For the purposes of NSW State taxes, a ‘foreign person’ is anyone is:
- not ‘ordinarily resident in Australia’, or
- not an Australian citizen
Foreign buyers and companies / trusts that foreign persons have a substantial interest in are currently subject to surcharge land tax and surcharge transfer duty in NSW. Currently, the land tax surcharge is 4% of the taxable value of land and the transfer duty surcharge is 8% on the value of the land being purchased. The surcharge is payable in addition to the NSW transfer duty / land tax that Australian persons are currently subject to (NSW land tax rates are currently between 1.6% – 2% depending on the value of land. NSW transfer duty varies from 1.25% to 7% depending on the dutiable value of the land).
Revenue NSW has recently announced that it has determined that the imposition of surcharge transfer duty and surcharge land tax is inconsistent with Australia’s Double Tax Treaties (DTAs) with New Zealand, Finland, Germany and South Africa. As a result, Revenue NSW will cease charging surcharge duty / land tax on citizens of these countries immediately and has committed to refunding any surcharge duty / land tax paid on or after 1 July 2021.
How do affected individuals claim a refund?
Revenue NSW has indicated that it will be contacting individual purchasers who are eligible for a refund of surcharge duty/land tax to arrange refunds. Where an individual believes they are eligible for a refund, but have not been contacted, Revenue NSW’s advice is to call or email Revenue NSW.
What if I purchased through a company or trust?
Certain companies or trusts in which residents of the above countries have substantial interests may also be entitled to relief from surcharge duty under the relevant DTAs. However, whether relief is available will depend on the specific DTA being relied upon and the specific facts of each case. Companies or trusts with individuals from the above countries that have direct/indirect substantial interests should seek additional taxation advice specific to their circumstances.
What if I own land / have purchased land in another State?
The Victorian State Revenue Office has announced that they are also considering the impact of Australia’s DTAs on Victorian surcharge purchaser duty and surcharge land tax. As DTAs are applied universally to all Australian taxpayers, it is expected that the Revenue NSW position will be considered in due course by all States. However, no formal announcements from other State Revenue offices have been made as yet.
Will citizens of other countries be entitled to relief?
The relief from surcharge duty / land tax for citizens of New Zealand, Finland, Germany and South Africa is granted in reliance based on the ‘Non-discrimination’ articles of Australia’s DTAs with those countries. Australian negotiates its DTA on a country-by-country basis. As such, the non-discrimination article in a DTA with one country can differ from a DTA with a different country.
For example, the non-discrimination article of Australia’s DTA with New Zealand provides that:
“1. Nationals of a Contracting State [New Zealand] shall not be subjected in the other Contracting State [Australia] to any taxation… which is more burdensome than the taxation… to which nationals of that other State… are or may be subjected…
7. The provisions of this Article shall… apply to taxes of every kind and description imposed on behalf of the Contracting States, or their political subdivisions.”.
By way of comparison, in Australia’s DTA with the United Kingdom, sub-Article 7 of the UK DTA provides that “[t]he provisions of this Article shall apply to the taxes which are the subject of this Convention”. This means that in other DTA’s the non-discrimination article may be restricted to taxes such as income tax and fringe benefits.
Revenue NSW has identified the four countries listed in this article as having non-discrimination articles wide enough to cover taxes imposed at a State level. Whether any countries are added to this list in future will depend on whether there are any amendments to existing DTAs and/or the exact wording of any new DTAs negotiated in future.
For more information on any issues relating to corporate and/or international tax, contact your local William Buck Tax Advisor.