Assessing and calculating additional foreign acquirer duty
Additional foreign acquirer duty (AFAD) receives the same treatment as transfer duty, landholder duty or corporate trustee duty in terms of:
- time of liability
- liable parties
- notification
- lodgement
- stamping.
Liability and change of resident status
If you are a foreign person entering into a transaction involving AFAD residential land, you will be liable for AFAD.
AFAD will continue to apply to the transaction even if your foreign status changes to an Australian citizen or a permanent resident at a later date.
Because duty is imposed on a relevant transaction at the time the liability for duty on the transaction arises, the change of resident status will not affect your liability.
This allows for taxpayer certainty on their liability for duty under the Duties Act 2001. This position is also consistent with the way that duty is imposed generally.
Specified foreign retirees will be exempt from AFAD on their principal place of residence purchased on or after 1 January 2023.
A foreign individual enters into an agreement that involves AFAD residential land, but she has permanent residency at settlement date and intends to reside in the property following settlement.
AFAD will apply, because the person was a foreign individual when they became liable for transfer duty—the date the agreement was made.
Lodging documents
If AFAD applies to your transaction, you must lodge the transaction documents and any required forms within 30 days.
Self assessors can use:
- the AFAD residential land interactive help
- the AFAD residential land toolkit
- other transfer duty toolkits for information about assessing particular transactions and what forms need to be completed.
If you are claiming the AFAD specified foreign retiree exemption, apply using Form D2.1 or Form D2.7 when you claim the concession for homes for transfer duty.
You can otherwise find out about:
- common forms to lodge for transfer duty transactions
- lodging documents for relevant acquisitions in a landholder
- lodging documents for relevant acquisitions in a corporate trustee.
Calculating AFAD
Additional foreign acquirer duty for transfer duty is based on the foreign acquirer’s interest of the dutiable value of the AFAD residential land. The GST-inclusive purchase price is used when determining the dutiable value. The following rates apply:
- 3% where the transaction’s liability for transfer duty arises between 1 October 2016 and 30 June 2018
- 7% where the transaction’s liability for transfer duty arises on or after 1 July 2018.
Dutiable value will also include the value of any chattels acquired in the transaction.
AFAD applies whether the AFAD residential land is for investment or non-investment purposes. It also applies where the dutiable property is an existing right that contains AFAD residential land.
Any AFAD payable on the transactions will be added to the transfer duty.
If there are multiple transferees, AFAD applies only to the interests of the foreign acquirers. For example, if there are 3 individual transferees in equal shares but only one is a foreign acquirer, AFAD applies to that person’s one-third interest.
If a person is appointed in writing as an agent acting for another person (a principal) in an agreement to transfer dutiable property, AFAD will apply if the agent or principal is a foreign person. Where an agent is foreign, but the principal is not, AFAD will apply when the agreement is assessed. But, when the agent transfers the property to the principal, AFAD will be reassessed.
Similarly, AFAD will apply when a transferee enters into an agreement for the transfer of dutiable property for, or for the benefit of, a company proposed to be registered under the Corporations Act 2001 (Cwlth) and the company is a foreign corporation when the dutiable property is transferred.
If there is more than one transaction, they may be aggregated for transfer duty under section 30 of the Duties Act.
A foreign individual signs a contract to buy a house with a dutiable value of $365,400. The house will be an investment property, so they don’t qualify for a home concession.
Using the transfer duty rates, the duty is calculated as:
$1,050 (for the first $75,000)
+ $10,164 ($3.50 for every $100 in $290,400, the balance above $75,000)
= $11,214 (the transfer duty payable).
The individual is a foreign person and liable for additional foreign acquirer duty. AFAD is calculated as:
$365,400 × 7% = $25,578.
The total amount of duty payable is $36,792 ($11,214 + $25,578).
A couple purchases a residential property for $500,000 in equal shares. One of them is a foreign person. The property is an investment, so the couple do not qualify for a home concession.
Using the transfer duty rates, the duty is calculated as:
$1,050 (for the first $75,000)
+ $14,875 ($3.50 for every $100 in $425,000, the balance above $75,000)
= $15,925 (the transfer duty payable).
The transaction is liable for AFAD. AFAD is calculated as:
($500,000 × ½) × 7% = $17,500.
The total duty payable is $33,425 ($15,925 + $17,500).
Concessions and exemptions
As a foreign acquirer, you can still claim the first home concession, first home vacant land concession and home concession if you meet the relevant requirements. But the concession will only apply to the calculation of transfer duty—you will still need to pay the AFAD calculated on the dutiable value of the AFAD residential land.
You are exempt from AFAD on your principal place of residence for transactions dated on or after 1 January 2023 if you are a specified foreign retiree.
If your relevant transaction is exempt from transfer duty, landholder duty or corporate trustee duty, it will also be exempt from AFAD.
If you received the AFAD exemption on the original transaction and it is later reassessed to remove the first home concession, first home vacant land concession or home concession, a reassessment for AFAD will be made at the same time.
A foreign individual purchases residential property for $500,000. The property is to be their principal residence. The foreign acquirer qualifies for a home transfer duty concession. They pay $8,750 in transfer duty and $35,000 in additional foreign acquirer duty.
A couple (one being a foreign individual) purchases a residential property for $390,000. The property will be their first home. Both individuals qualify for a first home transfer duty concession. They pay no transfer duty but the foreign individual will pay $13,650 in AFAD.
Build-to-rent concession
You may be eligible for a build-to-rent concession for AFAD for transfers, or agreements to transfer, entered into from 1 July 2023 for:
- land on which the acquirer will construct an eligible build-to-rent (BTR) development
- land that contains an eligible BTR development that is already receiving the BTR land tax concessions.
Find out more about build-to-rent concessions.
Paying
If you are liable to pay duty on a transaction, you are also liable to pay any applicable AFAD. If you paid AFAD for a transaction but you are not a foreign acquirer for the purposes of the transaction, you can recover the AFAD from the foreign acquirers under section 246I of the Duties Act.
Late payments
If you don’t pay the transfer duty (including the applicable AFAD) on a relevant transaction by the due date, a charge on the interest of specified acquirers will be imposed on the AFAD residential land for the amount of unpaid duty. In some circumstances, the Commissioner of State Revenue may apply to the Supreme Court for an order to sell the land.
Also consider…
- Find out more about transfer duty.
- Read about additional foreign acquirer duty for landholder duty and corporate trustee duty.
- Read the additional foreign acquirer duty provisions in Chapter 4 of the Duties Act 2001.
- Find out about payment options.
- Learn about unpaid tax interest and penalty tax.
- See previous additional foreign acquirer duty rates.