top of page

AFAD & FIRB: Important Information For Foreign Buyers

You’ve probably come across the terms 'AFAD' and 'FIRB' if you're a foreign buyer looking to purchase property in Queensland.


Purchasing property as a foreign buyer introduces a range of considerations and further duties that must be handled during a transaction; but this area of law can be complex and confusing. In this article, we're going to break down what AFAD and FIRB are in Queensland in simple terms, and provide important considerations for foreign buyers.


Remember, this is general information not legal advice. Where a foreign buyer is involved, we recommend you seek specialist foreign tax and financial advice before signing any contract.


Please note that any financial or exemption information provided below is accurate at the time of writing. AFAD and FIRB requirements, application fees and exemptions are updated and reviewed every year. If you are reading this after the publication date, please see the relevant website for the most up to date information.


Gold Coast Queensland City Skyline

What Is A Foreign Person?


Before diving in to AFAD and FIRB, it's important to break down what a 'foreign person' is in this context.


You are a 'Foreign Person' for AFAD purposes if you are a:


  • foreign individual

  • foreign corporation

  • trustee of a foreign trust


You are a foreign individual if you are not an Australian citizen or permanent resident. This means that any purchaser who is not an Australian citizen or permanent resident will be liable for this additional tax on their share of the property.


Please note that a New Zealand citizen who is the holder of a special category visa when entering into a transaction that involves AFAD residential land will not be liable for AFAD. So, provided they are living in Australia when they enter into a contract of sale, and hold the special category visa, they will generally be exempt from paying AFAD.


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%. This also applies for foreign trusts.


For more information about foreign persons and companies, and specific examples where AFAD will and will not apply, please click here for a detailed QRO article.


What Is 'Residential Land'?


Residential land, for the purposes of determining if AFAD is applicable, is property in Queensland that is or will be used solely or primarily for residential purposes. It can include:


  • homes and apartments (including chattels)

  • vacant land on which a home or apartment will be built

  • land for residential development, such as

    • smaller unit blocks

    • housing subdivisions

    • major developments with a residential component

  • buildings refurbished, renovated or extended for residential use


It's important to note that other types of residential property such as student accommodation or retirement villages are considered on a case-by-case basis.


What Is AFAD?


Additional Foreign Acquirer Duty (AFAD) is a state-based tax that applies to foreign buyers of residential property in Queensland.


AFAD is in addition to the standard transfer duty (also known as stamp duty), and was introduced to ensure foreign acquirers of residential property who benefit from government services and infrastructure also contribute to the delivery of said services.

 

The rate for AFAD is currently set at 8% of the property value for foreign individuals and companies, and it is payable at the same time as the standard transfer duty.


AFAD applies when all the following conditions are met:


  • You are an acquirer for the purposes of the transaction and a foreign person

  • Your transaction involves AFAD residential land (including chattels or existing rights)

  • The liability for your transaction arises on or after 1 October 2016


What Is FIRB?


The Foreign Investment Review Board (FIRB) is an Australian Government department that regulates foreign people purchasing property in Australia.


If you are a foreign person, company or trust, and intend to purchase residential property in Queensland, you may need to apply to FIRB for approval before proceeding with your purchase.


If you are an Australian citizen or permanent resident, or a New Zealand citizen, you do not need to apply for FIRB approval.


Making An Application To FIRB


There is an application to FIRB that will vary depending on the entity type of the foreign purchaser. You can learn more, and begin an application, by accessing the ATO website by clicking here.


If you are needing assistance with your application or have any specific question, you should speak with a dedicated immigration law specialist and your specialist financial advisor.


There is an significant application fee payable by foreign purchases who lodge an application fee for FIRB approval. The fee will depend on the value of the property, and whether the property is an established or new dwelling.


Note that there is a statutory 30 day timeframe for making a decision and providing a notification (by way of “no objection notification” or “exemption certificate”), and will not start until an application fee has been paid.


From 1 July 2024, the fee for FIRB applications for established residential dwellings are:

Amount

Fee

Less than $75,000

$12,900

$1 million or less

$44,100

$2 million or less

$88,500

From 1 July 2024, the fee for FIRB applications for new or near new residential dwellings are:

Amount

Fee

Less than $75,000

$4,300

$1 million or less

$14,700

$2 million or less

$29,500

There is a thorough breakdown of application fees, which can be accessed here, particularly for higher-value properties and other property types.


If you are purchasing the property as tenants in common, the fee payable is equal to your percentage of ownership in the property.


For example, let's says John and Jane are purchasing an established home for $1.5 million. They are purchasing as tenants in common: 75% for John, and 25% for Jane. John is an Australian citizen, whilst Jane is a foreign investor. Jane makes an application for residential approval with FIRB.


The application fee for a $1.5 million property is $88,500. When Jane submits her application, she needs to pay $22,125, which is 25% of the total fee.


Annual Vacancy Fee


If your property remains vacant or unrented for 183 days (6 months) or more during a vacancy year, or if you miss the deadline to submit your annual vacancy fee return, you may be required to pay a vacancy fee.


For vacancy years beginning on or after 9 April 2024, the fee will be double the amount of your foreign investment application fee.


Concessions & Exemptions


As a foreign buyer, you are still eligible to claim the first home concession, first home vacant land concession, and home concession, provided you meet the necessary criteria. However, these concessions will only apply to the transfer duty calculation, and you will still be required to pay AFAD based on the dutiable value of the AFAD residential land.


Note that an exemption may apply where you are purchasing a new property, and the property developer has obtained a FIRB exemption certificate. This will generally be noted in the contract documents, and a declaration will be made.


Let's look at some examples.


Note that these examples are provided directly from QRO, and are based on duty amounts and concessions as at the time of writing. You should always speak with QRO before making any declaration or determining what you may owe.


A couple purchases a residential property for $800,000 as tenants in common 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:


$17,325 (for the first $540,000)

+ $11,700 ($4.50 for every $100 in $260,000, the balance above $540,000)

= $29,025 (the transfer duty payable).


The transaction is liable for AFAD. AFAD is calculated as:

($800,000 × ½) × 8% = $32,000.


The total duty payable is $61,025.


A foreign individual purchases residential property for $1,200,000. The property is to be their principal residence. The foreign acquirer qualifies for a home transfer duty concession.


They pay $42,350 in transfer duty and $96,000 in additional foreign acquirer duty.


A couple (one being a foreign individual) purchases a residential property for $680,000. 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 $27,200 in AFAD.


Financial Considerations


The cost of obtaining FIRB approval can be a substantial expense for foreign buyers investing in residential property.


It is important to consider the financial implications, in addition to the purchase price and standard transfer duty, before proceeding. Foreign buyers should ensure these costs are included in their budget and make the contract contingent on securing FIRB approval, with sufficient time allowed to obtain it.


Without this approval, foreign buyers are legally prohibited from purchasing AFAD residential property.


We would recommend all foreign buyers speak with a financial specialist before signing a contract to ensure that both a lender will provide the necessary funds, and that the purchaser understands their financial position and the additional costs.


For Real Estate Agents


We've put this article together so that foreign buyers and other parties involved in a residential property transaction understand the fundamental principles of AFAD and FIRB. This includes real estate agents.


Of course, as lawyers, our role is always to protect our clients and work with them to achieve their goals. It is important though that we help other stakeholders, including a real estate agent, in ensuring that a contract of sale is drafted correctly and includes the relevant terms. This is critically important when considering the statutory 30 day timeframe of FIRB decisions, and financial obligations for foreign buyers, which could otherwise result in a property not settling.


It is vital that all real estate agents ensure they are asking any buyer whether they are an Australian citizen or permanent resident.


If the answer is no, and they are a foreign buyer, remind them of the importance of seeking specialist immigration law advice and speaking with a financial specialist in foreign acquisitions to ensure they are not only well-placed to purchase the property, but are meeting all of their obligations.


Where a transaction does include a foreign purchaser, you should consider inserting a special condition in the contract that makes the purchase conditional on a successful FIRB approval for the buyer. Our office can assist in drafting any special conditions, and recommend you contact our property lawyers so we can help.


Get Specialist Advice


If you are a foreign individual, company or trust, and are looking to purchase residential property in Queensland, it is important to obtain proper advice. It is important to carefully consider both the regulatory requirements and financial obligation before proceeding.


Whilst we assist thousands of families buy and sell property every year, including many international clients, it is critical you speak with a tax advisor and financial accountant who are specialists in foreign acquisitions.


Please do not hesitate to contact our office if you have any questions regarding our conveyancing service, and how we can help you.


Quick Links:


 

Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.


RHC Solicitors ©

bottom of page