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Chapters

  1. Overview
  2. Individuals
  3. Partnerships
  4. Corporations
  5. Discretionary Trusts
  6. Other Trusts
  7. Other Exemptions and Concessions
  8. International tax treaties

3. Partnerships

Determining Surcharge Purchaser Duty Liability for Partnerships

A partnership is defined by the Partnership Act 1892 (NSW) as the relationship which exists between persons carrying on a business in common with a view to profit.

The Partnership Act (PA) allows three types:

  • a limited partnership
  • an incorporated limited partnership
  • a partnership (normal partnership)

It is important to determine what type of partnership is acquiring the residential-related property. The Surcharge Purchaser Duty implications differ for each partnership type.

Limited partnership

Residential-related property being acquired by a limited partnership will be subject to Surcharge Purchaser Duty if the limited partnership is considered to be a foreign person.

General partners of limited partnerships are foreign persons under section 18 of the Foreign Acquisitions and Takeovers Regulation 2015 where:

An individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an interest of at least 20 per cent in the limited partnership,

or

Two or more persons each of whom is an individual not ordinarily resident in Australia, a foreign corporation, or a foreign government, hold an aggregate (combined) interest of at least 40 per cent in the limited partnership.

If the limited partnership is considered a foreign person, Surcharge purchaser duty is calculated on the dutiable value of the interest the limited partnership is acquiring.

Example

Residential-related property is being acquired by a limited partnership for $1,000,000.

Partner A holds a 30% interest in the limited partnership and is a foreign person.
Partner B holds a 70% interest in the limited partnership and is an Australian Citizen.

As Partner A (a foreign person) holds an interest over 20%, the partnership is considered a foreign person.

Transfer Duty is calculated on $1,000,000.
Surcharge Purchaser Duty is calculated on $1,000,000

References

Incorporated limited partnership

Residential-related property being acquired by an incorporated limited partnership will be subject to Surcharge Purchaser duty if the partnership is considered a foreign person.

General partners of incorporated limited partnerships are foreign persons under section 18 of the Foreign Acquisitions and Takeovers Regulation 2015 where:

An individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an interest of at least 20 per cent in the partnership,

or

Two or more persons each of whom is an individual not ordinarily resident in Australia, a foreign corporation, or a foreign government, hold an aggregate (combined) interest of at least 40 per cent in the partnership.

If the incorporated limited partnership is considered a foreign person, Surcharge Purchaser Duty is calculated on the dutiable value of the interest the incorporated limited partnership is acquiring.

Example

Residential-related property is being acquired by an incorporated limited partnership for $1,000,000.

Partner A holds a 30% interest in the limited partnership and is a foreign person.
Partner A holds a 70% interest in the limited partnership and is an Australian Citizen.

As Partner A (a foreign person) holds an interest over 20%, the partnership is considered a foreign person.

Transfer Duty is calculated on $1,000,000.
Surcharge Purchaser Duty is calculated on $1,000,000

References

Partnership (other)

Residential-related property being acquired by a normal partnership that is not a limited partnership will be subject to Surcharge Purchaser Duty if any individual not ordinarily resident in Australia, a foreign corporation or a foreign government is considered a foreign person.

Surcharge purchaser duty is calculated on the dutiable value of the interest the foreign person is acquiring.

Example

Residential-related property is being acquired by a normal partnership that is not a limited partnership for $1,000,000.

Partner A is acquiring 30% of the property and is a foreign person.
Partner B is acquiring 70% of the property and is an Australian Citizen.

Transfer Duty is calculated on $1,000,000.
Surcharge Purchaser Duty is calculated on $300,000

References

Documentary evidence and record keeping

The Duties Client Identification (CI) and Proof of Status factsheet and evidentiary requirements list the evidence required for all Duties transactions.

When residential-related property is being acquired, evidence confirming proof of status may be required for each liable party (individual, corporation, partnership, or trust).

The method of lodgement determines the initial information required before processing or lodging.

Transactions processed on EDR

To ensure an accurate assessment of Surcharge Purchaser Duty it is recommended practitioners processing transactions on EDR, sight or obtain proof of status documentation to confirm the purchaser/transferees are not considered foreign persons.

Transactions lodged with Revenue NSW

Transactions lodged with Revenue NSW via eDuties must provide all evidence at the time of lodgement.

Transactions selected for Audit

Transactions that have been processed on EDR and selected for audit must provide Duties Client Identification (CI) and Proof of Status documentation along with the evidentiary requirements for that transaction.

References