Revenue NSW announces foreign surcharge duty and land tax do not apply for certain foreign citizens – effective immediately
On 21 February 2023, Revenue NSW determined the NSW foreign purchaser surcharge duty and land tax will no longer be imposed on citizens of New Zealand, Finland, South Africa, and Germany.
The determination was made on the grounds that the foreign surcharge provisions are inconsistent with the international tax treaties entered into by Australia with these four nations. The international tax treaties contain non-discrimination provisions, which extend to federal and state taxes.
Effective immediately, refunds may be available for foreign purchasers and landowners from the nations concerned who have paid the surcharge duty or land tax on or after 1 July 2021. Revenue NSW have indicated they will proactively identify customers that may be eligible for refunds.
Liabilities for non-individual entities such as corporations, trusts or partnerships that arise because of an entity’s affiliation with these nations may also be affected by the international tax treaties. In these cases, an analysis would need to be carried out to determine whether the entity remains subject to the foreign surcharge.
While this is a significant development for foreign taxpayers of the nations concerned, there are many questions that remain unanswered. For instance, the relevance and impact that this development has on other Australian states and territories which levy the surcharges is yet to be determined. Further, it is unclear why certain countries such as Japan, which also contain similar non-discrimination provisions have not been included.
Victorian State Revenue Office considering Revenue NSW’s announcement regarding foreign surcharge duty and land tax
At the time of writing, no further announcements by the other states and territories have been made in relation to the validity of the surcharges.
However, the Victorian State Revenue Office has issued a short statement acknowledging NSW’s announcement and that it is “considering the implications” and will provide updates as required.
New South Wales Premier proposes to expand first home buyer stamp duty reforms
New South Wales Premier Dominic Perrottet, has announced an election promise to expand the “first home buyer choice” annual property tax scheme currently available to first home buyers.
Since November last year, certain eligible NSW property purchasers could opt in to pay an annual tax rather than an upfront stamp duty payment on purchase of an NSW property where the value is below $1.5 million.
Under the new proposal, first-home buyers will be allowed to continue to pay an annual tax rather than an upfront stamp duty payment for subsequent purchases of land. The $1.5 million threshold would also increase by $50,000 a year. The current scheme only applies to first home buyers who have not previously owned or co-owned residential property in Australia and who have not received duty concessions.
More details are expected to be announced ahead of the New South Wales Election on 25 March 2023.
Victoria’s upper house of parliament votes to establish a wide-ranging inquiry into stamp duty
On 22 February 2023, the upper house of Victoria has voted to establish a wide-ranging parliamentary inquiry into stamp duty, which involves an examination of the following:
• Impact of stamp duty on housing supply
• Labour mobility
• The overall efficiency of the tax system
The inquiry was pushed forward by Upper House Liberal Democrats MP David Limbrick who claimed that stamp duty, “negatively affects housing, labour mobility, and efficient allocation of housing.”
The inquiry is due to hand down its report within six months.
Grant Thornton will follow these developments closely and will provide details once available.
Windfall gains tax: deductions to be disallowed
From 1 July 2023, a windfall gains tax of up to 50% applies to Victorian land that is subject to a government rezoning resulting in a value uplift to the land of more than $100,000.
Under legislation passed in 2021, permitted deductions to offset any uplift were to be prescribed by regulations.
Last week through the Property Council of Australia, Victoria announced that no deductions will be prescribed. Consequently, the denial of deductions to offset windfall gains tax poses a significant cost to landowners and developers.
As no formal announcement has been made by the State Revenue Office, it is recommended that landowners maintain records of all types of potentially relevant expenditure involved in preparing for and seeking a rezoning. You can learn more about windfall gains tax including how it will be administered and when liability may arise by registering for Grant Thornton’s upcoming webinar.
If you have been impacted by any of these announcements, reach out to our State Taxes team.