On 1 January 2017, various Australian States and Territories started imposing surcharge on land owned or transferred directly or indirectly by foreign people. Five years later, it is time to check in on how these measures have evolved.
Both land tax surcharge and land transfer duty surcharge (or other various names) are now set features in most States and Territories, with only Northern Territory abstaining so far from both.
They impose additional tax on foreign persons that hold Australian real property. Of course, determining who qualifies as a foreign person has remained the main challenge. The table below attempts to summarise the issue.
| State | Rate | Definition | ||||
| Land Tax Surcharge | Land Transfer Duty Surcharge | Foreign Person | Foreign Company | Foreign Fixed Trust | Foreign Non-Fixed Trust | |
| ACT | 0.75% (residential) | N/A | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa AND not ordinarily resident in AU | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | foreign person named in the deed as potential beneficiary |
| NSW | 4% (residential) | 8% (residential) | not AU citizen AND not AU permanent resident who has lived in AU for 200 days in past 12 months AND not NZ citizen with a 444 visa | ≥ 20% foreign shareholders OR ≥ 20% foreign control of votes | ≥ 20% foreign beneficiaries | potential for foreign person to be a beneficiary |
| NT | N/A | N/A | ||||
| QLD | 2% (all) | 7% (residential) | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | default foreign beneficiary, unless unlikely to receive distributions |
| SA | N/A | 7% (residential) | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | foreign trustee OR foreign appointor OR foreign object OR foreign default capital beneficiary |
| TAS | 2% (residential) | 8% (residential) 1.5% (primary production) | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | potential for foreign person to be a beneficiary |
| VIC | N/A | 8% (residential) | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | potential for foreign person to be a beneficiary |
| WA | N/A | 7% (residential) | not AU citizen AND not AU permanent resident AND not NZ citizen with a 444 visa | incorporated overseas OR ≥ 50% foreign shareholders OR ≥ 50% foreign control of votes | ≥ 50% foreign beneficiaries | foreign trustee OR foreign appointor OR ≥50% foreign default capital beneficiary |
In February 2023, NSW announced that it believed its surcharge provisions were inconsistent with several international tax treaties (Finland, Germany, India, Japan, New Zealand, Norway, South Africa and Switzerland). These specific treaties bear non-discrimination clauses, whereby no heavier taxation can be imposed on foreigners than on nationals. As a result, Revenue NSW is now organising to refund the excess tax back to nationals of these countries. So far, all other States and Territories have either rejected that position or remained silent on the issue.
Between 2007 and 2010, all States and Territories worked on aligning payroll tax provisions, providing much needed clarity and simplification for cross-border employers. As a result, NSW, VIC, TAX, NT and SA now have virtually identical payroll tax legislation. A similar alignment would be very much welcome, to help you ensure that your structures will allow you investments throughout Australia.
Of course, the law itself in each of the above States and Territories is much more complex than summarised above. We strongly encourage you to seek legal advice for your specific circumstances, especially around Trust matters. We will work closely with your legal team to put in place an investment structure that matches your needs.
