NEW Additional Transfer Duty Payable by Foreign Buyers of QLD Residential Land

By 29 September 2016News, Property
Additional Transfer Duty Payable by Foreign Buyers of QLD Residential Land
A new foreign ownership duty in Queensland

A new 3% duty surcharge will be applied to the acquisition of houses and apartments by foreign investors. The surcharge applies in addition to the usual transfer duty payable on such acquisitions (which is imposed at marginal rates of up to 5.75% for purchases over $1 Million). So the top rate payable by foreign buyers of Queensland residential land will be 8.75%.

Start date for new charge

Legislation to give effect to this proposal was passed in parliament on Friday, 17 June 2016 and will commence on 1 October, 2016.

From 1 October 2016 AFAD (additional foreign acquirer duty) at the rate of 3% will apply in addition to normal transfer duty.

What is AFAD residential land?(new s.232 of the Duties Act 2001)

AFAD residential land is land in Queensland:

(a) that is, or will be, solely or primarily used for residential purposes; and
(b) to which any of the following applies:
  • 1. on the land there is, or will be constructed, a building designed or approved by a local government for human habitation by a single family unit;
  • 2. on the land there is a building that a person will refurbish, renovate or extend so it becomes a building mentioned in subparagraph (1);
  • 3. the land is a lot on which there is a building or a part of a building that, for the separate area the lot comprises, is designed or approved by a local government for human habitation by a single family unit;
  • 4. the land will be a lot on which there is a building or a part of a building that, for the separate area the lot comprises, is designed or approved by a local government for human habitation by a single family unit;
  • 5. the land is a lot on which there will be a building or a part of a building that, for the separate area the lot comprises, is designed or approved by a local government for human habitation by a single family unit;
  • 6. a person is undertaking, or will undertake, development of the land so it becomes land mentioned in any of subparagraphs (1) to (5).
Who is a foreign person? (new 234)
Each of the following is a foreign person—
(a) a foreign individual;
(b) a foreign corporation;
(c) the trustee of a foreign trust.A foreign individual is an individual other than an Australian citizen or permanent resident (new section 235). A permanent resident means is either:
(a) the holder of a permanent visa as defined by the Migration Act 1958 (Cwlth), section 30(1); or
(b) a New Zealand citizen who is the holder of a special category visa as defined by the Migration Act 1958 (Cwlth), section 32.
New tax applies to companies and trusts with foreign interests holding residential land as well
There are mechanisms for tracing foreign interests in trust and company acquisitions (sections 245 & 246). There is also a reassessment made retrospectively if with the landowner ends up with an interest being held by a foreign person within 3 years of the liability for transfer duty (new section 246A).
Enforcement
The new regime is not intended to be a toothless tiger with unpaid AFAD being a charge on the land with priority over all mortgages and other interests on the land (new s. 246B). The Duties Commissioner will have the power to apply to court to sell property charged with non-paid AFAD to recover  it (sections 246C to 246G).
Transition Arrangements
Basically, there are none! The new charges will apply to a relevant transaction if liability for transfer duty arises on or after 1 October 2016 (new section 662). There is no transitional relief for agreements entered into on or after 1 October 2016 which arise from call options or put and call options which are entered into before that date.
QLD not alone in taxing foreign residential investment

The big three eastern states have all targeted foreign investors in their respective budgets. In NSW, foreign buyers will be hit with a 4 per cent stamp duty surcharge from June 21 and 0.75 per cent land tax surcharge starting in 2017.Victoria will raise its existing 3 per cent stamp duty surcharge and 0.5 per cent land tax surcharge to 7 per cent and 1.5 per cent respectively on July 1, 2016.

For further information please contact a member of our property team on (07) 4616 9898 – Tony Randall, Wendy Gordon or Justine Shine.

 

This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.

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