If you are buying a residential property in Queensland, you should be aware of the changes in additional foreign acquirer duty (AFAD) and the First Home Owners’ Grant in response to the 2018-19 Queensland budget. So how do these changes affect you?
What is AFAD and how is it calculated?
AFAD was introduced to ensure that foreign acquirers of residential property make an appropriate contribution to the benefit they receive from government services and infrastructure. It is an extra amount of transfer duty, landholder duty or corporate trustee duty that applies when a foreign person acquires certain residential land in Queensland (that is used, or will be used, primarily for residential purposes), either directly or indirectly. This includes established homes and apartments, the renovation of a building for residential use and land acquired to be developed for residential use. It applies to any of these duties arising on or after 1 October 2016.
AFAD is calculated on the extent of a foreign party’s interest and to the extent that interest relates to residential land. AFAD is calculated on the dutiable value, even if a concession applies, such the first home concession if the relevant requirements are met.
Changes to AFAD in Queensland
The AFAD is imposed on a dutiable transaction when the liability for transfer duty, landholder duty or corporate trustee duty arises. On 1 July 2018, the AFAD is expected to increase from 3% to 7% of the dutiable value of residential land, which is the purchase price inclusive of GST. This means that the 7% increase will apply if the property is transferred on or after 1 July 2018.
Does AFAD apply to you?
The AFAD applies to you if you are:
- a foreign individual: an individual other than an Australian citizen or a permanent resident;
- the trustee of a foreign trust: a trust is a foreign trust if at least 50% of the interests in the trust are held by foreign persons; or
- a foreign corporation: a corporation incorporation outside Australia or a corporation controlled by foreign persons by at least 50%.
The AFAD does not apply when a New Zealand citizen with a special category visa under the Migration Act 1958 (Cth) acquires residential property in Australia.
In the circumstances where multiple transferees are acquiring residential property, the AFAD will only apply to the interests of the foreign acquirers amongst the multiple transferees.
Queensland First Home Owners’ Grant (FHOG)
In addition to AFAD, another major concern for property acquirers when buying or building their first home in Queensland is the first home owners’ grant. It is a state government initiative to help first home owners to purchase their first home sooner. Many first home owners will consider FHOG as part of the initial deposit when buying a brand-new home. The $20,000 Queensland FHOG will change in response to the 2018-19 Queensland budget.
Changes to FHOG
According to the budget, FHOG will be reduced from $20,000 to $15,000 on 1 July 2018. The $15,000 first home owners’ grant is for first time buyers to purchase a new house, unit or townhouse.
However, the value of the grant depends on the contract date. If the contract to purchase or build a new home was entered into between 1 July 2016 and 30 June 2018, the first home buyers may still be eligible to apply for the $20,000 grant.
Are you eligible for FHOG?
To be eligible for FHOG, you must be:
- at least 18 years of age;
- an Australia citizen or permanent resident (or applying with someone who is);
- buying or building a brand-new home (valued at less than $750,000);
- moving into the new home as your principal place of residence within 1 year of the completed transaction;
- living in the new home continuously for 6 months; and
- you and your spouse (if they are purchasing the property with you) must not have previously owned property in Australia that you (or your spouse if applicable) lived in.
If you have any questions about how the changes will apply to you and you would like to discuss your requirements in relation to the additional foreign acquirer duty or first home owners’ grant, please contact our office on (07) 3876 5111 for a consultation.
About the author
Kayleigh Whittaker is a senior lawyer on our Commercial and Property team who assists with Employment Law matters. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions property development and employee relations, Kayleigh provides practical advice to ensure smooth business transactions.