Additional Foreign Acquirer Duty increase - Queensland

Additional Foreign Acquirer Duty (AFAD) is an extra amount of duty payable to the Office of State Revenue (OSR) that applies to transactions that are liable for transfer duty, landholder duty or corporate trustee duty. AFAD applies when a company or individual is a foreign person and an acquirer for the purposes of the transaction and the transaction involves “AFAD residential land”.

From 1 July 2018, AFAD in Queensland is proposed to increase from 3% to 7%.

A foreign person is:

1. an individual who is not an Australian citizen or a permanent resident of Australia (a foreign individual);
2. a company at least 50% owned or controlled by a foreign individual or which is incorporated outside Australia (foreign corporation); or
3. the trustee of a trust if at least 50% of the interests in the trust are foreign individuals, foreign corporations, foreign trustees or people related to them (foreign trust).

AFAD is designed to apply no matter how the interest in land is held. For example if a foreign person is a partner in a partnership and another partner acquires the land for the partnership, the transaction is caught.

“AFAD residential land” is land in Queensland that is or will be used solely or primarily for residential purposes. AFAD residential land includes:

• homes and apartments (including chattels);
• vacant land on which a home or apartment will be built;
• land for residential development including smaller unit blocks, housing subdivisions and major developments with a residential component; and
• buildings refurbished, renovated or extended for residential use.

Sellers of residences should take steps to confirm the status of buyers of their property by undertaking a Visa Entitlement Verification Online (VEVO), for a fee, from the Department of Immigration and Border Control.

However, if a buyer subsequently changes its ‘foreign’ status within three years of the relevant transaction, they are obliged to re-lodge the transfer with the OSR for reassessment of stamp duty. As sellers are jointly liable with buyers for the payment of stamp duty, if a buyer has left Australia and is uncontactable, the OSR will look to the seller to recover any AFAD that becomes payable.

From 2007 to 2016 there was $16.5 billion in direct foreign investment in commercial real estate into Queensland. Foreign investment increases the amount of capital available for investment in construction, creating jobs and economic growth. A higher tax rate for these investors may present an economic obstacle to Queensland’s growth, especially with AFAD in, for example, NSW remaining at 3%.

If you would like further information about AFAD and what the changes will mean for you, please contact a member of our team.