foreign person surcharge

Foreign Person Surcharges State By State

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The land tax assessment is on 31 December 2019. The introduction of land tax and land tax surcharges for foreign persons acquiring or holding a residential land in NSW, Victoria, and Tasmania means Discretionary and Hybrid trusts with foreign beneficiaries in them will have to pay foreign person surcharges.

Below are the surcharges for the mentioned states.

NEW SOUTH WALES
Foreign Person Surcharge Land Tax and Surcharge Purchaser Duty

Budget measures introduced in New South Wales effective 1 January 2017provide that trusts that have a foreign person holding a substantial interest in the trusts are (as stipulated in Duties Act 1997 (NSW) and Land Tax Act 1956 (NSW) subject to:

  • Land Tax Surcharge on residential land own in NSW
  • Surcharge Purchaser Duty on residential land being acquired in NSW

Discretionary trusts are considered foreign and are therefore liable to a foreign person surcharges. If the trust deed has been amended to exclude a foreign person from the beneficiaries, you must provide the details and the supporting documents upon lodging of your land tax return.

VICTORIA
Foreign Purchaser Additional Duty

Similar budgetary measures were introduced in Victoria wherein foreign trusts are liable to pay foreign purchaser additional duty on the acquisition of residential property in the state (as defined in the Duties Act 2000 (VIC).

If a discretionary trust has a foreign person or if it’s a foreign corporation or the trustee is a potential beneficiary of another foreign trust, the trust is classified as a foreign trust and is therefore liable for additional stamp duty.

TASMANIA
Foreign Investor Duty Surcharge

The Foreign Investor Duty Surcharge under the Duties Act 2001 (Tas) stipulates that trusts who have a foreign person holding a substantial interest in it are subject to foreign investor duty surcharge for residential property and primary production property own in Tasmania.

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Effective 1 July 2018, any discretionary trust that has a potential foreign person as its beneficiary will be classified as a foreign trust. Therefore, any discretionary trust acquiring residential and primary production property in the state of Tasmania will be liable for foreign investor duty surcharge.

Surcharge Rates

State Applicable dates Additional Land Tax* *Property/Transaction to which Duty Applies
NSW 2017 land tax year 0.75% “residential land” as defined in the
Land Tax Act 1956 (NSW)
2018 land tax year onwards 2%

*land tax surcharge payable is in addition to any land tax otherwise payable

 

State Date of Contract Additional Stamp Duty *Property/Transaction to which Duty Applies
Victoria on or after 1 July 2016 7% “residential property” as defined in the Duties Act 2000 (VIC)
New South Wales on or after 1 July 2017 8% “residential land” as defined in the Duties Act 1997 (NSW)
Tasmania 1 July 2018 to 1 January 2020 3% (residential)

0.5% (primary production)

“residential property” as defined in the Duties Act 2001 (Tas)

“primary production property” as defined in the Duties Act 2001 (Tas)

1 January 2020 onwards 7% (residential)

1.5% (primary production)

“residential property” as defined in the Duties Act 2001 (Tas)

“primary production property” as defined in the Duties Act 2001 (Tas)

*additional duty payable is in addition to any stamp duty otherwise payable

There are quite a lot of surcharges aimed at ‘foreign persons.’ Fortunately, if you’re a trustee of a discretionary or hybrid trust, you can specifically exclude foreign persons from the class of beneficiaries so the trust won’t have to pay surcharges.

Presently in fact, the revenue offices are contacting trustees of Discretionary and Hybrid Trusts who have not informed them whether their deed has a provision for foreign person exclusions.

If you have received correspondence from your revenue office, contact your Chan and Naylor client manager who can help make the assessment if your trust deed requires the appropriate amendment that will exempt you from paying foreign person surcharges.

Land tax is assessed as at 31 December each year so you need to act promptly and contact Chan and Naylor to determine if your trust needs amendment.

Land Tax legislation varies from state by state. It is not a federal tax and unless requested by a client the responsibility of land tax compliance rests with the client. If you require assistance please contact your Chan & Naylor Client manager.

You can also learn more about surcharges by reading or downloading the pdf files below:

 

Discretionary Trusts and the Foreign Investor Duty Surcharge in New South Wales

Discretionary Trusts and the Foreign Investor Duty Surcharge in Victoria

Discretionary Trusts and the Foreign Investor Duty Surcharge in Tasmania

 


 

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