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Sydney Property Blog

Foreign Persons to pay extra for residential real estate in New South Wales

There were major impacts for foreign persons purchasing residential real estate in the 2016 New South Wales Budget. Foreign Persons are defined as:

  1. an individual not ordinarily resident in Australia; or
  2. a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
  3. a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
  4. the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
  5. a foreign government; or
  6. a general partner of a limited partnership where:
    1. an individual  not ordinarily resident in Australia, a foreign corporation or a foreign government holds at least 20% in the limited partnership, or
    2. two or more persons each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate interest of at least 40% in the limited partnership.

    This definition does not include an Australian Citizen, irrespective of where they reside.

    We are able to advise you if you or your entity falls within this definition.

    STAMP DUTY

    The Office of State Revenue now requires that all purchasers complete a declaration when paying stamp duty on the purchase of residential real property in New South Wales. If you are not an Australian resident you will be required to pay an additional surcharge of 4% of the value of the Property. Foreign persons will no longer be entitled to the 12 month deferral for payment of stamp duty which Australian residents enjoy when purchasing off the plan.

    Only one of the purchasers needs to be a foreign person to attract the new provisions and this could include any member of a Self-Managed Superannuation Fund or beneficiaries of a trust.

    LAND TAX

    Increased rates of Land Tax will also be payable by foreign owners from the 2017 Land Tax year onwards. The surcharge will be 0.75% of the value of all residential land held by foreign persons; and will apply even where the total residential land held by a foreign person does not exceed the land tax threshold for any given year.

    As with the stamp duty surcharge the land tax surcharge will apply to any foreign person who is the owner of residential land in New South Wales.

    These changes come on top of the Commonwealth withholding tax discussed in our previous blog post (Go to blog post). So if you are planning to sell off residential land to avoid the additional land tax surcharge in the future if you are a foreign person or have foreign persons as beneficiaries or members of a trust fund, you will need to ensure that you have a clearance certificate issued by the Australian Tax Office prior to entering the transaction, or at the very least, a variation certificate to ensure that you do not have 10% of the purchase price automatically remitted to the ATO on settlement.

    With these constant changes it is now more important than ever that you seek advice before entering into any property transaction so we are able to help you arrange these matters.

    N.B. Not all New Zealand citizens are exempt from these surcharges.

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