If you are not an Australia citizen or Australian Permanent Resident it is possible that you will be considered a foreign purchaser. If this is the case, then there may additional costs incurred when purchasing a property in New South Wales and during your ongoing ownership.
KEY TAKE OUTS:
- Understand what Purchaser Surcharge Duty is and whether it will apply to you
What is Surcharge Purchaser Duty in NSW?
If you are identified as foreign person then you are required to pay an additional 8% surcharge on the value of any residential property you purchase. This duty may also apply to other transactions including declaring a trust or transferring a lease.
When does it apply?
- Are you a foreign person living overseas or residing in Australia as a temporary resident? If yes, surcharge purchaser may apply to your purchase, continue with the questions below.
- Are you buying residential property within NSW? Surcharge Purchaser Duty does apply to the purchase of commercial property.
- Are you purchasing with your partner? Do they hold Australian citizenship, permanent residency or the special NZ 444 visa? If they do then they will not have to pay surcharge purchaser duty on their portion of ownership.
- When did you enter into the Contract – if after 21 June 2016 then Surcharge Purchaser Duty may apply.
When doesn’t it apply?
- If you are an Australian citizen; or
- If you are a permanent resident or hold a similar type of visa and meet the 200 day exemption.
What is the 200-day exemption for permanent residents and other similar visa holders?
For permanent residents the 200 day exemption is not clear cut, however generally speaking, you must meet either of the below conditions:
- You have lived in Australia for 200 days within the 12 months prior to exchanging contracts (paying deposit and signing the contract). This does not need to be continuous, you can travel in and out of Australia.
- You will live in the property for 200 days within the 12 months after exchanging contracts. This must be continuous. As it is from exchange not from settlement this will not work for an off the plan purchase.
What is surcharge land tax?
- If you are identified as a foreign purchaser above you may be liable for surcharge land tax.
- The surcharge rate is two per cent (2%) from the 2018 land tax year onwards.
- The surcharge is payable on the taxable value of all residential land you own as at 31 December each year. Even if you do not pay land tax generally, surcharge land tax may still be payable.
- The surcharge is assessed in relation to each property owned and relates to your proportion of ownership of the properties.
Is a foreign purchaser eligible for the principal place of residence exemption?
From 1 July 2019, the following visa holders will be exempt from surcharge land tax on their principal place of residence:
- permanent visa holders
- New Zealand citizens who hold a special category visa (subclass 444)
- partner (provisional) visa holders (subclass 309 or 820)
- holders of retirement visas (subclass 410 and 405)
To be eligible you need to occupy your home for a continuous period of 200 days in the current land tax year.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.