With newfound laws comes newfound confusion, and the surcharges that were recently introduced to duties and land tax are no exception.
The New South Wales (NSW) Treasurer, The Hon. Gladys Berejiklian MP, announced changes to the State Revenue Legislation Amendment (Budget measures) Act 2016, which affects state taxes regarding residential real estate and land purchased or owned by foreign persons.
We have set out the current situation for you.
Am I a Foreign Person?
Generally, yes, if you are:
- an individual not ordinarily resident in Australia;
- a corporation in which such an individual has a substantial interest;
- a trustee of a trust in which such an individual holds a substantial interest;
- a foreign government.
No, if you are:
- an Australian citizen, wherever you reside;
- a New Zealand citizen holding special category visas and you have been in Australia for at least 200 days in the last 12 months.
What is Duty?
Duty is a tax charged by the New South Wales Government on certain documents, including the contract for sale and transfer of land. The purchaser or transferee is liable to pay the duty, which is calculated on the total dutiable value of the property.
|Value of the property subject to the transaction||Rate of duty|
|$0 - $14,000||$1.25 for every $100 or part of the value|
|$14,001 - $30,000||$175 plus $1.50 for every $100, that the value exceeds $14,000|
|$30,001 - $80,000||$415 plus $1.75 for every $100, that the value exceeds $30,000|
|$80,001 - $300,000||$1,290 plus $3.50 for every $100, that the value exceeds $80,000|
|$300,001 - $1m||$8,990 plus $4.50 for every $100, that the value exceeds $300,000|
|over $1m||$40,490 plus $5.50 for every $100, that the value exceeds $1,000,000|
|Premium Property Duty: over $3m||$150,490 plus $7.00 for every $100, that the value exceeds $3,000,000.|
Table taken from http://www.osr. nsw.gov.au
From 21 June 2016, a 4% surcharge on the purchase of residential real estate by foreign persons came into effect. The purchaser duty surcharge is in addition to the duty payable on the purchase of residential property. In short:
- A foreign purchaser would be paying a duty rate on a purchase capped at 9.5%.
- The 4% surcharge applies to all contracts entered from June 21, 2016.
- Every property transaction must be analysed to determine if the buyer or seller are foreign.
- Foreign persons will no longer be entitled to the 12-month deferral of duty for off-the-plan purchases of residential property.
- All transferees who are liable to pay duty must lodge a declaration form.
- It is not clear yet whether this will apply to commercial residential premises such as hotels.
This surcharge will also apply to landholder transactions if:
- There is a landholder liability;
- One or more of the properties owned by the landholder is classified residential; and
- The purchaser is a foreign person who purchases shares or units in the landholder.
Additionally, from 1 July 2016, duty on the transfer of business assets or a declaration of trust over business assets (other than land) will be abolished.
The content of this article is intended to provide a summarised general guide to this topic. Contact us to seek legal advice regarding your specific circumstances. Contact OSR for the full details of the changes.