A new stamp duty surcharge for foreign purchases of property in Queensland has recently been introduced by the Queensland government. But before we get into that, lets take a look at why Queensland is such an attractive destination for Australians and foreign purchasers alike.
As the tourism ads say, Queensland is beautiful one day, and perfect the next. Offering everything from pristine beaches, to spectacular rainforests, tourist hotspots and more, Queensland has always been a very attractive destination for foreign buyers. And it’s easy to see why.
As such, property purchasing by foreign buyers in Queensland has grown exponentially in the past few years. The chief reason for this is the fantastic lifestyle options the Sunshine State offers. From rural, countryside life to inner-city living, Queensland is awash with spectacular properties to suit every lifestyle.
What exactly is a foreign buyer?
Before we delve into what the recent stamp duty surcharge means for foreign purchases in Queensland, we should clearly define the term “foreign buyer”. Before you decide to purchase a property in Queensland, you must determine whether you are, in fact, a foreign buyer.
In regard to property acquisition, a foreign buyer is defined as: “an individual who is not ordinarily an Australian resident.” In accordance with this definition, a foreign person will only be considered an “ordinarily Australian resident” if the following conditions are met:
- You have resided in Australia for at least 200 days of the last 12 months; and
- Your time spent in Australia is (or was) not contingent upon any time-related limitation, such as those imposed by law.
Queensland’s 2016-2017 Budget 101
As mentioned previously, Queensland has always been a very attractive destination for foreign buyers. The Sunshine State’s stellar reputation may change, however, in the wake of Queensland’s somewhat controversial 2016-2017 State Budget.
To put it bluntly, Queensland’s 2016-2017 Budget was not kind to foreign buyers planning to purchase property in the state. Focusing heavily on the impact foreign buyers currently have and will have in future on Queensland’s economy, a raft of changes have been introduced. One of the most significant changes is the highly publicised three percent stamp duty surcharge.
This controversial new Australian tax applies to two categories of foreign buyers. First, to all new property acquisitions (i.e. new homes, units, townhouses, blocks of land, etc.) made by foreign buyers. And second, to indirect property acquisitions (i.e. corporate trustee duty and landholder duty, purchased as part of a discretionary trust).
What prompted these sweeping changes?
The decision to implement Queensland’s stamp duty surcharge for foreign purchases was not made lightly. Changes to Queensland’s stamp duty charges come in the wake of similar decisions made by the New South Wales and Victorian Governments.
On July 1st, 2015, Victoria introduced an additional foreign purchaser stamp duty surcharge of three percent. From July 1st, 2016, this surcharge increased to a hefty seven percent.
In a similar move, New South Wales confirmed a four percent stamp duty surcharge for foreign purchases in the 2016-2017 budget. This State Budget also confirmed a 0.75 percent land tax surcharge.
What does this mean for foreign property purchases in Queensland?
Obviously, the introduction of Queensland’s aforementioned stamp duty surcharge leads to significant incidental costs for foreign property buyers. Coupled with current stamp duty charges, the additional three percent surcharge means foreign buyers are required to pay stamp duty of 8.75 percent on each residential property.
What exactly is a “residential property”?
To clearly understand your stamp duty obligations, we must define what constitutes a residential property in Queensland. As outlined in Queensland’s 2016-2017 Budget, residential land is defined as: “land located within Queensland which is or will be primarily or solely used for residential reasons, and on which there currently is (or will be) a residential building approved or designed for human habitation for a family unit.”
When designing this portion of the Budget, the Queensland Government took into account that every person’s individual circumstances vary.
That’s why the Budget contains a broad range of residential circumstances, such as established apartments, units, homes and townhouses, land on which a home or apartment will eventually be built, and buildings and land which will be redeveloped or refurbished, expressly for residential use.
However, this residential property definition does not appear to encompass commercial residential premises, such as retirement villages, student accommodation, serviced apartments, hotels and motels.
When do these amendments come into effect?
The stamp duty amendments introduced in the 2016-2017 Budget will apply to you if landholder duty, corporate trustee duty or transfer duty occurred on or prior to October 1st, 2016. If you entered into a home purchase contract prior to this date, the stamp duty increase will not apply to you.
What do these changes mean for foreign purchases?
The stamp duty increase outlined in Queensland’s 2016-2017 Budget will significantly impact foreign purchasers who buy and sell property in Queensland. When a foreign buyer purchases a property, they will be charged an extra three percent in stamp duty, and when (and if) they decide to sell said property, a portion of the proceeds will be withheld by the Federal Government.
Put simply, the foreign purchases stamp duty increase was implemented to “level the playing field”. These changes were designed to ensure foreign purchasers of Queensland property who benefit from government-implemented infrastructure and services contribute to the delivery of these projects, just as local buyers are required to do.
Is there any relief from the stamp duty surcharge?
While a three percent hike in stamp duty seems excessive, the good news is, there is a way to avoid this additional payment. Relief from this stamp duty increase is available to foreign persons, who, as defined in the Duties Act (2001), are undertaking a “significant” residential development. This relief will be granted by the Commissioner on a case-by-case basis.
To be exempt from the stamp duty increase, you must also meet certain requirements. These include:
- Total compliance with the Corporations Act (2001); and
- Total compliance with current Queensland taxation laws.
In addition, exemption from the stamp duty surcharge will only apply to prospective home buyers who acquire residential land or property in Queensland, and are either:
- A foreign person – a person without Australian citizenship or a permanent resident. Permanent residents include New Zealand citizens who either hold a permanent visa or special category visa, as defined by the Migration Act (1958, Cth.);
- A foreign corporation – these include companies which are incorporated outside of Australia, or Australian companies in which at least 50% of the interest is held by a foreign person or a related person (i.e. relatives/spouse or partners within a partnership); or
- A trust – in this case, at least 50% of the trust’s interests must be held by a foreign person.
How do I apply for ex-gratia relief?
If you believe you fall into any of the above categories, you may be able to apply for ex gratia relief. To apply for ex gratia relief, you must lodge a Statutory Declaration to the Office of State Revenue. This document will detail the basis on which the foreign buyer believes they satisfy the conditions for stamp duty relief, as well as any supporting evidence.
When you submit a request for ex gratia relief, you are acknowledging your obligation to inform the Office of State Revenue within 28 days if you no longer satisfy any of the aforementioned conditions for this relief scheme.
How do I purchase property in Queensland as a foreign resident?
If you believe you meet the aforementioned definition of a “foreign person”, you must apply to the Foreign Investment Review Board (FIRB) prior to purchasing a new property or vacant residential land.
According to the FIRB, such applications are taken into consideration in accordance with the all-encompassing principle that property investment will ultimately increase Australia’s housing supply.
As a general rule, FIRB applications are unconditionally accepted. However, applications to purchase vacant land come with various conditions. One of the most serious being that construction must be completed within four years.
You will also require FIRB approval to purchase any Queensland property if you are a temporary Australian resident.
According to the FIRB, a temporary resident is “a person holding a temporary visa, permitting them to reside in Australia for over 12 months.” Or, someone who resides in Australia, has applied for a permanent visa and possesses a bridging visa.
Are you a foreign buyer looking for an opportunity to purchase residential land in the Sunshine State?
If so, call or email the expert team at Expat Tax Services today. Our talented team will explain what the Budget’s stamp duty changes mean for you and whether you can apply for relief from these charges.
Australian expats are generally unable to obtain specialist advice and services that they require from their domestic Australian accountant. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included).
Receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team at Expat Tax Services today.
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