Additional Foreign Acquirer Duty – What You Need to Know!

Additional foreign acquirer duty (AFAD) is an additional duty that applies to foreign acquirers purchasing residential property in Queensland.

From 1 July 2018, the Queensland Government increased the AFAD amount from 3% to 7%. This means that a foreign person now needs to pay an additional 7% transfer duty to the Government when acquiring residential land in Queensland.

Who has to pay AFAD?

AFAD applies to “foreign persons” who include:

Foreign individuals – an individual other than an Australian citizen or permanent resident at the time of entering into the transaction. Some exceptions apply to New Zealand citizens holding a special category visa under the Migrations Act 1958.

Foreign corporation – a corporation incorporated outside Australia, or if foreign persons or related persons of foreign persons have a controlling interest of at least 50% of the corporation.

Foreign trust – at least 50% of its interests in the trust are held by foreign interests.

What’s AFAD land?

AFAD residential land refers to land used solely or primarily for residential purposes. Examples include vacant land if a house or unit will be constructed on it, or the purchase of land for a future residential development. It does not apply to short term accommodation such as a hotel or student accommodation.[1]

AFAD only applies to the foreign person’s interest in the land.

Example 1 – a married couple, one spouse (foreign individual) and the other spouse (Australian citizen) purchase a residential property in Queensland in equal shares for $500,000. An additional 7% duty will apply on the foreign person’s share of the transaction.

AFAD: $250,000 x 7% = $17,500 additional duty will be payable on this transaction. This amount will be in addition to any normal transfer duty payable.

Example 2 – a foreign individual enters into a contract to purchase a house. A day before settlement, their Australian permanent residency is approved. AFAD still applies because they were a foreign individual when they entered into the agreement – the day they became liable for transfer duty.

If you are looking at purchasing at your think AFAD may apply to you, contact Olsen lawyers on (07) 3846 5288 or click here.

Information current as at 18 July, 2019.

Sources

[1] Queensland Government, 2016, ‘Public Ruling DA232.1.1 AFAD residential land’, https://www.treasury.qld.gov.au.