Stamp Duty Foreign Purchaser Surcharge
Who Pays and Recent Changes
In NSW anyone who purchases real property is required to pay stamp duty, a tax that is levied on dutiable transactions and is generally calculated based on the purchase price of the property in question. Depending on the purchase price the rate of stamp duty varies from 1.25% to 5.5%. However, if a foreign person whishes to buy a residential property in NSW then they will be hit with surcharge purchaser duty at the rate of 8% of the purchase price and is paid in addition to standard duty rates. This means that a foreign buyer in the market for a house at the current Sydney median price will be paying stamp duty at a rate of 13.5%. For this reason it is essential that people who have recently arrived in Australia and are looking to buy a residential property in NSW are aware of the rules and regulations surrounding foreign buyer surcharge to avoid paying more than is actually required for your purchase, or avoid a costly re-assessment if an incorrect assessment was made at the time of purchase.
Meaning of ‘Residential Property’
Revenue NSW defines residential property as any of the following:
A parcel of land on which there are one or more dwellings or on which a dwelling is under construction.
A strata lot.
A land use entitlement.
A parcel of vacant land that is zoned or otherwise designated for use under an environmental planning instrument for residential or principally for residential purposes.
Meaning of ‘Foreign Purchaser’
Revenue NSW defines a foreign person as generally any of the following:
An individual not ordinarily resident in Australia.
A corporation in which an individual or multiple individuals who are not ordinarily resident in Australia, a foreign corporation or foreign government hold a substantial interest.
The trustee of a trust in which an individual or multiple individuals who are not ordinarily resident in Australia, a foreign corporation or foreign government hold a substantial interest.
An individual not ordinarily resident in Australia is a person who is in Australia on a temporary visa, such as student, visitor, work or business visa, or a person who has permanent residency but has not been in Australia for at least 200 days in the 12 months before entering into the contract for purchase. This means that if you have recently been granted permanent residency you need to consider when you entered Australia to determine if you meet the 200-day rule. Also, any short trips overseas will impact whether you meet the 200-day rule.
For corporations and trusts a substantial interest means any foreign entity which holds at least 20% interest in the corporation or beneficial interest in the trust, or if there are multiple foreign entities then an aggregate interest of at least 40% in the corporation or beneficial interest in the trust.
Recent Changes
In 2023 Revenue NSW announced that due to international tax treaties purchasers from a number of countries were exempt from surcharge purchaser duty. The countries in question were:
New Zealand
Finland
Germany
India
Japan
Norway
South Africa
Switzerland
Purchasers from these nations who had paid surcharge duty on or after 1 January 2021 were eligible to seek a refund by submitting an application no later than 30 November 2023.
However, in April 2024 this loophole was closed with the passage of the Treasury Laws Amendment (Foreign Investment) Bill 2024 through both houses of federal Parliament. The Bill specifies that the provisions of international tax treaties, including provisions concerning non-discriminatory treatment are to be read subject to the laws of a State or Territory that impose a tax. This means that commencing on 8 April 2024 any foreign buyer who purchases residential property in NSW is required to pay surcharge duty and all nationalities are now treated on the same basis.