If you are a foreign person or are a trustee of a foreign trust, before buying a property in Australia you may need to:
- obtain a notification from the Foreign Investment Review Board (‘FIRB’) under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (‘FAATA’) that it has no objection to your acquisition of the property (‘No Objection Notification’);
and
- notify Titles Queensland under the Foreign Ownership of Land Register Act 1988 (Qld).
Who needs make an FAATA application?
The FAATA application is required for the following entities and individual:
- A corporation with an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest in the corporation (at least 20% voting entitlements or shares) or two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest.
- A trustee of a trust with an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest in the trust (at least 20% of the income or property of the trust) or two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest in the trust; and
- The trustee of a discretionary trust where a foreign person holds any beneficial interest in the trust.
Failure to obtain a required No Objection Notification prior to entry into the Contract to transact a property will involve a breach of warranty. In addition, to proceed with the transaction without a required “no objection” notification may result in a forced sale and substantial penalties being imposed.
For this reason, if your purchase is subject to the FAATA, it is imperative that the contract is made conditional on a No Objection Notification being obtained.
Australian Taxation Office (‘ATO’) requirements
Foreign entities or individual owning a property that is not occupied or genuinely available for rent for at least half of the year, may be subject to an ATO annual fee that is equal to the relevant foreign investment application fee imposed on the property.
Registration of acquisition
A foreign person or entity who has purchased residential real estate in Australia must register their acquisition on the Register of Foreign Ownership of Australian Assets maintained by the ATO within 30 days of settlement. Required reporting must be made using the ATO’s online notification system. A ‘myGovID’ is required to access this service.
Foreign resident/becoming a foreign resident
If you live overseas for more than six months in any given year, or otherwise become a foreign resident for tax purposes, and then sell your property during that time, you may not be eligible for the CGT main residence exemption on the disposal, even if you lived in the house as your principal place of residence prior to becoming a foreign resident. Ascertaining whether an individual is a foreign resident at a particular point in time can be complicated and will depend on all the circumstances.
If this might apply to you, we recommend you obtain tax advice before you enter into a contract to sell the property or dispose of the property in the future.
Additional Foreign Acquirer Duty (‘AFAD’)
AFAD applies to property transactions which are liable to transfer duty if:
- the property is AFAD residential property (see below); and
- the acquirer under the transaction is a foreign acquirer.
AFAD residential property is property in Queensland that is or will be used solely or primarily for residential purposes, where particular conditions are met. These include:
- established homes and apartments;
- vacant land on which a home or apartment will be built;
- land for development for residential use; and
- refurbishment, renovation or extension of a building for residential use.
AFAD residential property does not include property used for hotel and motel purposes.
A person will be a “foreign acquirer” if the person is:
- a foreign individual i.e. an individual other than an Australian citizen or permanent resident. However, AFAD will not apply to a New Zealand citizen who holds a permanent visa, or who holds a special category visa as defined in the Migration Act 1958 (Cth);
- a foreign corporation i.e. a corporation incorporated outside Australia or a corporation in which foreign persons have a controlling interest; or
- a trustee of a foreign trust i.e. a trust where at least 50% of the trust interests are foreign interests.
AFAD is an additional duty imposed on the transaction’s dutiable value.
However, if there are multiple buyers and only one is a foreign acquirer, AFAD will only apply to the extent of the foreign acquirer’s interest under the transaction. Liability for AFAD will not affect any entitlement to a home concession for transfer duty.
If, within three years of the transaction, the acquirer becomes a foreign corporation or the trustee of a foreign trust, it is important to note that the Commissioner of State Revenue (‘Commissioner’) must make a reassessment to impose AFAD on the transaction.
This may occur, for example, because of a change in the controlling interest in the company or interests in the trust.
If this becomes applicable, you must take action to inform the Commissioner of the changed circumstances within 28 days. If you do not, significant additional penalty duty may be payable, and interest will be charged from when you are liable to notify the Commissioner.
Ex gratia relief from AFAD may be available where a foreign acquirer which is Australian based acquires residential land for significant development. Qualifying for such relief will depend on satisfying relevant conditions imposed by the Commissioner (including as to the significance of the proposed development). If a foreign acquirer is granted relief, it must notify the Commissioner if any of the conditions are no longer satisfied or if there is a material change in the circumstances existing when the relief was granted.
This information is of a general nature only and we recommend you obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on 07 3733 1390 or email [email protected].