Beware land tax surcharge for foreign corporations and trustees of foreign trusts

From 30 June 2020, all foreign corporations and trustees of foreign trusts (foreign entity) that own land in Queensland and pay land tax, are liable for an additional 2% foreign land tax surcharge over and above the land tax rates.

For example:

• On 30 June 2021, Company A is controlled by foreign persons (at least 50% interest) and owns land with a taxable value of $4,000,000.
• Land tax payable by Company A is $60,000 ($33,750 + 1.5 cents for each $1 more than $2,250,000).
• Company A must pay an additional foreign land tax surcharge of $73,000 (($4,000,000 – $350,000) x 2%).
• Company A’s total land tax liability is $133,000 ($60,000 + $73,000).

Click here for the OSR’s full list of rates

The foreign land tax surcharge was due to commence for the 2019/20 tax assessment year but was waived as part of the Queensland Government’s COVID-19 tax relief.

The surcharge applies for the 2020/21 tax assessment year (midnight 30 June 2020).

Multinationals who already own Queensland land and are subject to the additional 2% foreign land tax surcharge can apply for ex-gratia relief of the foreign land tax surcharge by satisfying the conditions in Public Ruling LTA000.4.1 Guidelines for ex gratia relief from the land tax foreign surcharge:

1. The entity is Australian based;
2. Foreign Investment Review Board’s requirements are met;
3. ASX rules and obligations under the Corporations Act 2001 (Cth) are met; and
4. The foreign entity conducts commercial activities that make a significant contribution to the Queensland economy and community.

This requires strong supporting evidence and is the hardest condition to satisfy. For a foreign entity that has only recently begun operating in Australia, it is possible to include a business plan, recruitment plan, details of capital raised and development approval to demonstrate the entity has committed to future commercial activities (within 12 months) that will make a significant contribution to the Queensland economy and community.

For multinationals intending to acquire Queensland land, it may be possible to undertake tax structuring to manage the foreign land tax surcharge before making the acquisition.

Ex-gratia relief from additional foreign acquirer duty

Property developers who intend to purchase land for development in Queensland and are subject to the additional foreign acquirer duty may be eligible for ex gratia relief of additional foreign acquire duty if the development is a significant development and satisfies the requirements under Public Ruling DA000.15.2 Additional foreign acquirer duty – ex gratia relief for significant development.

How we can help

Thynne +Macartney helps you plan the structure to acquire properties and businesses for tax efficiency.

Our dedicated tax lawyer Danh Nguyen can also provide advice and help apply for ex gratia relief of land tax foreign surcharge and additional foreign acquirer duty.