Foreign Investor Duty Surcharge

​​The Foreign Investor Duty Surcharge (FIDS) is an additional amount of duty charged when residential or primary production property is acquired (either directly or indirectly) by a foreign person. This includes vacant land which may meet the definition of residential or primary production property.

 A direct acquisition occurs when the land acquired will be registered as being owned by the foreign person. These are assessed under Chapter 2 of the Duties Act 2001
An indirect acquisition occurs if a significant interest in a land owning company or trust is acquired by a foreign person, or where a land use entitlement is acquired by way of allotment of shares or issue of units. These are assessed under Chapter 3 of the Duties Act. 

​For transactions on or after 1 July 2018 to and including 31 March 2020, or where a written agreement is entered into before 1 April 2020.

The following surcharge applies for acquisitions: 

  • 3 per cent on the proportion of the dutiable value of residential property directly or indirectly acquired by a foreign person; and 
  • 0.5 per cent on the proportion of the dutiable value of primary production property directly or indirectly acquired by a foreign person.

For agreements (or transactions without a written agreement) on or after 1 April 2020.

The following surcharge rate applies:

  • ​8 percent on the proportion of the dutiable value of residential property directly or indirectly acquired by 
    a foreign person; and
  • 1.5 per cent on the proportion of the dutiable value of primary productions property directly or indirectly acquired by a foreign person.

Definition of a foreign person

A foreign person includes:
• a foreign corporation;
• a foreign natural person; and
• a foreign trustee (including a nominee).

A corporation or trust acquiring residential or primary production property will be required to satisfy its TRO Agent (or the Commissioner of State Revenue if it is not using a TRO Agent) that it is not foreign in order to avoid imposition of the FIDS.

Who is a fore​​ign natural person?

A foreign natural person is an individual who is not acting in the capacity as a trustee of a trust, who is not:

  • Australian citizen within the meaning of the Australian Citizenship Act 2007 of the Commonwealth.
  • the holder of a permanent visa within the meaning of the Migration Act 1958 of the Commonwealth.
  • a New Zealand citizen who is the holder of a special category visa within the meaning of the Migration Act 1958 of the Commonwealth.

What is a foreign corporation?

A foreign corporation is a corporation incorporated:

  • outside of Australia; or
  • in Australia in which foreign natural person/s, foreign corporation/s, or trustee/s of foreign trust/s have a significant interest in the corporation.

All corporations are presumed to be foreign unless proved otherwise.

What is a foreign trustee?

A foreign trustee is a person who holds, agrees to hold, or has acquired, dutiable property on trust for a foreign trust. A foreign trustee can be an Australian citizen or corporation in Australia.

What is a foreign trust?

A foreign trust is a trust in which a foreign natural person, foreign corporation, or a foreign trustee has a substantial interest in the trust. All trusts are deemed to be foreign unless proved otherwise.

​Are discretionary trusts foreign trusts?

A trustee under a discretionary trust generally has a power or discretion to distribute the capital of the trust estate to a person or a member of a class of persons. Any such person is taken to have a beneficial interest in the maximum percentage of the capital of the trust estate that the trustee is empowered to distribute to that person. This means that any discretionary trust that has any potential foreign beneficiaries is likely to be a foreign trust.
 

​How can I satisfy my TRO Agent or the Commissioner that I am not a foreign person?

The following forms have been updated to assist in identifying if a transferee is a foreign person:
A.    Duty Transferee (Person) Information Form
B.    Duty Transferee (Company) Information Form

TRO Agents can use these forms to collect information from the liable taxpayers in order to submit transactions through TRO. The Commissioner of State Revenue will also use these forms. Information required in the above forms can also be collected directly by your representative and entered into TRO.

Individuals (not acting in a capacity as a trustee) who are Australian Citizens need to disclose to their TRO agent (or the Commissioner of State Revenue) that they are an Australian Citizen. The State Revenue Office may ask for additional evidence if required.

For individuals who are not foreign persons because they hold a Permanent Visa or a Special Category Visa, you will need to provide evidence to satisfy that you are a holder of a Visa (providing the visa number and class is not sufficient). Evidence may include a certified copy of your passport evidencing your Visa status or documentation obtained from the Visa Entitlement Verification Online (VEVO) system from the Commonwealth Department of Home Affairs.

A corporation or trust acquiring residential or primary production property will be required to satisfy the Commissioner of 
State revenue that it is not foreign in order to avoid imposition of the FIDS. A careful examination of a corporation's structure or the trust deed will be necessary and the evidence required can vary. 

What is residential property?

Residential property includes:
• vacant land on which a building may be built so that the land would be capable of being used predominantly for residential purposes;
• land on which a person intends to build a building (or which includes a building the person intends to refurbish) so that the land would be capable of being used predominately for residential purposes;
• land on which a building is currently located which is capable of being used predominately for residential purposes; and
• certain goods which are linked to the use of any of the above land.
Residential property also includes an option, a land use entitlement or a partnership interest which relate to residential property.

What is primary production property?

Primary production property includes:
• land which is capable of being used predominately for primary production purposes;
• land which a person intends to develop so that it is capable of being used predominately for primary production purposes; and
• certain goods which are linked to the use of any of the above land.

Primary production property also includes an option, a land use entitlement or a partnership interest which relate to primary production property.

Are there any concessions or exemptions?

FIDS is not payable if the underlying transaction is exempt or is eligible for a concession. An exception to this is if the transaction is eligible for a concession under section 50 of the Duties Act 2001, in which case FIDS is payable. 

There are two specific exemptions from FIDS, sections 30J and 30K of the Duties Act 2001.

A dwelling used as a principal residence.
If a property is purchased:

  • with an existing dwelling; and
  • which will be used as the transferees' principal place of residence within 6 months of purchase; and
  • is held by parties to a marriage, significant relationship or by caring partners; and
  • it is held in equal shares (as either joint tenants or tenants in common); and
  • only one of the parties is a foreign natural person;

then the transaction is exempt from FIDS. If FIDS has already been paid, then the Commissioner may, on application, reassess the surcharge payable. To make an application you will need to complete this application form.

A vaca​nt block of land on which a principal residence is built

If a vacant property is purchased and within 2 years:

  • a dwelling is constructed; and
  • the land is used as the transferees' principal place of residence; and
  • is held by parties to a marriage, significant relationship or by caring partners; and
  • it is held in equal shares (as either joint tenants or tenants in common); and
  • only one of the parties is a foreign natural person;​​

then the Commissioner may, on application, refund the surcharge paid at the time of the dutiable transaction. To make an application you will need to complete this application form​, together with the necessary supporting documentation​.

What if the land type changes?

A foreign person must notify the Commissioner of State Revenue within 14 days if land becomes primary production property or residential property within 3 years of its acquisition. This includes where primary production property becomes residential property.
The transaction will be reassessed as if at the time of the acquisition the land was residential property or primary production property (whichever is relevant). The additional FIDS is payable 90 days from the date of the land type change.
The land type change rules do not apply to landholder transactions under Chapter 3.

What if a person becomes foreign?

A person must notify the Commissioner of State Revenue within 14 days if the person becomes a foreign person within 3 years of the acquisition of the land. The transaction will be reassessed as if at the time of the acquisition the person was a foreign person. The additional duty is payable within 90 days of the person becoming a foreign person.

The exception to this is a New Zealand citizen who is the holder of a Special Category visa (subclass 444) within the meaning of the Migration Act 1958 of the Commonwealth. If this visa holder temporarily leaves Australia, the visa is withdrawn, meaning that the person may become liable for FIDS.

To overcome this issue, the Commissioner has issued a determination under section 30M of the Act whereby a New Zealand citizen that temporarily leaves Australia will not be deemed a foreign person in the following circumstances:

  • the person is a natural person; and
  • the person was a citizen of New Zealand at all material times; and
  • the person was in Australia at the time of the dutiable transaction and held a Special Category visa (subclass 444); and
  • the person's principal residence was in Australia at all material times; and
  • the person, within three (3) years of the dutiable transaction, temporarily leaves Australia for a period of three months or less within any calendar year.

For additional information see the Commissioner's Revenue Ruling Section 30M Discretion.​

What if a person or trust is no longer foreign?

A natural person or a discretionary trust that ceases to be foreign within 6 months of the dutiable transaction, may apply to the Commissioner, in writing, for a refund of the surcharge paid.

To make an application for a refund of the surcharge, you will need to complete this application form​.

For a discretionary trust to be reassessed as no longer being foreign, it will be necessary that:

  • at the time of the dutiable transaction, the trust was a foreign trust;
  • under the terms of the trust, the trustee has a discretion in regard to the distribution of capital;
  • the trustee in the capacity of trustee was the transferee in respect of the dutiable transaction;
  • the trust deed of the trust has been amended, and as a result of the amendment, the trust is no longer a foreign trust;
  • the amendment of the trust deed was undertaken within six months of the dutiable transaction, or within six months of 30 March 2020; and
  • the trustee has not transferred or distributed all or any part of the property.​

Commissioner's discretion

Under section 30L of the Act, a transferee who is a foreign person and who is liable for FIDs can apply to the Commissioner in writing to be considered non-foreign. The Commissioner has the discretion to either:

  • determine that the person is not a foreign person; or
  • refuse the application.

This discretion is applied on a case by case basis, and a determination by the Commissioner under section 30L is a non-reviewable decision, meaning that a taxpayer cannot object or appeal a decision under this section. Because the Act already includes specific FIDs exemptions, it is likely that this discretion will only be applied in exceptional circumstances under which the imposition of FIDs would be inconsistent with the intention of the FIDs provisions.

​What if the acquisition occurred before 1 July 2018?

FIDS is not chargeable if the acquisition (whether directly or indirectly) occurred before 1 July 2018. If a contract was entered into before 1 July 2018 but settled after 1 July 2018, FIDs applies.

What do I do if I am liable for FIDS?

The dutiable document or acquisition statement needs to be assessed by the SRO for duty in the normal manner. However, some additional information is required so that the FIDS can be calculated.
For direct acquisitions under Chapter 2 this will include information about:
• what type/s of land are being acquired;
• the value of any residential and/or primary production property being acquired; and
• the percentage of the land being acquired by a foreign person/s.

For landholder acquisitions under Chapter 3 the information required will include:
• the type/s of land held by the landholder;
• the value of any residential and/or primary production property held by the landholder as at the date of any acquisition in the landholder made by the foreign person; and
• the percentage of the landholder acquired by a foreign person/s.

For land use entitlements under Chapter 3 the information will include:
• the type/s of land related to the land use entitlement.

The forms or statements that are required to be lodged have been amended to include an additional question in order to determine whether FIDS is applicable. A Foreign Investor Acquisition Statement will also be required to be completed if FIDS is applicable.

How can I calculate the amount of FIDS?

To calculate the total FIDS applicable to the dutiable transaction, it is necessary to firstly calculate the amount of FIDS for each property, and then sum these individual amounts. The Foreign Person Duty Calculator​ in TRO can be used for these individual property calculations.

Where can I find additional information about FIDS?

The Duties Act 2001 contains additional information such as definitions of the terms used.​

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