Understanding Additional Foreign Acquirer Duty (AFAD) for Residential Land in Queensland
As a foreign buyer interested in Queensland’s property market, it is crucial to understand the Additional Foreign Acquirer Duty (AFAD) and how it may affect your property acquisition. This article provides an overview of AFAD, what qualifies as AFAD residential land, and potential exemptions available for foreign retirees.
What is Additional Foreign Acquirer Duty (AFAD)?
AFAD is an additional 8% duty imposed on transactions subject to transfer duty, landholder duty, or corporate trustee duty. This extra duty applies when all the following conditions are met:
- The buyer is classified as a foreign person under Queensland law.
- The property in question is AFAD residential land (including associated chattels or existing rights).
- The liability for duty arises on or after 1 October 2016.
AFAD ensures that foreign property buyers contribute to government services and infrastructure in the same manner as local buyers.
What is Considered AFAD Residential Land?
AFAD applies to land that is or will be used primarily for residential purposes, including:
- Homes and apartments (including chattels).
- Vacant land intended for residential development.
- Land designated for residential projects such as:
- Small unit blocks.
- Housing subdivisions.
- Large-scale developments with residential components.
- Buildings undergoing refurbishment, renovation, or expansion for residential purposes.
However, certain property types do not fall under AFAD residential land, including:
- Hotels and motels.
- Some specific types of residential properties, such as retirement villages and student accommodation, which are considered on a case-by-case basis.
Exemption for Foreign Retirees
Foreign retirees purchasing a principal place of residence may be eligible for an AFAD exemption, provided the property was acquired on or after 1 January 2023. However, to maintain this exemption, retirees must meet certain conditions:
- The property cannot be sold or transferred before moving in or within one year of occupancy.
- The property cannot be leased or granted exclusive possession before moving in or within one year of occupancy.
- Partial leasing is restricted within the first year of moving in, except for lease arrangements starting between 10 September 2024 and 5 December 2024.
Foreign retirees should also consider other legal and tax implications, including:
- Residential Tenancies Authority (RTA): Compliance with landlord obligations if leasing part of the property.
- Australian Taxation Office (ATO): Understanding the impact on federal taxes and income reporting.
How to Assess and Manage AFAD Obligations
Understanding your AFAD liability is essential for proper financial planning. The key steps include:
- Determining Your Foreign Status – AFAD applies to foreign individuals, corporations, and trusts.
- Assessing AFAD Residential Land – Ensure that the property meets the criteria for AFAD liability.
- Calculating AFAD – AFAD is charged at 8% of the dutiable value in addition to regular transfer duty.
- Seeking Exemptions or Relief – Explore eligibility for ex gratia relief or other concessions.
- Meeting Payment Obligations – Ensure timely payment to avoid penalties.
Legal Guidance for Foreign Buyers
Navigating Queensland’s property laws as a foreign buyer can be complex. At our Brisbane property law firm, we assist clients with:
- AFAD compliance and exemption applications.
- Structuring property acquisitions to minimize tax implications.
- Understanding legal rights and obligations as foreign property owners.
For professional legal advice on AFAD and property transactions in Queensland, contact us today to ensure a smooth and compliant property acquisition process.
Stephen Kwok is the Principal Lawyer at Ensure Legal. This article provides general information and should not be considered legal advice. Please consult a property lawyer for advice tailored to your specific situation.
