NSW Revenue recently announced on 21 February 2023 that citizens of New Zealand, Finland, Germany and South Africa (Exempt Countries) are no longer required to pay surcharge purchaser duty (SP Duty) and surcharge land tax in NSW.
For now, we will put aside surcharge land tax for a later advertorial and look at SP Duty.
Generally, when foreign buyers purchase residential related property in NSW they must pay an additional 8% SP Duty on top of the usual stamp duty.
In NSW, you are generally not a foreign person if you are a:
- 1. Citizen of Australia
- 2. Person who is ordinarily a resident of Australia. To meet this requirement, you need to:
- have actually been in Australia during 200 or more days of the preceding
12 months; and
- not be subject to any time limit to leave. So, you would need a permanent entry visa (not a work visa and the like).
As part of the recent update, Revenue NSW decided that charging SP Duty is inconsistent with international tax treaties entered into by the Federal Government with the Exempt Countries.
SP Duty for non-individuals (such as companies, trusts and partnerships) that arises because of an entity’s connection with the Exempt Countries may also be affected by international tax treaties. At a general level, a corporation is considered foreign when a foreign person holds a substantial interest (20%) in the corporation.
To put all of this into perspective:
- If Alex is not a citizen of Australia or a person who is ordinarily a resident, then Alex may be a foreign person.
- If Alex is purchasing a $1,000,000 property in East Tamworth, the estimated stamp duty is approximately $40,110.
- 3. As a foreign person, Alex could pay up to an additional $80,000 in SP Duty on the $1,000,000 purchase (8% of purchase price). So, the total duty Alex pays in addition to the purchase price would be $120,110.
But, in this scenario, if Alex is from an Exempt Country (i.e. New Zealand, Finland, Germany or South Africa), Alex may now save $80,000 in SP Duty
On the other hand, Alex may be entitled to a refund if this amount was previously paid on or after 1 July 2021.
If we can assist you with your property transaction, please contact Everingham Solomons because Helping You is Our Business.
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