Evidence for additional foreigner acquirer duty exemption application

An entity is an individual or company registered under the Corporations Act 2001 (Cwlth).

Where an entity is a trustee acting in a nominee or custodian capacity for regulatory compliance purposes, the nominee or custodian will be looked through and eligibility will be determined by the activities of the next-level trustee.

Corporate group tracing is available for most of the eligibility requirements in the ruling.

• A parent entity is an entity that directly owns at least 90% of the issued shares in and has voting control over another entity.
• A subsidiary entity (first entity) is one in which another entity directly owns at least 90% of issued shares and has voting control over the first entity.
• Voting control means that an entity is in a position to cast, or control the casting of, 90% or more of the maximum votes that can be cast at a general meeting of a company (other than under a debenture or trust deed securing the issue of a debenture).
• All parent and subsidiary entities constitute a corporate group.
• Each entity within the corporate group is a group entity.

The circumstances and activities of a group entity can be taken into account when considering whether relevant requirements are satisfied. Where this happens, the entity is referred to as a ‘relevant group entity’.

Supporting documentation includes:

• a corporate structure diagram of the corporate group confined to entities that are directly connected by at least 90% share-ownership and voting control (including identifying the entity seeking the exemption and the other group entities)
• ASIC records confirming the entity’s connection with the parent entity that directly owns at least 90% of its shares and any other entity being relied on via corporate group tracing, in the 12-months before the liability date
• information confirming that these connections and arrangements existed at the date the liability for transfer duty arises for the land the subject of the exemption
• information confirming how the relevant group entity is satisfying the nominated requirement in connection with the land the subject of the exemption.

See the public ruling (GEN012) for definition of ‘notifiable event’.

The notification requirement continues until:

• a minimum of 20 residential lots has been developed or re-developed—for the qualifying development test
• at the end of the summing period or averaging period (whichever is later)—for the large developer test.

We have used future dates in these examples.

An entity can apply for pre-approval for the AFAD exemption if one of the following applies:

• The entity has previously been approved for the AFAD exemption (or AFAD ex gratia relief).
• A group entity in a corporate group has been approved for the AFAD exemption while a member of the group, and the entity is the parent or a subsidiary of the group entity when the liability for transfer duty arises (the AFAD liability date).

If pre-approval is given, it will continue to apply until a notifiable event occurs.

A lot includes individual dwellings that are independently habitable by a single family unit and is not limited to the meaning of a lot under the Land Title Act 1994.

Land lease communities (LLCs) may meet the development requirements. For these cases, we will generally look to see whether a requisite number of individual sites (each for a single dwelling) will be produced, rather than a requisite number of separately titled lots. Other examples of a lot may include:

• an independent living unit (ILU) in a retirement village
• a site in a residential park
• a dwelling in a built-to-rent development. See section 58D of the Land Tax Act 2010.

An entity is not eligible for the AFAD exemption for a relevant transaction if the amount of AFAD on the transaction has been calculated under Chapter 4, Part 4AA of the Duties Act 2001 (concessions for eligible BTR developments).

Provide an ASIC historical extract showing the entity’s principal place of business and a copy of the entity’s lease or title documents showing the location of the head office or the principal place of business.

Generally, we do not accept an accountant, solicitor or agent’s office address as evidence of the entity’s head office or principal place of business.

If the address listed on ASIC is leased or owned by another entity, advise of the relationship between the entities.

Corporate group tracing is not available for this requirement.

You’ll need to provide evidence of significant Australian management staff and office presence.

Significant management staff

Significant management staff (i.e. directors and managers) in Australia must be employed by the entity, or by a relevant group entity where corporate group tracing applies. The employment arrangements must exist at the time that liability arises.

• Entity directly employs significant management staff in Australia—evidence includes:
  • a diagram of the entity’s organisational structure outlining the entity’s management staff in Australia
  • information outlining how the management staff is engaged and the types of management functions they undertake in relation to the entity’s commercial activities
  • evidence that the management staff is Australian-based, such as an ASIC extract or corporate documents
  • corporate documents, such as
    • any relevant management or service agreements
    • prospectus, project documents, brochures or annual reports that outline the entity’s presence in Australia.
• Group entity in a relevant corporate group employs significant management staff in Australia—evidence includes:
  • the name and ABN of this entity
  • the entity’s ASIC historical extract
  • a corporate structure diagram of the corporate group confined to group entities (including identifying the entity seeking the exemption and the employing relevant group entity)
  • information confirming that these connections and arrangements occurred on or immediately before the liability date
  • information confirming that the significant management staff are managing the commercial activities being undertaken on the land of the entity seeking the exemption
  • employment details and evidence such as examples of contracts, which confirm the arrangements and the periods in which they were entered into and operated for. (See ‘Employs Australian citizens or permanent residents’ for more detail.)

Significant office presence

Provide evidence the entity has significant office presence in Australia including:

• the number of offices located in Australia
• the functions and activities being undertaken in the offices
• how those functions and activities relate to the entity’s commercial activities in Australia.

If the entity’s principal place of business address recorded with ASIC or other offices are leased or owned by another entity, also provide the details of the relationship between the entities.

If the address belongs to the entity’s solicitor or accountant for instance—and the entity does not have any other location for its business—it will likely not be considered to have a significant office presence in Australia unless alternative evidence to this effect can be provided.

Entity as employer—evidence includes:

• payroll data that identifies the total number of employees based in Australia and the number that are Australian citizens or permanent residents
• an employee register showing the residence of the employees and whether they are Australian citizens or permanent residents
• financial statements, such as profit and loss statements, confirming employee expenses
• a sample of employment contracts between the entity and its employees, as well as information confirming that the employees are Australian citizens or permanent residents.

Group entity as employer—evidence includes:

• the name and ABN of the employing entity
• the employing entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group that identifies the entity seeking the exemption and the employing entity
• information confirming that these connections and arrangements were current as at the liability date
• information confirming that the employees are being engaged in relation to the commercial activities being undertaken on the land of the entity seeking the exemption.

We have used future dates in these examples.

Entity carries on business in Australia—evidence includes:

• a list of business activities conducted in Australia in the last 5 years and evidence of this business activity
• evidence of expenditure on business activities such as invoices from third parties relating to the supply of goods or services in the relevant period
• financial or corporate documents, such as
  • annual reports
  • profit and loss statements
  • wage or salary expenditure
  • strategic plans
  • incurred and forecast expenditure
  • other corporate documents outlining the above.

Group entity in a relevant corporate group carries on business in Australia—evidence includes:

• the name and ABN of this entity
• this entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group confined to group entities (including identifying the entity seeking the exemption and the entity carrying on the business)
• ASIC historical extracts of all group entities that traces the entity seeking the exemption to this entity via corporate group tracing
• information confirming that these connections and arrangements were current as at the liability date
• information confirming that this entity’s business in Australia involves commercial activities being undertaken on the land of the entity seeking the exemption.

‘Primarily’ means chiefly or principally. Where decisions are made by multiple entities across different jurisdictions, an assessment must be made as to whether those decisions that are made by management or employees in Australia are the primary decisions about the entity’s business and operations in Australia. Generally, where more than 50% of decisions are made by management or employees in Australia, this would prima facie suggest that the requirement is satisfied. However, this is not an absolute rule; and the assessment must be made on a case-by-case basis.

Entity

To prove the entity’s management or employees in Australia primarily make decisions about the entity’s business and operations in Australia, include:

• memoranda executed by or on behalf of the entity, stating the powers of the entity’s directors, managers and key personnel in relation to Australian participation
• organisational structure identifying location and responsibilities of staff involved in making strategic or key operational decisions
• copies of minutes of meetings conducted in Australia that show Australian decision making on or immediately before the liability date. (The meeting minutes must confirm the names of the people in attendance and the decisions being made by those people.)

Group entity

To prove the management or employees of a group entity primarily makes decisions about the entity’s business and operations in Australia, include:

• the name and ABN of this entity
• this entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group confined to group entities (including identifying the entity seeking the exemption and the entity that conducts its commercial activities in Australia and primarily makes decisions about the entity’s business and operations in Australia)
• ASIC historical extracts of all group entities that trace the entity seeking the exemption to the relevant group entity via corporate group tracing
• information confirming that these connections and arrangements were current as at the liability date
• information confirming that this Australian decision-making relates to the entity seeking the exemption and the commercial activities being undertaken on the land of the entity seeking the exemption.

We have used future dates in this example.

You can provide relevant supporting documentation when lodging your exemption application; for example:

• where approval was required, a copy of the entity’s FIRB approval or no objection document
• where approval was not required, the reasons why and any information from FIRB from the time of acquisition supporting these reasons
• where approval has not yet been received, a copy of the FIRB application (together with supporting documents)
• copies of any other correspondence with FIRB concerning the entity’s compliance
• details regarding how any previous non-compliance issues have been addressed.

We will assess whether legal and regulatory requirements have been met by the information already available to us. If this is not possible, we will request supporting documentation.

You can provide relevant supporting documentation when lodging your exemption application; for example:

• a written statement confirming whether regulatory requirements in Australia (if applicable) or another relevant jurisdiction (if any) have been complied with
• where the entity or the group entity is listed on a stock exchange
  • the stock exchange on which it is listed
  • the name it is listed under
  • any unique code used to identify the entity on the exchange
• the entity and the group entity’s financial or annual reports required to be lodged with ASIC (or equivalent entity) for the last 2 years (If the entity or the group entity have been registered for less than 2 years, provide a copy of the entity’s financial report and any other reports lodged.)
• if the entity or the group entity is under the control of another entity, consolidated financial reports or annual reports of the controlling entity required to be lodged with ASIC (or equivalent entity) for the last 2 years
• if relief from lodgement of financial reports has been granted by ASIC, evidence of this
• if the entity or the group entity is not registered with ASIC, any other documents (including financial reports or annual reports) for the last 2 years that the entity and the group entity are required to prepare by the law that applies in the entity’s place of origin. (If any document is not in English, provide a certified translation of that document into English.)

If you (the entity and/or the group entity) have had previous dealings with us, we will consider whether you have been subject to, or are currently dealing with audit or collection activity. To help with this process, you should provide relevant QRO client numbers.

If any revenue laws have not been complied with, provide confirmation that any previous non-compliance issues have been addressed.

Typically, we only consider information relating to the liability date; however, we may consider the entity’s and the group entity’s historical and current non-compliance.

If you have entered into a payment arrangement with us, this will not be treated as non-compliance provided you meet your responsibilities under the arrangement.

We have used future dates in this example.

For this test, you need to establish that the AFAD residential land is a qualifying development. That is, the land you acquire is AFAD residential land for the purposes of undertaking a development or re-development of 20 or more residential lots on the acquired land in Queensland, and the development is primarily residential.

Generally, we look to determine whether an entity will be creating the requisite number of lots for the purposes of residential development. Evidence you can provide includes:

• the executed or draft development or redevelopment plan for the land
• relevant development approvals
• feasibility study
• application documents for council approval and town planning advice.

We have used future dates in this example.

Where an entity is undertaking a development or redevelopment of less than 20 lots in a relevant year, the entity may still be eligible for the exemption if the development or redevelopment is approved by the Commissioner as a qualifying development.

The Commissioner will approve a qualifying development if one of the following applies.

• The development or redevelopment is significant to a non-metropolitan area regarding:
  • the nature of the development and area
  • the contribution made to housing stock and infrastructure in the context of population size, demographics and activity in the area
  • the economic and social impacts of the development for the area
  • whether in the absence of the development by the entity, such outcomes would otherwise be likely for the area
  • any other relevant factors.
• The development or redevelopment is in a priority development area under the Economic Development Act 2012.
• The development or redevelopment is part of a declared coordinated project under the State Development and Public Works Organisation Act 1971.

This condition will be met where an entity, or the relevant corporate group of which the entity is a group entity, is a large developer.

A ‘large developer’ is an entity, or a relevant corporate group, that undertakes development or redevelopment of 20 or more residential lots in Queensland in a relevant 12-month period, including the land the subject of the exemption. A relevant 12-month period is a 12-month period that includes the date the liability for transfer duty arises for the land the subject of the exemption.

Generally, we look to determine whether an entity will be creating the requisite number of lots for the purposes of residential development, and whether that development will occur in the relevant 12-month period. In determining whether 20 or more residential lots have been developed or redeveloped, averaging for up to 5 consecutive years is permitted (averaging period).

Satisfying the test

You should describe how you are satisfying the test, including:

• nominating an averaging period of up to 5 consecutive financial years, which must include the date of the relevant transaction and the development of the land the subject of the exemption (where relevant)
• identifying the developments or redevelopments undertaken or to be undertaken in the averaging period
• identifying the date each development or redevelopment is planned to commence and complete in the averaging period
• identifying the number of residential lots already produced, or to be produced, from each development or redevelopment and the date the residential lots were registered, or are expected to be registered, in the averaging period.

You will also need to provide information based on whether the lots will be created before or after the date of the application, including:

• for lots created before the date of application
  • evidence identifying the land to be developed and its ownership
  • Titles Queensland evidence of lot creation (which may include registered plans of subdivision for the lots or the registration confirmation statement for each lot)
• for lots to be created after the date of application
  • evidence identifying the land to be developed and its ownership
  • evidence of the total number of residential lots to be created, such as development plans, feasibility studies, council development approvals, and the expected date for title registration.

If you propose to rely on developments by a relevant group entity, provide:

• the name and ABN of the other entity
• a current copy of the group entity’s current ASIC historical extract and evidence of voting control
• a corporate structure diagram of the relevant corporate group confined to group entities (including identifying the entity and the relevant group entity)
• information confirming that these connections and arrangements existed at material times, including the date of the liability
• information and evidence confirming the relevant group entity’s developments.

Five-year averaging methodology

The averaging period can only be for a period of up to 5 consecutive financial years and must include the date of liability. If it is proposed to include previous lot productions as well as future lot productions, the lot productions must occur within the 5-year averaging period.

Generally, ‘completion’ means the date the lots were created, such as when the plan of subdivision for the land is registered. (Titles Queensland evidence will be required.) For developments such as LLCs or ILUs, certification as to the satisfaction of the development conditions may be used as an alternative for evidencing lot creation in these circumstances.

We have used future dates in these examples.