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The 2016-17 NSW Budget introduced the Foreign Purchaser Surcharge, which stipulates that a foreign person who acquires residential property in NSW on or after 21 June 2016 is liable to pay surcharge duty.
The 2017-18 NSW Budget increased the surcharge duty applicable from four per cent to eight per cent.
NOTE: Australian Permanent Residents are also considered as foreign persons, and the below rules apply to them
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 Residential Land
Residential land is:
- A parcel of land on which there are one or more dwellings, or on which there is a building under
construction that, when completed, will constitute one or more dwellings; or
- A strata 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
- 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 for
residential or principally for residential purposes.
FOREIGN PURCHASER SURCHARGE EXEMPTIONS
Many exemptions applicable to ordinary purchaser duties are also applicable to the foreign purchaser surcharge, such as:
- 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.
Particular exemptions for foreign purchasers include:
- Ordinarily resident—if you have lived in Australia for at least 200 days in the past 12 months from the purchase date, you may be exempt from the surcharge duty; or
- Permanent resident—you will be exempt if you have continuously lived in Australia for at least 200 days in the past 12 months from the purchase date, and you plan to live in the property as your principal place of residence.
‘OFF THE PLAN’ PURCHASES
Payment of Stamp Duty
Foreign persons purchasing off-the-plan residential properties must pay stamp duty within the usual three month period after exchange of Contract.
FOREIGN INVESTMENT REVIEW BOARD (FIRB) APPROVAL
When purchasing a new residential property as a foreign person, FIRB approval must also be obtained. Generally, a foreign person can only purchase new dwellings or vacant residential land and not ‘established dwellings’ (second–hand properties). FIRB approval must be obtained before signing a Contract to purchase a residential property.
Temporary residents can purchase one established dwelling by applying to purchase a specific dwelling or applying for an established dwelling exemption
certificate, which lasts for a period of six months and allows a temporary resident to make multiple
attempts to purchase an unspecified property.
The application fee for FIRB approval depends on the price of the property. For example, the fee is $5,600 for properties under $1 million; and $22,700 for properties between $2 and $3 million.
If the residential property is not rented out or occupied for more than six months per year, an annual vacancy charge applies from 9 May 2017 onwards. This charge is assessed by the Australian Tax Office (ATO) and is usually the price of the application fee for FIRB
FIRB APPROVAL EXEMPTIONS
A foreign person can purchase residential property without the need for FIRB approval if:
- They are purchasing from a developer who holds a new or near-new dwelling exemption
certificate (most common way); or
- They are purchasing property as joint tenants with a spouse who is an Australian citizen,
permanent resident, or a New Zealand citizen.
Comasters can assist any foreign client in the process of paying surcharge duty, gaining FIRB approval and subsequently the completion of their purchase of the property.
© Comasters November 2019.
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.