Definitions

Foreign person – individual

You are a foreign person if you are not an Australian citizen or an ordinarily resident. New Zealand citizens are not foreign persons if they hold a special category visa, within the meaning of section 32 of the Commonwealth Migration Act 1958, and they are ordinarily resident in Australia.

Ordinarily resident

Ordinarily resident means you have been in Australia 200 or more days in the previous calendar year and are not subject to any limitation on your continued presence in Australia. This includes the date of arrival or the date of departure.

Foreign person – corporations

A corporation is a foreign person if:

  • substantial interests are held by an individual not ordinarily resident, a foreign corporation or a foreign government, or

  • aggregate substantial interests are held by two or more people that are not permanent residents who ordinarily reside in Australia, a foreign corporation or a foreign government.

Foreign person – trusts

The trustee of a trust is a foreign person if:

  • substantial interests are held by a beneficiary who is an individual and is not ordinarily a resident of Australia, a foreign corporation or a foreign government

  • aggregate substantial interests are held by two or more individuals who are not ordinarily residents of Australia, a foreign corporation or a foreign government.

See the legal guidelines or revenue rulings for more about how foreign persons are defined.

Fixed trusts

Beneficiaries are liable for proportionate interests where a trust is a fixed trust for land tax purposes. However, if the beneficiary defaults, the trustee is responsible to pay the surcharge.

Special trusts

Beneficiaries are not treated as owners for special trusts and do not have to pay the surcharge unless one or more beneficiaries are foreign persons. In that case the trustee is liable for surcharge land tax on their interest in the property.

Foreign person surcharges – Discretionary trusts

A legal guideline, Revenue Ruling G010v2, exempts a discretionary trust from surcharge taxes. Retrospective exemption can be applied for land tax if the trust deed is amended to remove foreign persons from the list of beneficiaries within six months after granting the exemption.

Interest

A person holds an interest in an entity if the person, alone or together with one or more associates:

  1. controls a percentage of the voting power in the entity; or

  2. holds interests in the percentage of the issued securities in the entity; or

  3. would hold interests in the percentage of the issued securities in the entity if relevant options were exercised.

Interest in a trust is:

  • a beneficial interest in the income or property of the trust; or
  • an interest in a unit in a unit trust.

For a discretionary trust, each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or property that the trustee may distribute to that beneficiary.

Substantial interest

A person holds a substantial interest in an entity or trust if:

  1. for an entity—the person holds an interest of at least 20 per cent in the entity; or

  2. for a trust (including a unit trust)—the person, together with any one or more associates, holds a beneficial interest in at least 20 per cent of the income or property of the trust.

Aggregate substantial interest

Two or more persons hold an aggregate substantial interest in an entity or trust if:

  1. for an entity—the persons hold an interest of at least 40 per cent in the entity; or

  2. for a trust (including a unit trust)—the persons, together with any one or more associates of any of them hold, in the aggregate, beneficial interests in at least 40 per cent of the income or property of the trust.

Associate

The definition of associate includes:

  • individuals (e.g. relatives)
  • companies (e.g. substantial interest holders, holding entities, senior officers)
  • partnerships
  • trusts and super funds (e.g. substantial interest holders).

A relative of a person means:

  • the person’s spouse

  • the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendent or adopted child of that person, or of that person’s spouse (and the spouse of any of these persons).

Residential land

Residential land includes any of the following:

  1. a parcel of land on which there are one or more dwellings, or a parcel of land on which there is a building under construction that, when completed, will constitute one or more dwellings, or

  2. a strata lot, if it is lawfully occupied as a separate dwelling, or suitable for lawful occupation as a separate dwelling, or

  3. a utility lot if its use is restricted to the owner or occupier of a strata lot, or

  4. a land use entitlement, if it entitles the holder of the land use entitlement to occupy a building, or part of a building, as a separate dwelling e.g. company title and residential flats, or

  5. a parcel of vacant land that is zoned or otherwise designated for use for residential or principally for residential purposes.

Residential land does not include land used for primary production that is exempt from land tax.

The surcharge applies if a building has both residential and commercial purposes. In this case, an apportionment factor is used to apportion the land value.

Contact

Phone
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Or phone 1300 139 816*
8.30am - 5.00pm Monday to Friday
Mail
GPO Box 4269
SYDNEY NSW 2001
Email

Last updated: 15 May 2018