The State budgets for 2016 in three Australian States namely, Queensland, New South Wales and Victoria, will make far reaching changes to stamp duty on land purchases. Where a foreigner purchases residential property, higher rates of duty than those applying to local purchasers will be payable. Queensland is the latest state to announce these changes in its 2016 State budget handed down today. This Legal Alert is a summary of the changes.
The Queensland Treasurer has announced today that the State will introduce a 3% transfer duty surcharge to be applied to foreign purchasers who acquire residential property in Queensland from 1 October 2016. The effective rate for foreign purchasers will be 8.75% (compared to the standard 5.75% rate). The measure is expected to raise $15,000,000 in the 2016-17 financial year and $25,000,000 per annum afterwards.
New South Wales
The NSW Treasurer Gladys Berejiklian has announced today that the 21 June NSW Budget followingQueensland and Victoria will include the introduction of foreign investor surcharges on stamp duty and land tax on residential real estate. She has indicated that the “NSW Budget will outline a 4% stamp duty surcharge on the purchase of residential real estate by foreign purchasers to commence on Budget day (21 June) and a 0.75% land tax surcharge on residential real estate owned by foreign persons commencing in the 2017 land tax year”.
Further, foreign investors will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property. Foreign persons will not be provided with a tax-free threshold for the land tax surcharge.
Victoria introduced a 3% duty surcharge for foreign purchasers effective 1 July 2015, now to be increased to 7% effective 1 July 2016.
The relevant changes in Victoria are set out in the State Taxation and Other Acts Amendment Bill 2016(Bill) currently before the Parliament of Victoria. The Bill proposes to increase the rate of additional duty payable by foreign purchasers of residential property from 3% to 7% (resulting in a rate of 12.5% compared to the usual rate of 5.5% payable by domestic purchases).
The bill, as passed by the Legislative Assembly, applied to hotels and similar property. It was amended by the Legislative Council to exclude from its operation “commercial residential premises” such as hotels. The amended bill is awaiting consideration by committee and is expected to take effect from 1 July 2016 as amended.
The Bill also provides for an increase of the land tax surcharge introduced in 2015 for absentee landlords from 0.5% to 1.5%.
Further details are required from the Queensland and New South Wales governments as to whether options and contracts made before the start date for the higher rates will be protected from the relevant change of law. The Victorian changes are understood not to apply to transfers made after 1 July 2016 completing an agreement made before that date although the position will be finally known only after the passage of the Bill as amended through both houses of the Victorian Parliament.
It is also not clear whether the higher rates in New South Wales and Queensland will apply to commercial residential premises such as hotels. This will presumably be known once bills are available.
Higher taxes on foreign purchasers of land are not unusual in other parts of the region (such as Hong Kong and Singapore) but are relatively new in Australia.
Click here to read our previous alert on the 2016-17 Federal Budget.