• Transfer duty and land tax reforms affecting foreign property investors

Many of the States have recently been moving away from subjecting the transfer of business assets that are not real property to transfer duty.

However, foreign property investors on Australia’s East Coast are being subjected to additional transfer duty and land tax as the eastern States look to replace this lost revenue.

New South Wales and Queensland have both made changes in recent months to join the first mover in this space, Victoria. Victoria, in turn, has made additional changes to further increase the transfer duty and land tax that foreign investors are required to pay.

So, what transfer duty and land tax surcharges are foreign investors subject to, in addition to the transfer duty and land tax that is payable by all property investors in each of these States?

Victoria

  • a 7% transfer duty surcharge is payable by foreign buyers of Victorian residential property on contracts entered into on or after 1 July 2016. The transfer duty surcharge, which has applied since 1 July 2015, was previously applied at the rate of 3%
  • a land tax surcharge equal to 1.5% of the unimproved value of the land is payable by foreign owners who do not ordinarily reside in Australia for property held from the start of the 2017 land tax year (for property owned as at 31 December 2016). The land tax surcharge, which has applied from the start of the 2016 land tax year, was previously applied at the rate of 0.5%. This surcharge applies to both residential and commercial property.

New South Wales

  • a 4% transfer duty surcharge is payable by foreign buyers of New South Wales residential property on contracts entered into on or after 21 June 2016
  • a land tax surcharge equal to 0.75% of the unimproved value of the land (generally calculated as the average of the unimproved land value for the current tax year and the unimproved land values for the previous two tax years) is also payable by foreign owners of New South Wales residential property from 1 January 2017 (for residential property owned as at 31 December 2016)

Queensland

  • A 3% transfer duty surcharge is payable by foreign buyers of Queensland residential property on contracts entered into on or after 1 October 2016

The definition of who is a foreign investor for the purposes of the transfer duty and land tax surcharges varies from State to State. If you’re a foreign investor looking to purchase in these markets, you’re advising a foreign investor on their transaction, or you’re selling to a foreign investor, it’s therefore vital that you seek professional advice on the transfer duty and land tax payable on the transaction.

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