Chapter 2A of the Duties Act 1997 (NSW) – Surcharge purchaser duty applicable from 21 June 2016
Pursuant to Chapter 2A of the Duties Act 1997 (NSW) on or after 21 June 2016 foreign persons acquiring residential property in New South Wales are liable to pay a 4% surcharge duty in addition to the usual stamp duty payable on their purchase:
- 4% duty surcharge on dutiable transactions relating to residential land entered into by foreign persons (includes companies and trusts)
- The surcharge applies to the dutiable value of the property
- Only purchasers / transferees who are foreign persons are liable to pay surcharge purchaser duty
- No 12 month deferral of duty for off-the-plan purchases
The meaning of “Residential Land” and “Foreign Person” is defined under Chapter Chapter 2A of the Duties Act 1997 (NSW).
You are not a foreign person if you are
- An Australian citizen; or
- A person who is ordinarily resident in Australia
Ordinarily resident means
- Actually in Australia during 200 or more days in the 12 months before the transaction; and
- Was not subject to any limitation as to time for their continued presence in Australia
Foreign person means
- An individual not ordinarily resident in Australia
- A corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest
- The trustee of a trust which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest
- A foreign government
- A general partner of a limited partnership where an individual not ordinarily resident in Australia holds a substantial interest
- Corporations and trusts in which 2 or more foreign persons hold an aggregate substantial interest
Substantial and aggregate substantial interest
A person holds a substantial interest in an Entity or Trust if:
- For an Entity – the person, together with one or more associates, holds an interest of least 20% in the Entity; or
- For a Trust – the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the Trust
- Note – for a Discretionary Trust each beneficiary is deemed to hold a 20% interest
- Aggregate substantial interest is where 2 or more persons hold at least 40%
Surcharge purchaser duty
Example 1
| A foreign person purchases residential property for $2 million | ||
| Stamp duty payable on $2 million | $95,490.00 | |
| Surcharge duty of 4% on $2 million | $80,000.00 | |
| Total duty payable | $175,490.00 | |
Example 2
| A, B and C purchase a residential property for $2.7 million as tenants in common in equal shares and C is a foreign person | ||
| Stamp duty payable on $2.7 million | $133,990 | |
| The value of C’s 1/3 interest in the property is $900,000
Surcharge duty of 4% on $900,000 |
$36,000.00 | |
| Total duty payable | $169,990.00 | |
Landholder duty – Company or Unit Trust with land in NSW valued at $2 million or more
Surcharge purchaser duty applies to landholder acquisition:
- On the interest acquired by foreign persons
- On the value of the residential property only
Exemptions and concessions
No surcharge purchaser duty payable if:
- Exemption applies under Chapter 2
- Concession applies under Chapter 2
- Some exceptions
- First Home – New Home scheme
- New Home Grant
- Transfers of principal place of residence between married couples or de facto partners
Deceased Estates, no surcharge duty
- Unless trusts are varied under an agreement between beneficiaries (the proportion of residential property a foreign person was not entitled to Will be liable to the surcharge)
- General exemptions apply
NB The information contained in this article (and its contents) is general information only and should not to be considered as legal advice.
Penny Browne Conveyancing