WHO SHOULD READ THIS
- Any foreign person who is considering acquiring residential property in Queensland.
THINGS YOU NEED TO KNOW
- The Queensland government recently announced that foreign persons will be required to pay a stamp duty surcharge of 3% for acquisitions of residential property in Queensland.
WHAT YOU NEED TO DO
- Further details regarding the surcharge have not yet been released. However, if you are considering acquiring residential property in Queensland, we recommend that you seek specialist duty advice to ensure your exposure to the stamp duty surcharge is properly managed.
On 9 June 2016, Treasurer Curtis Pitt announced that the Queensland government will introduce a new 3% surcharge on stamp duty for foreign investors who purchase residential property in Queensland. He expects the fee to raise $15 million in its first year and $25 million a year in future years.
Mr Pitt told the Queensland Media Club that the new surcharge, “will ensure foreign purchasers of residential property, who benefit from government services and infrastructure, make a contribution to their delivery - as local buyers do."
Duty on the purchase of residential property in Queensland is currently charged on a sliding scale up to 5.75%. With the surcharge, this will rise to 8.75% for foreign buyers. This is on top of the recently introduced fee imposed on foreign buyers to apply for approval from the Foreign Investment Review Board, which is approximately another 1% of the purchase price.
Despite these mounting costs, Mr Pitt noted that the government is, “confident this surcharge - that does not affect Queenslanders - will also not affect the interest foreign investors have in sharing our State's economic strengths."
This move by the Queensland government follows the introduction of a similar 3% duty surcharge on foreign buyers of residential property in Victoria last year. Interestingly, the Victorian government announced only a few weeks ago that they would be increasing their surcharge to 7% from 1 July 2016.
There has been much criticism of the proposed surcharge in Queensland, with Executive Director (Qld) of the Property Council, Chris Mountford, commenting that, “our residential development cycle has reached its peak. The Treasurer’s actions are likely to intensify the market’s cooling process, impacting construction work and ultimately jobs over the next 12 months and beyond.”
Although no further details of the Queensland surcharge have been released, it is reasonable to expect that the government will seek to limit the impact of this surcharge on foreign investment in new residential development projects in Queensland.
The Victorian rules include a discretionary exemption, which enables foreign investors to be exempt from the surcharge if they acquire residential property as part of a development project that will increase the housing stock, create jobs and contribute to local, state and federal tax revenues. We will wait to see if a similar approach is adopted in Queensland.
The surcharge is likely to be introduced for all Queensland residential land acquisition contracts by foreign buyers signed on or after 1 July 2016. The obvious message for those foreign buyers currently considering such a purchase is to sign up now, even if that contract is conditional, to lock in the lower duty rate.
Any buyers (including developers buying land for residential development) who are likely to be affected by this change should seek specialist duty advice before the introduction of this surcharge to ensure the best possible duty outcome.