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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

4. Corporations

Determining Surcharge Purchaser Duty Liability for Corporations

A corporation is considered a foreign person if an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest or aggregate substantial interest in the corporation.

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

Holding an interest in a corporation

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:

  1. controls that percentage of the voting power in the entity;
    or
  2. holds interests in that percentage of the issued securities in the entity;
    or
  3. would hold interests in that percentage of the issued securities in the entity if relevant options were exercised.

For more information refer to:

Substantial interest

A person holds a substantial interest in a corporation if the person holds, alone or with one or more associates, an interest of at least 20 % in the corporation.

The entire corporation is deemed to be a foreign person if an individual not ordinarily resident in Australia, a foreign corporation or foreign government holds a substantial interest.

Surcharge Purchaser Duty is calculated on the dutiable value of the interest the corporation is acquiring.

Example

A
has a
Substantial Interest
as they own
20%  		B
has a
Substantial Interest
as they are associated persons
with A and have a combined
ownership over 20% 		C
has a
Substantial Interest
as they own
70%

If A, B or C are foreign persons, the corporation is considered a foreign person
and liable for Surcharge Purchaser Duty.

Helpful information

A substantial interest may be held through interests in other corporations or trusts. See tracing provisions.

References

Aggregate substantial interest

Two or more associated persons hold an aggregate substantial interest in a corporation if the persons, alone or with one or more associates, hold a combined interest of at least 40% in the corporation.

If two or more associated persons hold an aggregate substantial interest in a corporation and are foreign persons, the entire corporation is considered a foreign person.

Surcharge Purchaser Duty is calculated on the dutiable value of the interest the corporation is acquiring.

In accordance with paragraph 26 of Revenue Ruling G009, small holdings of less than 5% are not counted towards an aggregate substantial interest if the corporation has its primary listing on a stock exchange in Australia.

Example

A, B, C & D
have an

Aggregate Substantial Interest

as their combined holding is
40%

If A, B, C & D are foreign persons, the corporation is

Liable for Surcharge Purchaser Duty

Helpful information

An aggregate substantial interest may be held through interests in other corporations or trusts. See tracing provisions.

References

An associate of a person

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 and Guidance Note 2 of the Foreign Investment Review Board.

Tracing provisions

A substantial interest or an aggregate substantial interest may exist as a result of holding interests in other corporations or trusts under the tracing provisions in section 19 of the Foreign Acquisitions and Takeovers Act 1975. The tracing process can be applied multiple times through a number of entities.

Example

A is a foreign person who holds a substantial interest in Company B. This makes company B a foreign person.

Company B has a substantial interest in Trust C. The trustee of Trust C is considered a foreign person.

Trust C has a substantial interest in Company D. This makes company D a foreign person.

Company D purchases residential-related property in NSW

Through the tracing provisions, it is determined that each party is a foreign person.
This transaction is liable for Surcharge Purchaser Duty

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