We have summarised some of the key aspects of the regime below. If you require any further clarification around the AFAD or whether your clients are affected, give us a call on 07 3223 6100.
1. What is the Additional Foreign Acquirers Duty?
Essentially, the AFAD imposes an additional 3% levy on top of standard transfer duty (formerly known as stamp duty), landholder duty and corporate trustee duty.
As an example, a standard residential lot purchased for $500,000.00 by a Foreign Acquirer, provided that all criteria are met, would incur transfer duty in the amount of $15,925.00 and AFAD in the amount of $15,000.00 (being 3% of the purchase price).
2. When does AFAD apply?
There are essentially three elements for determining the applicability of the AFAD from a general real estate perspective:
- A contract for the purchase of real property in Queensland is entered into on or after 1 October 2016;
- The property is ‘Residential Land’; and
- The acquirer is a ‘Foreign Person’.
While the first element above is somewhat self-explanatory, the latter two have specific preconditions as defined in the Act and summarised below.
3. What is ‘Residential Land’?
Residential Land is land in Queensland that is, or will be, solely or primarily used for residential purposes. Additionally, at least one of the following three criteria must be met:
- There is, or will be, a building on the land designed or approved for human habitation by a single family unit. While a single family unit has not been defined in the Act, it is presumed that this will be interpreted broadly;
- There is a building on the land that a person will refurbish, renovate or extend so that it is designed or approved for human habitation by a single family unit; or
- The land is being developed for a building to be designed or approved for human habitation by a single family unit.
This definition captures almost every type of standard residential development or purchase in Queensland, from a residential home to an off the plan residential unit (that may be let out for investment purposes).
4. Who is a ‘Foreign Person’
A Foreign Person, under the Act, is any of the following:
- A foreign individual – being an individual that is not an Australian citizen or permanent resident;
- A foreign corporation – being a corporation incorporated outside of Australia or a corporation where foreign persons have a controlling interest (i.e. 50% control, voting rights or shareholding, which is also deemed to include reference to related persons); or
- A foreign trust – being a trust with at least 50% of the beneficial interest in said trust beneficially held for a foreign individual or foreign corporation.
5. Who is an ‘Acquirer’?
An Acquirer, in the simplest of terms, is any entity that obtains or surrenders an interest that is otherwise captured by the Act (i.e. a purchaser).
6. How does the AFAD affect Foreign Purchasers?
Foreign Purchasers will need to ensure that they attend to each of the following before entering into any type of residential land contract:
- Notify their solicitor of their concern that AFAD may apply;
- Ensure that an additional 3% of the purchase price is available at settlement to pay for AFAD; and
- Lodge the relevant statement, usually prepared by a solicitor, with the Office of State Revenue within 30 days of settlement occurring.
The details above are general in nature only and provide snippets of the full contents of the relevant sections of the Act. Depending on the circumstances, the AFAD may or may not apply to the transaction in addition to other duties in question, and legal advice should always be sought.
You can phone our office on 07 3223 6100 to discuss your specific situation and whether the AFAD applies.