Recently, the NSW government has announced that the surcharge purchaser duty and land tax surcharge will be raised again to foreign person investing in residential real estate from 1 July 2017. The Surcharge Purchaser Duty will be doubled from 4% to 8% and the Land Tax Surcharge will be increased from 0.75% to 2%. NSW government also stated that the raised revenue will be used to help the first home buyer in Australia.
Firstly, let’s take a look at the difference of the stamp duty, surcharge purchaser duty, land tax and land tax surcharge prior and after the change.
| Current rate | Future rate | |
| Stamp Duty*+ Surcharge Purchaser Duty | ≈5%+4%=9% | ≈5%+8%=13% |
| Land Tax*+ Land Tax Surcharge | 1.6%+0.75%=2.35% | 1.6%+2%=3.6% |
* the stamp duty is about 5% when the transaction price is under 3million. However, when the transaction price is over 3 million, the premium duty rate will be 7% for the over portion. The overall stamp duty and surcharge purchaser duty will be as high as 15% for foreign person. Likewise, when the land value is over 3.357 million dollars, the rate will be 2% for the over portion. At this instance, the land tax and land tax surcharge rate will be 4% for foreign person.
The above shows the difference prior and after the change. Now let’s see what’s the difference between the local ordinary resident and foreign person in terms of the stamp duty and land tax payment after the change.
Assume the residential real estate is 2 million dollars, the land value is 1 million dollars and not qualify for the land tax premium threshold.
| Stamp Duty | Surcharge Purchaser Duty | Land Tax（first year） | Land Tax Surcharge（first year） | Payment | |
| Ordinary resident | $95,490 | 0 | $16,100 | 0 | $111,590 |
| Foreign person | $95,490 | $160,000 | $16,100 | $20,000 | $291,590 |
| Discrepancy | $180,000 |
As you can see, the stamp duty, surcharge purchaser duty, land tax and land tax surcharge payment will be almost tripled paid by foreign person compared to the local ordinary resident. The difference will be further increased along the future years’ land tax and land tax surcharge.
Here, we have to address that Australia permanent resident, New Zealand citizen, Australia setup companies, most family trust, etc can be treated as foreign person for the surcharge purpose. In terms of the definition of foreign person, please refer to our earlier article Land Tax Surcharge.
Pitt Martin is specialised in investment property related tax issues. If you are not sure about whether you are a foreign resident and whether your property is a residential real estate, please speak to one of our advisers.
Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.
Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.
Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.