Since the 1st October 2016 residential conveyancing transactions for which the liability for transfer duty (stamp duty) has arisen, and where the subject property is classed as ‘Additional foreign acquirer duty’ (‘AFAD’) residential land’, then if the purchaser falls within the meaning prescribed in the Duties Act 2001 as a ‘foreign acquirer’, then it is important to be aware that AFAD may also be applicable.
What is Additional foreign acquirer duty residential land?
‘Additional foreign acquirer duty’ (‘AFAD’) residential land’ that is or will be used either solely or primarily for residential purposes (also called the residential test), and generally includes established homes, apartments, vacant land that is to be used to develop units/housing sub-divisions/major developments for residential use, and any refurbishments, renovations or extensions of a building being used for residential use.
There are other types of property which may be classed as AFAD residential land, including those in retirement villages and student accommodation. There are also exemptions which can apply for large-scale developments by way of an application for ex-gratia relief.
It is important that each particular purchase is considered with respect to its own individual circumstances.
Who is a ‘foreign acquirer’?
A purchaser will fall within the description of a ‘foreign acquirer’ if they are:
- A foreign individual (subject to exclusions as detailed further below);
- A foreign corporation – which is a corporation in which foreign persons have a controlling interest or a corporation that was incorporated outside of Australia; or
- The trustee of a foreign trust where at least 50% of the trust interests are foreign interests.
An individual who is an Australian citizen or permanent resident (including people who hold a permanent visa, or who are New Zealand citizens who hold a special category visa) will not be classed as a ‘foreign individual’, and will not be liable to pay AFAD (provided they are eligible in accordance with the Migration Act 1958 (Cth)).
How is AFAD calculated?
AFAD is calculated as 3% of the dutiable value of the property and is paid in addition to the applicable stamp duty payment. For example, for a property valued at $500,000, the AFAD duty amount would be a hefty $15,000.
How this affects New Zealand Citizens
Generally, New Zealand citizens enter Australia in accordance with the Trans-Tasman Travel Arrangement and do not have to apply for a visa upon entry to Australia, a Special Category Visa (subclass 444) is automatically granted (provided that they meet certain eligibility requirements including:
- not being the holder of another visa;
- being the holder of a valid New Zealand passport that is in force;
- do not pose a behaviour or health concern;
- has presented a completed incoming passenger card; and
- meets specific health and character requirements.
What this means for New Zealanders purchasing property in Australia
Essentially, the special category visa allows the holder of the visa to fall within the scope of the exemption for a ‘foreign individual’ and accordingly, no AFAD will be charged.
What this means is that if the visa holder is present in Australia when signing the contract of sale, the AFAD will not be applicable, and result in a significant saving in duty payable on the transaction. As detailed above, the AFAD on a $500,000 purchase would be $15,000, so for the sake of a return flight from New Zealand to Australia to sign the contract, it may well be worth the cost of a return plane ticket to save thousands of dollars in duty.
As always, Affinity Lawyers have an experienced and professional team in place ready to assist with any of your conveyancing needs, so feel free to telephone our Gold Coast office today on 07 5563 8970 to discuss your specific requirements.