], the OIO and relevant Ministers must apply a "counterfactual test" when assessing whether an overseas investment will, or is likely to benefit New Zealand. This test, which was described by the Court as a "with and without" test, requires a comparison of what is likely to happen with the investment, and what is likely to happen without the investment (“the counterfactual”). Please note, this counterfactual test is not applicable to the modified benefits test for forestry.

Benefit to New Zealand is determined by reference to a list of factors set out in section 17 of the Overseas Investment Act 2005 and regulation 28 of the Overseas Investment Regulations 2005 (“relevant benefit factors”).

A counterfactual analysis will be applied to any relevant benefit factors set out in section 17, and to those relevant regulation 28 factors capable of having a counterfactual applied (see OIO technical resources on individual benefits to determine which regulation 28 factors are capable of having a counterfactual applied).

Consequently, when preparing an application for consent, you must include submissions on:

  • What you consider the likely counterfactual will be if the overseas investment does not proceed; and
  • In terms of the relevant benefit factors, what you consider are the benefits resulting from the investment which will not likely arise under the counterfactual.

[1]Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand [2012] NZHC 147.

Process for assessing the counterfactual and net benefits

Step 1 is to identify who the likely alternative owner to the applicant will be if consent is not granted. This will most likely be a competent and adequately funded alternative New Zealand purchaser or the vendor.

Step 2 is to set out the current state of the assets and then to identify what would likely happen to them under the ownership of the likely alternative owner.

Step 3 is to identify points of difference between what the applicant is likely to do compared to the likely alternative owner and explain the reasons for this.

Step 4 is to apply the counterfactual to each of the benefit claims where relevant (as set out in the “Technical Guidance” section).

Counterfactual submissions should be well researched and evidence based. If you are unsure about the counterfactual, identify and research more than one counterfactual. The counterfactual scenario must be forward-looking and the time-frame for analysis extends well beyond that required to locate another purchaser.

We will form our view on the most appropriate counterfactual having regard to the best information available including information sourced directly from the vendor and other external sources.

Rebuttable presumption

There is a rebuttable presumption that it is likely that the assets will be acquired by a competent and adequately funded alternative NZ purchaser (ANZP). The onus is on you to show that this is unlikely to be the case (eg. if you believe that the vendor will be the most likely alternative owner, convincing evidence must be provided to support this).


Identifying the likely alternative owner

  • Reasons for the sale and the vendor’s intentions should the application be declined;
  • The extent of advertising of the assets (eg. length, form, locations and target market);
  • Response to advertising and level of New Zealand interest in the assets including whether there were New Zealand under-bidders;
  • Saleability – how large or limited is the likely potential pool of purchasers for the type of asset.

Identifying current asset condition and what the alternative owner would likely do with them

  • Historical and recent use – what have the assets traditionally and recently been used for;
  • Recent inputs and outputs of any business run in conjunction with the assets;
  • Condition of the assets (eg. well run or underperforming);
  • Market trends for asset type and location - this should be supported by expert independent analysis. Useful sources include the Ministry of Primary Industries, Statistics NZ and industry organisations such as Dairy NZ, Beef + Lamb etc.

Identifying points of difference and net benefits

  • What is your motivation for implementing the business plan? Would this motivation also be shared by the likely alternative owner? Why would the likely alternative owner not undertake a similar business plan?
  • Change of use of the assets – is the asset use changing and would this otherwise likely occur?
  • Cost – how much will it cost to implement the proposed business plan relative to the expected returns?; If the expenditure is small relative to the expected profits and is expenditure of a type usually undertaken by businesses of this type, we are likely to conclude that an alternative owner of the assets would likewise undertake this expenditure without evidence to the contrary.

Common mistakes

  • Choosing the counterfactual most favourable to you rather than the counterfactual which is most likely (we regularly reject unrealistic counterfactuals that overstate the benefits of the proposed investment);
  • Considering only the short term counterfactual (the longer term also needs to be considered);
  • Claiming there is no New Zealand interest in the assets when the market has not been properly tested (eg. where farm land was only advertised for the minimum period, advertised while it was under offer by you or advertised at above market prices);
  • Assuming that an ANZP would be poorly funded and unable to improve the relevant assets. For example, in farm scenarios an ANZP will usually be a competent and adequately funded farmer who will normally seek to maximise profitability unless there are clear reasons for not doing so;
  • Relying on unrealistic statements by the vendor (eg. where the vendor has stated that without the investment it would allow the assets to deteriorate);
  • Failing to make basic enquiries of the vendor or about the sales process.


This website provides general information only. The OIO and LINZ do not assume any responsibility for giving legal or other professional advice and disclaim any liability arising from the use of the information. If you require legal or other expert advice you should seek assistance from a professional adviser.

Last Updated: 3 December 2018