As of 21 June 2016, foreign purchasers of residential land in New South Wales may be exposed to additional stamp duty and land tax charges. There are six key points you need to understand.
1. Stamp duty surcharge on foreign purchasers
If the proposed measures are passed by the NSW Parliament, a 4% stamp duty surcharge will be imposed on foreign purchasers of residential real estate in New South Wales. This is in addition to the ad valorem rate of duty payable by all purchasers.
For example, the duty payable by a resident purchaser of a residential property in New South Wales for AU$1 million would be AU$40,490. However, from 21 June 2016, a foreign purchaser of a residential property for AU$1 million will be charged duty of $80,490 (including the foreign resident surcharge).
The details of the surcharge will not be announced until the NSW Budget is released on 21 June 2016. However, it is expected that this new surcharge will only apply to contracts exchanged on or after 21 June 2016.
Victoria has imposed an equivalent surcharge on acquisitions of residential land by foreign purchasers since 1 July 2015. However, the Victorian Government announced in its 2016-17 Budget that the rate of the surcharge will increase from 3% to 7% with effect from 1 July 2016.
The Queensland Government has also introduced a Bill which (if passed) will impose a 3% stamp duty surcharge on acquisitions by foreign purchasers of residential land in Queensland with effect from 1 July 2016.
2. Foreign controlled companies or trusts
It is not clear at this stage how the new surcharge will apply to foreign controlled entities. However, if the NSW provisions reflect the equivalent provisions in Victoria and Queensland, a foreign person may include a corporation or trust (whether established in Australia or elsewhere) in which foreign persons have controlling or substantial interests.
3. Residential development sites
The NSW surcharge may apply to residential development sites (including vacant residential land) acquired by a foreign controlled corporation or trust.
4. Nominations and subsales
Nominations and subsales made after 21 June 2016 may be caught even though the contract for the acquisition of land in New South Wales was made before 21 June 2016.
5. Off-the-plan concession eliminated for foreign buyers
Foreign investors will no longer be entitled to the 12 month deferral for the payment of stamp duty on off-the-plan purchases of residential property in New South Wales. It is expected that this will only impact off-the-plan contracts exchanged on or after 21 June 2016.
6. Land tax surcharge for foreign investors
There will be a new land tax surcharge of 0.75% on residential land owned by foreigners for the 2017 land tax year. This is on top of the general rates of land tax in New South Wales and there will be no tax-free threshold for the 0.75% land tax surcharge.
The NSW Government has also confirmed that it will abolish mortgage duty, share transfer duty and non-real transfer duty from 1 July 2016.