Foreign purchaser stamp duty surcharge about to start in Queensland

By Adrian Chek
Property & Development Tax

In brief

From 1 October 2016, a stamp duty surcharge of an additional 3 per cent will apply when a foreign person acquires residential land in Queensland. Affected taxpayers should therefore urgently consider whether contracts relating to potentially affected transactions can be exchanged in the next few days. Partner Adrian Chek and Senior Tax Counsel Marc Johnston report.

How does this affect you?

From 1 October 2016 an additional 3 per cent stamp duty surcharge ('additional foreign acquirer duty' (AFAD)) will apply when a foreign person acquires residential land in Queensland. (For more information, please see our Focus article outlining AFAD).

The rules will apply to contracts formed on or after this date – they will not apply to a contract to acquire Queensland land executed before 1 October, even if settlement occurs on or after that date. Accordingly, affected taxpayers should urgently consider whether contracts relating to potentially affected transactions are able to be exchanged before 1 October.

Reaction to AFAD 

The media has commented extensively on the introduction of AFAD. Additionally, various industry bodies and property developers have been lobbying the Queensland Government in relation to the adverse impacts that AFAD will have in the State when it commences.

In particular, where property developers that are foreign persons acquire land in Queensland for residential development, the AFAD is effectively an additional cost of that development. This cost could either make the project not financially viable or otherwise adversely impact housing affordability in Queensland.

The Queensland Government has recognised this problem, and announced last Friday that it would develop guidelines with the Queensland Office of State Revenue to exempt from AFAD land acquired by foreign property developers in certain circumstances. The proposed exemption will apply to projects that receive ‘significant development’ status. In order to pass this test the development must include a minimum of 50 residential lots.

Relief may also be available for non-metropolitan developments not meeting this 50-lot minimum if the project is of significant benefit to the region in question. The Treasurer's statement also suggests that relief might be available for other projects involving Australian-based foreign property developers – 'We will also give weighted consideration to foreign companies with a head office in Australia, a significant staff presence here or when foreign companies primarily contract for Australian services and materials through Australian contractors.'

Once the guidelines have been released, we will provide a further update on how they will apply to residential property developments in Queensland. In the interim, please feel free to contact us if you require more detailed advice on AFAD and its impact on any transactions with which you are involved.