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Stamp duty surcharges for foreign investors

Posted by Northadvisory on July 25, 2018

All states in Australia have (or will) implemented surcharges on foreign investors in the residential property market.

The following is a state-by-state breakdown for foreign purchasers, including the specific definitions and exclusions which apply in each jurisdiction.

New South Wales

Stamp duty surcharge

8%

Affected persons

Individual must be in Australia for 200 days or more within
the 12 months immediately prior to contract date to be ordinarily
resident.
Persons who do not meet the 200 days rule and are either a
– permanent visa holder
– NZ citizen with 444 visa, or
– partner visa holder (subclass 309 or 820)
are considered foreign persons. Also, a temporary visa holder is considered a
foreign person.

Other provisions affected

No longer entitled to the 12 month deferral for the payment of
stamp duty for off-the-plan purchases of residential property.

 

Other notes for NSW:

A corporation and a trustee of a trust can be a foreign person. This will occur where the corporation or trust itself is not resident in Australia, or an Australian company which has a substantial foreign company or individual ownership.

A substantial interest of a corporation means an ownership or control of at least 20 percent. For trusts, if the minimum possible distribution is over 20 percent the trust is deemed a foreign person also.

If a trustee has a discretionary power to make a distribution for a foreign person, then they are deemed to have a 100% beneficial ownership.

A trust deed under this scenario must be amended with 6 months of the exemption being granted (ie. contract date) in order for the surcharge to be avoided.

Victoria

Stamp duty surcharge

7%

Affected persons

Persons who are not a:
– citizen or permanent resident of Australia, or
– NZ citizen with 444 visa.
A foreign corporation includes:
– corporations incorporated outside Australia, or
– corporations incorporated in Australia if a foreign person or corporation
has a controlling interest in the corporation.
A foreign trust is a trust where a foreign natural person or corporation has
a substantial interest in the trust estate of that trust.

Other provisions affected

First home buyer concession of duty not available for foreign
persons unless purchased with Australian spouse.

 

Other notes for Victoria:

A foreign purchaser may be entitled to an exemption from additional duty if they purchase a principal place of residence jointly with a spouse who is an Australian citizen, permanent resident or NZ citizen with a special category visa.

Controlling interest in corporations refers to a 50 percent control in the company by way of shares or voting rights.

Beneficial interest in trusts refers to a 50 percent beneficial interest in the capital of the trust, or if the maximum percentage of discretionary beneficial entitlement is greater than 50 percent.

A foreign purchaser may still be entitled to a concession of general stamp duty where they are purchasing their principal place of residence. However, the foreign purchaser duty may apply.

Queensland

Stamp duty surcharge

7%

Affected persons

Persons who are not a:
– citizen or permanent resident of Australia, or
– NZ citizen with special category visa.
A foreign corporation includes:
– corporations incorporated outside Australia, or
– a corporation incorporated in Australia if a foreign person or corporation
has a 50% interest in the corporation.
A foreign trust is a trust where a foreign natural person or corporation has
a 50% interest in the trust estate of that trust.

Other provisions affected

Additional stamp duty applies to:
– Landholder duty, and
– Corporate trustee duty

 

Other notes for Queensland:

Purchases of other types of residential property such as retirement villages and student accommodation are considered on a case-by-case basis.

A foreign purchaser can still claim the first home concession, first home vacant land concession and home concession.

South Australia

Stamp duty surcharge

7%

Affected persons

Persons who are not a:
– citizen or permanent resident of Australia, or
– NZ citizen with special category visa.
A foreign corporation includes:
– corporations incorporated outside Australia, or
– a corporation incorporated in Australia if a foreign person or corporation
has a 50% ownership or voting interest in the corporation.
A fixed trust is a foreign trust where a foreign natural person or corporation
has a 50% capital beneficial interest in the trust estate of that
trust.
A discretionary trust is a foreign trust where a foreign natural person or
corporation would be beneficially entitled to receive any distribution,
whether or not is it exercised.

 

Other notes for South Australia:

A foreign person is entitled to a refund of the surcharge duty where they cease to be a foreign person as defined above within 12 months of acquisition.

The surcharge will be retrospectively imposed where a person, corporation or trust becomes a foreign person, corporation or trust within three years of the acquisition.

Western Australia

Stamp duty surcharge

4%

Affected persons

Foreigners, including individuals, corporations and trusts.

 

Other notes for Western Australia:

The foreign purchaser surcharge will not apply to residential developments of 10 or more properties.

Tasmania

Stamp duty surcharge

3%

Affected persons

Foreign natural person
Foreign corporation
Foreign trustee (including a nominee)

Other provisions affected

Additional 0.5% on the proportion of dutiable value of primary
production directly or indirectly acquired by a foreign person.

 

Other notes for Tasmania:

A corporation or trust acquiring residential or primary production property will be required to satisfy its TRO agent that it is not a foreigner in order to avoid imposition of the additional duty.

The additional duty is not payable if the underlying transaction is exempt or is eligible for a concession. The main general concession is for companies undergoing a statutory wind-up.

If you have questions on any of the above issues raised, please do not hesitate to contact us.

Kim Edwards
Chartered Tax Adviser
Chartered Accountant
T: 02 9984 7774
E: kime@northadvisory.com.au