Businesses and investors will be welcoming the Government’s planned reform of the Overseas Investment Act 2005 (Act), announced on Sunday. The reforms are designed to speed up international investment into New Zealand and give investors confidence that New Zealand is open for business. The changes are expected to come into effect before the end of the year.

The Act has always been based on a presumption that it is a privilege to own sensitive assets in New Zealand and that offshore investment should therefore, in general, require consent.

Under the proposed reforms, this presumption would be reversed and inbound investment would be permitted except in certain limited circumstances, namely:

• Protected Asset Acquisitions: Where the acquisition in question would require consent under the existing regime AND the assets being acquired include farm land, residential land or fishing quota (collectively, Protected Assets). The acquisition of Protected Assets will remain subject to the existing regime.
  
  
• Other Asset Acquisitions: Where the acquisition in question would require consent under the existing regime but no Protected Assets are involved, consent will only be required if an initial review indicates a risk to national security.
  
  For this new category of streamlined applications, the Overseas Investment Office (OIO) must carry out an initial risk assessment. If there are no national interest risk factors present, the OIO must approve the application within 15 business days.
  
  If a national interest risk is identified, the application will undergo a national interest assessment, to consider whether there are benefits substantial enough to potentially outweigh the identified risk. This national interest assessment consolidates the existing investor test, benefit to New Zealand test, and the national interest test.
  
  
• Strategically Important Businesses/Overseas Government Investors: Where the acquisition in question would require consent under the existing regime and involves an interest in a strategically important business (SIB) or a foreign government (or an associate) acquiring more than 25% ownership or control of the asset, the transaction will be automatically escalated to the national interest assessment mentioned above.

The existing “national security and public order” (NSPO) notification regime will remain in place, for transactions involving a SIB. Even if a transaction is not captured by the existing consent thresholds (which would apply to trigger assessment under the new national interest regime above), it may still need to be notified under the NSPO regime (triggering Ministerial powers to impose conditions or block the transaction). The reform proposals include: 

• An ability to add to SIB categories by regulation
• An ability to add SIB categories which are subject to “mandatory notification”.

Commentary

Corporate and Commercial Partner, James Hawes, points out that these reforms represent a significant change in New Zealand’s approach to foreign direct investment. “Investment into New Zealand can be complicated, particularly if it involves investment in land. In our Expanding Horizons survey, released in October 2024, 98% of offshore investors indicated that they were considering an investment in the next five years, with 40% planning to invest within the next twelve months. Those investors ranked us as the top destination for ease of doing business and quality of investment opportunities. With these changes to the overseas investment regime, we expect to see a healthy increase in investment once the reforms are enacted later this year.”

We would also like to see the Government take this opportunity to consider reforms around farmland and residential land. Tara Wylie, a partner in the Real Estate Team, says that while some investments in farmland should have significant regulatory oversight to protect New Zealand’s agricultural identity, the definitions could be adjusted to account for the proposed use. For example, the use of farmland for a solar farm or housing development should not be subject to the same regulatory controls as a large dairy farm or high country sheep station.

Similarly, in relation to residential land, it would be good to see a distinction drawn between foreign investment in one home to live in, which NZ First has made clear it will not move on, to residential land which is used for housing development. These foreign investments increase housing stock rather than diminish it.

Conclusion

The proposed reforms are rated a “category three” priority on the 2025 Legislation Programme, and the OIO is expecting the changes to pass before the end of 2025.

There will be the opportunity to make submissions on the proposed reforms and we would be happy to assist with those.

Get in touch

If you have any questions about how the changes to the overseas investment process might affect you, please get in touch with one of our experts.

Special thanks to Tom Howie and Sarah Heslin for their assistance in writing this article.