Queensland Treasurer Announces Relief from Additional Foreign Acquirer Duty
In June this year, the Queensland Government passed legislation that will impose a 3% surcharge on the purchase of residential land in Queensland by “foreign acquirers”.
Dubbed the “Foreign Investor Tax”, this surcharge was proposed by the Queensland Government in an effort to ensure that foreign purchasers of residential land in Queensland, who benefit from Government services and infrastructure in Queensland, contribute to the State in the same way that local purchasers do.
While the Queensland Government is adamant that this surcharge will not affect Queenslanders, the Property Council of Australia and the Housing Industry Association Queensland are not so sure; claiming that imposing the surcharge is reckless and will cause Queensland to fall in line with the other Australian states – losing its appeal for foreign investment in the process.
Who Will Be Affected?
Coming into effect on 1 October 2016, this 3% surcharge will take the form of an Additional Foreign Acquirer Duty (AFAD) that will be imposed on dutiable transactions (or relevant acquisitions on which landholder or corporate trustee duty is imposed) relating to residential land in Queensland that are entered into by a “foreign acquirer”.
Under this new regime, “foreign acquirer” is defined as:
- a foreign individual—an individual other than an Australian citizen or permanent resident;
- a foreign corporation—a corporation incorporated outside Australia or a corporation in which foreign persons have a controlling interest; or
- a trustee of a foreign trust—a trust where at least 50% of the trust interests are foreign interests.
“Residential land” is defined as land that is or will be solely or primarily used for residential purposes, and:
- there is, or will be, on the land a building designed or approved by a Council as a single family unit;
- there is, or will be, on the land a number of lots in a strata title building;
- an existing building on the land will be renovated to be one of the above, or land that will be developed into one of the above.
The Queensland Treasurer’s Announcement
In what may be a response to some of the above criticisms, Queensland Treasurer Curtis Pitt recently announced that certain foreign acquirers may be able to gain ex gratia relief from the 3% AFAD if they manage to satisfy a number of particular requirements.
- the foreign acquirer must demonstrate a “significant development” status. To pass this test, the development by the foreign acquirer must include a minimum of 50 residential lots; or
- in regional areas, where a major project may not meet the “significant development” status, the foreign acquirer must demonstrate that the development would deliver significant economic benefits in the region where it’s proposed to occur. The regional significance test is targeted at non-metropolitan areas and is not intended to apply to urban in-fill developments.
The Queensland Treasurer also announced that when determining whether to grant ex gratia relief to a foreign company, weighted consideration would be given to those who:
- have a head office in Australia;
- have a significant staff presence in Australia; or
- primarily contract for Australian services and materials through Australian contractors.
The AFAD has undoubtedly been developed with noble intentions, with the Queensland Government attempting to support Australian individuals and Australian based companies investing in Queensland property by raising the price for foreigners trying to buy in.
Although the Queensland Treasurer’s announcement seems to show a slight relaxing of this position, exactly how the above tests will be applied by the Queensland Government is still very uncertain, which could potentially be enough to change the minds of foreign acquirers looking to invest in Queensland property.