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The New South Wales (NSW) Treasurer, The Hon. Gladys Berejiklian MP, announced the following changes to State taxes as part of the 2016 State Budget.
These and other changes were introduced under the State Revenue Legislation Amendment (Budget measures) Act 2016.
The NSW Budget introduces a 4 per cent surcharge purchaser duty on the purchase of residential real estate by foreign persons to commence on 21 June 2016. The surcharge is in addition to the duty payable on the purchase of residential property.
Foreign persons will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property.
This surcharge will also apply to landholder transactions if there is a landholder liability and one or more of the properties owned by the landholder is classified residential and the purchaser is a foreign person who purchases shares or units in the landholder.
From 21 June 2016, all transferees who are liable to pay duty in respect of a dutiable transaction must lodge a declaration in the approved form.
The NSW Budget introduces a 0.75% surcharge land tax of the taxable value of residential land owned by a foreign person at midnight on 31 December in any year commencing with 2016.
The tax is separately assessed in relation to each parcel of land and is payable in addition to any land tax otherwise payable by a foreign person. There is no tax threshold to exempt land below the specified value nor any exemption for land occupied by a foreign person as a principal place of residence.
Australian citizens are not foreign persons, wherever they are located in the world. The 200 day rule does not apply to Australian citizens.
In addition to Australian citizens, the following individuals are not foreign persons:
The following relates to being ordinarily resident.
An individual must be in Australia for 200 days or more within the 12 months immediately prior to the contract date.
The start and end date of each period of entry and exit from Australia will be counted towards the 200 days to determine if a person is ordinarily resident for the purposes of section 5(1)(a) of the Foreign Acquisitions and Takeovers (FAT) Act 2015.
From 20 June 2017, permanent residents, including New Zealand citizens holding a special category visa (subclass 444), will be exempt from surcharge purchaser duty on their principal place of residence, if they occupy the home for a continuous period of 200 days within 12 months of the contract date.
The exemption will be granted if the person declares that they will complete the 200 day residence requirement.
Yes, a corporation and a trustee of a trust can be a foreign person. This includes:
A person holds a substantial interest in an entity or trust, if:
Two or more persons hold an aggregate substantial interest in an entity or trust if:
A person holds an interest of a specified percentage in an entity if the person, alone or together with one or more associates of the person:
An interest in a trust includes:
The definition of an associate includes individuals, companies, partnerships, trusts and superannuation funds.
For more information see section 6 of the Foreign Acquisitions and Takeovers (FAT) Act 2015 of the Commonwealth and Guidance Note 32 of the Foreign Investment Review Board.
Yes, from 21 June 2016, any time a trustee of a discretionary trust purchases residential property in NSW, and any beneficiary of that trust is a foreign person, the trustee may be liable to the surcharge purchaser duty if it does not adhere to the requirements under the Variation to Statute.
The purpose of the variation to statute is to avoid discretionary trusts becoming inadvertently liable for surcharge purchaser duty and/or surcharge land tax. It takes effect from 21 June 2016 and will be in force until the legislation is amended.
Amendments to a trust deed must prevent potential discretionary beneficiaries that are foreign persons from receiving distributions as to income and/or capital under the trust.
Should the trust deed contain named beneficiaries who are foreign persons, such beneficiaries must be removed from the trust deed as beneficiaries. Trust deeds that do not remove named beneficiaries will be liable to surcharge purchaser duty and/or surcharge land tax. It is not sufficient that named beneficiaries are merely prevented from receiving distributions, such as through a general clause excluding foreign persons from being beneficiaries.
Any amendments to the trust deed must also be irrevocable.
If the variation is or includes a declaration of trust, the variation will be liable to duty on the unencumbered value of the dutiable property at the date of the declaration, without any deduction for liabilities of the trust.
In the case of a discretionary trust over dutiable property, an assignment of the interest of a taker in default will be a dutiable transaction over dutiable property, and will be liable to duty on the greater of the consideration for the transfer and the unencumbered value of the 'dutiable property'.
The following variations to discretionary trusts are not dutiable transactions over dutiable property, and will not be liable to duty:
For more details, see Revenue Ruling DUT 017.
It is irrelevant that a trustee may never exercise discretion to distribute income and/or capital to a foreign person. For a discretionary trust, each beneficiary to whom the trustee has discretion to distribute the income or property is deemed to have the maximum percentage interest in the income or property that the trustee may exercise discretion to distribute to them.
Yes. You may apply for a reassessment and refund of surcharge purchaser duty paid in respect of a dutiable transaction entered into on or after 21 June 2016 if you have now amended the trust deed to exclude foreign persons as beneficiaries.
The Chief Commissioner will accept applications for reassessment up to six months after the date of legislative amendment.
No, the surcharge purchaser duty will not be payable unless the trusts under the will are varied under an agreement made between the foreign beneficiary and one or more of the other beneficiaries. In that case surcharge purchaser duty will be payable on the portion of the property to which the foreign beneficiary did not have an entitlement arising under the trusts contained in the will or arising on intestacy.
The Purchaser/Transferee Declaration (Declaration) – ODA 076 I (individuals) or ODA 076 NI (non-individuals) - serves the following purposes:
For both surcharge and the CRR, on request, the person must provide both the Declaration and all the supporting evidence. If the purchaser declares that he/she is ordinarily resident, they must provide:
Surcharge duty must be paid within three months of the liability date, being the date of first execution of the dutiable transaction, e.g. contract date.
If the residential land is used for purposes other than residential, the duty is only calculated on the residential component.
On 21 June 2016 the NSW Government introduced Purchase Surcharge Duty on residential property. There is no surcharge purchaser duty on commercial property. Some types of commercial businesses provide a form of housing on residential land.
The NSW Government has issued Revenue Ruling No. G 011 to provide clarity for these businesses. Most proprietors will be able to determine if they fall into the commercial residential category which is exempt from surcharge. This will reduce the overall incidence where proprietors of commercial operations occur on residential land will need to seek a private ruling on their liability.
The ruling identifies the following commercial premises as not satisfying the definition of “dwelling” according to s 104I(2) of the Duties Act 1997 (‘Duties Act’) and therefore not liable to surcharge:
It is important to refer Revenue Ruling No. G 011 for more information on the features that must be present to meet the requirements of the section. The Chief Commissioner will also consider other categories of premises not listed above, on a case by case basis.
Yes, an assessment of surcharge purchaser duty will be made unless the Chief Commissioner determines that the premises is not a ‘dwelling’ under s 104I(2) of the Duties Act 1997. Revenue Ruling No. G 011 provides guidelines that identify the types of premises determined not to be a dwelling by the Chief Commissioner.
Yes, a reassessment of the surcharge purchaser duty liability will be made and any resulting overpayment will be refunded, provided that the requirements under Revenue Ruling No. G 011 have been satisfied. A request for a reassessment must be made within 5 years after the initial assessment.
The following premises are considered not to be ‘dwellings’ for the purposes of s 104I(2) of the Duties Act 1997:
Refer to Revenue Ruling No. G 011 for more information on the features that must be present to meet the requirements of s 104I(2) of the Duties Act.
The Chief Commissioner will also consider other categories of premises not listed above, on a case by case basis.
The Chief Commissioner will consider objective factors that are relevant to characterising premises as falling within paragraphs 5 to 12 of Revenue Ruling No. G 011. These factors include the overall character of the premises, how the premises are operated, and whether it is operated for commercial purposes.
Ultimately, whether a premises falls within a class of premises specified in Revenue Ruling No. G 011 involves the weighing up of all relevant factors to determine if it exhibits the requisite characteristics so as not be a ‘dwelling’.
The supporting documents vary and depend on the type of premises to be considered. As a general rule, each application will involve a test of facts and will be considered on a case by case basis. Applicants are strongly encouraged to provide any supporting documents which substantiates their claim that a premises is not a ‘dwelling’ for the purposes of s 104I(2) of the Duties Act 1997.
Application for assessment or reassessment is made by way of written submission setting out the grounds for assessment or reassessment under s 104I(2) of the Duties Act 1997, with supporting documentation attached. This type of application cannot be processed on EDR.
For assessments, the lodgement will also need to include:
For reassessments, the lodgement will also need to include:
Lodgements for assessment or reassessment should be sent to:
Revenue NSW
Duties Branch
GPO Box 4042
Sydney NSW 2001
Overpayments will be refunded via Electronic Funds Transfer. Eligible applicants will receive further instructions on how to proceed once their matter is determined.
On 21 June 2016, the NSW Government introduced surcharge purchaser duty on residential property. Australian-based developers who are foreign persons (‘Australian-based developer’) were liable to surcharge purchaser duty on the acquisition of residential land used for the construction and sale of new homes, or used for subdivision and sold for new home construction.
Amendments to the Duties Act 1997 (‘Duties Act’) have since been made with the addition of s 104ZJA, which ensures that foreign-owned, Australian-based developers will no longer be liable to surcharge purchaser duty if they acquire residential land used for the construction and sale of new homes, or used for subdivision and sold for new home construction.
Section 104ZJA of the Duties Act provides for a surcharge purchaser duty concession in two forms, being:
The Chief Commissioner has issued Revenue Ruling No. G 013 to provide guidance on the conditions which need to be met to be granted an exemption under s 104ZJA. The Orders approved by the Treasurer (‘Treasurer’s Orders) outlines how refunds of surcharge purchaser duty will be administered under s 104ZJA.
The concession will be administered on an exemptions and/or refunds basis, depending upon whether the Chief Commissioner is of the opinion that the Australian-based developer would likely become entitled to a full refund of the surcharge purchaser duty on a transaction or a class of transactions to which the concession applies.
For transactions where the Chief Commissioner determines that the Australian-based developer is likely to become entitled to a full refund, an exemption from surcharge purchaser duty will be approved in lieu of a refund, per Revenue Ruling No. G 013. If an Australian-based developer paid surcharge purchaser duty on a transaction prior to the exemption being approved, the exemption may apply retrospectively and a full refund granted.
For transactions where the Chief Commissioner is not of the opinion that the Australian-based developer is likely become entitled to a full refund, surcharge purchaser duty will need to be paid and refunds will be made on a whole or proportionate basis, per the Treasurer’s Orders.
To support the NSW Government’s Housing Affordability Strategy, the Chief Commissioner will consider granting exemptions from surcharge purchaser duty before administering refunds on a proportionate basis.
Eligibility for exemption will be dependent upon the Australian-based developer supplying documentation (such as those specified in clause 11) to support clause 9 and 10 of Revenue Ruling No. G 013, which may assist the Chief Commissioner in forming an opinion that the Australian-based developer is likely to be entitled to a full refund of the surcharge purchaser duty.
In determining this, the Chief Commissioner will consider the requirements set out in clause 9 of Revenue Ruling No. G 013. An Australian-based developer that meets these factors is known as an ‘exempt transferee’, per s 104ZJA(3).
The minimum requirements for an Australian-based developer to be granted a refund are as follows:
If the aforementioned requirements are satisfied, the Chief Commissioner will refund the whole or a proportion of the surcharge purchaser duty paid. Further guidance is provided under the Treasurer’s Orders on how proportionate refunds are administered under s 104ZJA(2).
If the Chief Commissioner is of the opinion that the Australian-based developer has satisfied clause 9 (having regard to the factors set out in clause 10 of Revenue Ruling No. G 013) and is likely to become entitled to a full refund (i.e. the Australian-based developer is an ‘exempt transferee’), a refund of the full amount of surcharge purchaser duty will be granted. In this instance, the Treasurer’s Orders will have no applicability.
An Australian-based developer that is approved as an ‘exempt transferee’ may, for future transactions, be exempted from surcharge purchaser duty. Approval as an ‘exempt transferee’ may be subject to specific conditions which the Chief Commissioner could impose to ensure compliance with s 104ZJA.
The Chief Commissioner will also consider the granting of pre-transaction approvals to Australian-based developers where there is evidence of past involvement in new home construction or the subdivision of land for new home construction.
The Chief Commissioner may revoke an approval as an ‘exempt transferee’ at any time by notice to the Australian-based developer, per s 104ZJA(5)(c). The revocation can be retrospective and transfers, or agreements for the sale or transfer, exempted from surcharge purchaser duty can be reassessed as if the approval had never applied, per s 104ZJA(5)(d)-(e).
The Chief Commissioner may revoke an exemption having regard to the exempt transferee’s conduct. Circumstances which may warrant revocation of an exemption include, but are not limited to, conduct set out in clause 16 of Revenue Ruling No. G 013.
Yes, an application for reassessment and refund must be made within 12 months after the completion of the sale of the new home or the issue of the subdivision certificate and no later than 10 years after completion of the transfer of residential-land to the Australian-based developer.
A ‘related body corporate’ is defined under s 50 of the Corporations Act 2001. An Australian trustee company is taken to be an Australian corporation or ‘related body corporate’ for the purposes of s 104ZJA.
Application for exemption or reassessment is made by way of written submission setting out the grounds for exemption or reassessment under s 104ZJA of the Duties Act, with documentation (such as those specified in clause 11) to support clause 9 and 10 of Revenue Ruling No. G 013. This type of application cannot be processed on EDR.
For applications for exemption where a transaction has been effected but no surcharge purchaser duty has been paid, the lodgement will also need to include:
Applications for pre-transaction approvals will need to be made by way of written submission setting out the grounds for exemption and will also need to include:
For reassessments, the lodgement will also need to include:
Lodgements should be sent to:
Revenue NSW
Duties Branch
GPO Box 4042
Sydney NSW 2001
Refund payments will be processed via Electronic Funds Transfer. Eligible applicants will receive further instructions on how to proceed once their matter is determined.
Some transactions that are exempt from duty under Chapter 2, section 104ZK of the Duties Act are still liable for Surcharge.
For transactions entered into on or after 20 June 2017, if a purchaser/transferee is an exempt permanent resident but is not ordinarily resident, they may be entitled to an exemption from surcharge. For a definition of permanent resident, see the Dictionary, Clause 1 Duties Act.
To be considered an exempt permanent resident, a purchaser/transferee must meet the residence requirement.
The residence requirement is not the same as the ordinarily resident requirement. To meet the residence requirements the purchaser/transferee is required to occupy the property as their principal place of residence for a continuous period of at least 200 days from the liability date.
This exemption does not apply to purchasers/transferees who are not natural persons.
Yes. If surcharge has been paid on an agreement for sale or transfer of residential related property, and the Chief Commissioner is satisfied that none of the transferees, in respect of a transfer made in conformity or partial conformity with the agreement, are foreign persons, a refund may be sought once all transferees are registered on title.
Surcharge is only payable by the foreign person on the proportion of the property they are acquiring.
If the residential-related property is purchased by two parties as joint tenants and one joint tenant is a foreign person, the joint tenancy will be treated as tenants in common in equal shares and the surcharge will be applied to the foreign person’s share (being 50 per cent of the dutiable value of the property).
Surcharge Purchaser Duty calculator
The amendment increases the payroll tax rebate for the second year of employment from $3,000 to $4,000 for eligible employment commencing on or after 31 July 2016. The rebate amount for the first year of employment is $2,000 and for the second year it is increased to $4,000. A total of $6,000 per employee.
The amendment restricts the rebate payable in relation to employment commencing on or after 31 July 2016 to employers that have 50 or less full time equivalent employees not including the new employee or employees.
From 21 June 2016, all transferees who are liable to pay duty in respect of a dutiable transaction must lodge a declaration in the approved form.
Yes, as long as all other eligibility conditions are met. All 6 new jobs would be eligible to register as they have the same prior FTE that is below 50.
No, as at 2 September 2016, ABC Pty Ltd’s prior FTE for those new jobs will be 55. For jobs commencing on or after 31 July 2016 an employer's prior FTE has to be at or below 50 to be eligible to register new jobs for the rebate scheme.
Yes, as long as all other eligibility conditions are met and the registration for the new jobs is within 90 days after the employment commences.
First Anniversary (25 July 2017) - $2,000.
Second Anniversary (25 July 2018) - $3,000.
First Anniversary (3 August 2017) - $2,000.
Second Anniversary (3 August 2018) - $4,000.