The Queensland Treasurer has announced that from 1 October 2016, foreign buyers will pay substantial additional transfer duty for purchases of residential real estate in Queensland. The increase is 3% of the value or price paid, which is roughly a doubling of the amount of duty which must be paid.
The increase in duty also applies to landholder duty and corporate trustee duty where the liability arises on and after 1 October 2016.
The changes are known as the Additional Foreign Acquirer Duty (“AFAD”).
Which transactions will the Additional Foreign Acquirer Duty apply to?
The additional 3% duty will apply to –
- Transactions for land, directly or indirectly, which are liable to transfer duty, landholder duty or corporate trustee duty;
- Where the liability arises on or after 1 October 2016;
- If the land is residential land; and
- If an acquirer is a foreign acquirer.
In the most common scenario, foreign buyers will be liable for the extra duty if they are purchasing residential land and the contract is formed on or after 1 October 2016.
Am I a foreign acquirer for Additional Foreign Acquirer Duty?
The extra duty will not apply if you are a New Zealand citizen who holds a permanent or special category visa.
A person will otherwise be a foreign acquirer if they are:
- a foreign individual—an individual other than an Australian citizen or permanent resident;
- a foreign corporation—a corporation incorporated outside Australia or a corporation in which foreign persons have a controlling interest; or
- a trustee of a foreign trust—a trust where at least 50% of the trust interests are foreign interests.
Am I buying residential land for the purposes of Additional Foreign Acquirer Duty?
Land will be residential land for the purposes of the extra duty if it is land in Queensland that is or will be used solely or primarily for residential purposes (residential test), where particular conditions are met.
Residential land will include:
- established homes and apartments;
- vacant land upon which a home or apartment will be built;
- land for development for residential use (such as smaller unit block developments, housing subdivisions, and major developments with a residential component); and
- refurbishment, renovation or extension of a building for residential use.
AFAD residential land does not include land used for hotel and motel purposes.
Other types of residential property (such as retirement villages or student accommodation) may be subject to AFAD if the use of that property meets the residential test.
Please contact us if you are concerned whether the land you are buying will be residential land for the purposes of AFAD.
Is the extra duty apportioned between foreign and non-foreign Buyers?
Yes. The extra duty will only apply to the extent of the foreign acquirer’s interest in the land.
So, in a scenario where there are three buyers, and only one buyer is foreign, the extra duty will only be imposed on the dutiable value of the foreign acquirer’s interest in the land.
A purchase by a foreign acquirer will not attract the Home or First Home concessions to the extent of the extra 3% duty imposed.
However, concessions for homes or first homes may continue to apply to the normal component of any transfer duty imposed.
Is there anything else to be aware of?
Post Settlement Duty
The extra 3% will also apply to changes of ownership post settlement. For example, the extra 3% duty may be imposed if there are changes in the trust or company so that it becomes a foreign corporation or trustee of a foreign trust within 3 years of purchase.
Charges on Land
The changes give the Office of State Revenue an ability to register a charge over the property if the 3% duty is unpaid. The charge becomes a first ranking charge on the property which received priority over any mortgage. This gives the Office of State Revenue significant rights to sell and recover duty that is unpaid.
Due to extent to the changes, please contact our office if you have any concerns about how the new Additional Foreign Acquirer Duty may affect you.