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Types of foreign persons for additional foreign acquirer duty (‘AFAD’)

AFAD is an additional 7% transfer duty that applies to foreign acquirers only who purchase residential property in Queensland on or after 01 July 2018. You are considered a foreign person for AFAD if you fall into one of the following categories:

 

  1. Foreign individual

 

You are a foreign individual if you are not an Australian citizen or permanent resident.

You can only be considered a permanent resident of Australia if you are granted a permanent visa that allows you to remain in Australia indefinitely. This means you will still be considered a foreign person for AFAD even if, at the time you enter into the transaction, you hold a kind of visa that provides a pathway to Australian permanent residency. For example, a temporary skill shortage visa subclass 482, a partner visa (temporary) subclass 820, or any kind of bridging visa.

 

  1. Foreign Corporation

 

A foreign corporation is one that is incorporated outside Australia or in which foreign persons (or related persons of foreign persons) have a controlling interest of at least 50%.

The corporation should carefully check the foreign status of its ‘related persons’. In particular, 2 corporations are considered related persons if they are related bodies corporate—that is, one of the corporations is a subsidiary, holding company, or subsidiary of a holding company of the other corporation. Further, an individual and a corporation are considered related persons if the individual or a family member is a majority shareholder, director, or secretary of the corporation/the corporation’s related body corporate, or if the individual or family member holds a majority interest in the corporation or related body corporate. Related persons also include partners in a partnership.

Interests of unrelated foreign persons will also be considered when determining whether the foreign persons have a controlling interest in a corporation.

 

  1. Trustee of a foreign trust

 

A trust is foreign if at least 50% of its interests are trust interests of foreign individuals, foreign corporations, trustees of a foreign trust, or related persons of any of the above, including partners in a partnership.

If AFAD is not applied to a transaction and within 3 years the transferee acquirer becomes a foreign trust or foreign company, this transferee must lodge all documents with the Commissioner for reassessment within 28 days after the transferee becomes a foreign entity.

 

Strict imposition of interest and penalty tax may apply for breaches of any of the AFAD rules.

If you have any doubt about your status as a foreign buyer, please take legal advice and guidance before you sign a contract.

 

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog published. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

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