Foreign Tax Surcharges on Land. A breach of our International Tax Treaties?

All States and Territories in Australia, except the Northern Territory, currently impose a foreign purchaser surcharge duty on certain acquisitions of property, some also impose a higher rate of land tax on foreign owners or absentee owners.

In Victoria, foreign persons purchasing residential land are imposed a surcharge of 8% (on top of the transfer duty already payable by non-foreign persons, which, for a $1 million home is typically 5.5%). In Queensland, the foreign duty surcharge is currently 7% (on top of the transfer duty already payable by non-foreign persons, which, for a $1 million home is typically 3.8%).

The New South Wales Government has recently determined that the NSW surcharge provisions are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany and South Africa. Those treaties are in relation to taxation and other matters, and are enforceable at the federal level.

New South Wales have announced that, ‘effective immediately, individuals that are citizens of the nations concerned purchasing residential-related property or land in their own capacity will no longer be required to pay surcharge purchaser duty or surcharge land tax’. Further, ‘refunds may be available for purchasers/transferees, and landowners, from the nations concerned who paid surcharge purchaser duty or surcharge land tax on or after 1 July 2021’.

There is currently no suggestion that any changes are proposed to landowners from non-treaty nations.

The Victorian State Revenue Office has acknowledged the announcement from NSW and announced that ‘the position in Victoria has not changed and the SRO will continue to apply the Victorian provisions to all foreign purchasers and absentee owners’.

No such announcement has been issued by the Queensland Government. 

Further Information:

If you have any legal questions relating to the above, please contact us through our online form or via email at hello@legalsynthesis.com.au.

DISCLAIMER:

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. If you are seeking legal advice about a specific matter please contact us to discuss.