Yes. AFAD can be applied retrospectively if a foreign person who did not have a controlling interest in a trust or corporation when the land was purchased obtains a controlling interest within 3 years of purchase.
However, the Bill says the reassessment provision applies where AFAD is not imposed on a relevant transaction only because an acquirer under the original transaction is not a foreign person. That means that where any non-foreign person acquires AFAD residential land, the transaction is open to reassessment regardless of whether any interest was initially acquired by a foreign person. This has significant cost implications.
For example, if a company acquires a residential development site post 1 October 2016 for $1 million, the land acquired is “AFAD Residential Land” even if the buyer is not foreign. The transfer duty on the transaction will be (at current rates) $30,850. A year later, the company obtains a development approval for the site. The value of the site with the approval is $2 million. It then decides to introduce a foreign JV party that takes a 51 per cent interest in the development project by buying shares in the Company. The foreign party will pay landholder duty on its acquisition as a foreign acquirer. Assume the price is 51 per cent of the then current value being $1,020,000. Duty of $32,000 plus AFAD of 3 per cent ($30,600) will be paid on the acquisition on the shares being a total duty of $62,600.
However, the Commissioner must also reassess the transaction under which the Company acquired the land – to impose AFAD on the original transaction as if, at the time the liability for transfer duty arose, the company was a foreign person. Transfer duty will therefore be the $30,850 originally assessed plus another 3 per cent of $1,000,000 (original purchase price) being an additional $30,000.
Despite the fact that AFAD is collected on the acquisition of the interest in the private landholder by the foreign investor, the Government also collects another $30,000 on the original transaction even though there is clearly no intention to avoid duty in any of these transactional steps. The blanket approach to reassessment in a fixed time frame with no regard to the transactional context results in ‘double dipping’.