Comasters Law Firm and Notary Public | Foreign Purchasers in New South Wales
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Foreign Purchasers in New South Wales

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The 2016-17 New South Wales Budget introduced the Foreign Purchaser Surcharge, which stipulates that a foreign person who acquires residential property in New South Wales on or after 21 June 2016 is liable to pay surcharge duty. The surcharge duty applicable is four (4) per cent which is additional to the usual duty payable on the purchase of the residential property.

IMPORTANT DEFINITIONS

Definition of a Foreign Person

Foreign person means:

  • an individual not ordinarily resident in Australia; or
  • a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
  • a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an aggregate substantial interest; or
  • 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 two or more persons each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an aggregate substantial interest; or
  • a foreign government; or
  • a general partner of limited partnerships where:
    • an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds at least 20 per cent in the limited partnership; or
    • two or more persons of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, holds an aggregate interest of 40 per cent in the limited partnership.

 

Definition of a Substantial Interest

A person holds a substantial interest in an entity or trust if:

  • for an entity: the person holds an interest of at least 20 per cent in the entity; or
  • for a trust (including a unit trust): the person, together with any one or more associates of them hold, in aggregate, beneficial interests in at least 40 per cent of the income or property of the trust.

 

Definition of an Aggregate Substantial Interest

Two or more persons hold an aggregate substantial interest in an entity or trust if:

  • for an entity: the person holds an aggregate interest of at least 40 per cent in the entity; or
  • for a trust (including a unit trust): the person, together with any one or more associates of them hold, in aggregate, beneficial interests in at least 40 per cent of the income or property of the trust.

 

Definition of Residential Land

Residential land is:

  • a parcel of land on which there are one or more dwellings, a parcel of land on which there is a building under construction that, when completed, will constitute one or more dwellings; or
  • a strata lot, if it is lawfully occupied as a separate dwelling, or suitable for lawful occupation as a separate dwelling; or
  • a utility lot if its use is restricted to the owner or occupier of a strata lot; or
  • a land use entitlement, if it entitles the holder to occupy a building, or part of a building, as a separate dwelling; or
  • a parcel of vacant land (including any land that the Chief Commissioner is satisfied is substantially vacant) that is zoned or otherwise designated for use under an environmental planning instrument (within the meaning of the Environmental Planning and Assessment Act 1979) for residential or principally for residential purposes.

 

Definition of Residential-Related Property

Residential-related property means:

  • residential land in New South Wales; or
  • an option to purchase residential land in New South Wales; or
  • an interest in any residential-related property referred to in (a) or (b), except to the extent that:
    • it arises as a consequence of the ownership of a unit in a unit trust scheme and is not a land use entitlement,
    • it is, or is attributable to, an option over residential-related property.
  • it is a marketable security; or
  • a partnership interest (being an interest in a partnership that has partnership property that is residential property).

 

 

FOREIGN PURCHASER SURCHARGE EXEMPTIONS

The same exemptions outlined in Chapter 2 of the Duties Act 1997, which apply to purchaser duty payable, is generally the same for surcharge purchaser duty. Some notable exemptions include:

  • the First Home-New Home Scheme; or
  • the New Home Grant Scheme; or
  • Transfers of the principal place of residence to joint names for married couples and de-facto partners.

 

 

‘OFF THE PLAN’ PURCHASES

Payment of Stamp Duty

Foreign persons purchasing off-the-plan residential properties on or after 21 June 2016 are no longer entitled to the 12-month deferral for payment of stamp duty stipulated in s49A of the Duties Act 1997, meaning payment must be made within the usual three (3) months period after exchange of Contract.

This applies for any contract where a foreign purchaser is involved, even where one of the purchasers is not foreign.

 

Comasters can assist any foreign client in the process of paying surcharge duty and subsequently the completion of their purchase of the property.

© Comasters December 2016.

Important: This is not advice. Clients should not act solely on the basis of the material contained in this paper. Our formal advice should be sought before acting on any aspect of the above information.