While the Queensland Government has waived the foreign surcharge for 2019-20 in response to COVID-19, these Guidelines are important for the 2020-21 year onwards.

'Foreign Company' and 'Foreign Trust' explained

These Guidelines are relevant for a range of taxpayers, noting that the definitions of 'foreign company' and 'foreign trust' are extremely broad:

• 'Foreign Company': A corporation (whether incorporated in Australia or elsewhere) will be a 'foreign company' if one or more foreign persons, or related persons of foreign persons, are together in a position to control at least 50% of the voting power (or potential voting power) in the corporation, or together have an interest in at least 50% of the issued shares in the corporation.
• 'Foreign Trust': Similarly, a unit trust will be a ‘foreign trust’ if one or more foreign persons, or related persons of foreign persons, have at least 50% of the interests in the trust. A discretionary trust will generally be a 'foreign trust' if its default beneficiaries are foreign persons (or related persons of foreign persons).

Taxpayer eligibility

In determining whether relief will be granted, the Queensland Commissioner of State Revenue must be satisfied that the taxpayer:

• Is Australian-based - factors to be considered include (but are not limited to) whether the taxpayer has a head office, principal place of business and/or significant management staff and office presence in Australia, the degree of Australian participation in decision making, and whether the taxpayer primarily contracts for services and materials from Australian suppliers;
• Complies with all FIRB requirements in relation to the acquisition of the relevant land;
• Meets regulatory requirements (including those contained in the Corporations Act 2001 (Cth) and Queensland taxation laws); and
• Conducts commercial activities that make a ‘significant contribution’ to the Queensland economy and community (factors to be considered include the extent to which commercial activities are conducted in Queensland and the extent to which local labour / suppliers and materials are used). Note that:
  • The contribution to the economy and community must be ‘significant’ relative to the size of the taxpayer’s Queensland landholdings; and
  • A taxpayer that essentially holds land passively as a landlord or property investor will generally not be treated as making a ‘significant contribution’.

Importantly, the Queensland Government is yet to address industry recommendations to introduce:

• An exemption for publicly listed entities or widely held trusts;
• An exemption for foreign owned agricultural land; and
• An 'absentee proportion' mechanism (so that any surcharge is only assessed by reference to the proportion of the land that is ultimately foreign owned).
  These issues represent significant departures from the Victorian exemption regime, lessening Queensland’s appeal as a destination for foreign investment.

Applying for an exemption

A taxpayer may apply for an exemption from the foreign surcharge either retrospectively or prospectively, provided that it can demonstrate that it has met the relevant eligibility conditions (or will meet such conditions at the time that liability for the surcharge arises).

To apply, the taxpayer must submit an application in the approved form together with supporting information and documentation (including a statutory declaration). If the exemption is obtained, the taxpayer must then annually confirm that it continues to satisfy the eligibility conditions (the taxpayer must also inform the Commissioner within 28 days if it no longer satisfies such conditions).

Please contact us if you require assistance in considering your eligibility for (or otherwise applying for) an exemption from the foreign surcharge.