The 2016 NSW Budget introduced a 4 per cent surcharge purchaser duty on the purchase of residential real estate by foreign persons from 21 June 2016. The surcharge is in addition to the duty payable on the purchase of residential property.
Foreign persons will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property.
This surcharge will also apply to landholder transactions if there is a landholder liability and one or more of the properties owned by the landholder is classified residential and the purchaser is a foreign person who purchases shares or units in the landholder.
From 18 July 2016, the purchaser/transferee declaration must be completed by any person entering into a transaction on or after 21 June 2016, that results in the acquisition of an interest in land in NSW.
[NSW OSR – Surcharge Purchaser Duty – summary] [LTN 196, 11/10/16]
Preamble – The State Budget 2016 introduced a 4% Surcharge Purchaser Duty and Land Tax Surcharge, which apply from 21 June 2016. The amendments were included in the State Revenue Legislation (Budget Measures) Act 2016.
- Surcharge Purchaser Duty applies, to dutiable transactions, where the interest in residential related property is acquired by a foreign person; and
- Land Tax Surcharge is applied to residential land owned by a foreign person.
- Foreign Person is defined by reference to the Foreign Acquisitions and Takeovers Act 1975.
This ruling outlines the application of the foreign person definition to Surcharge Purchaser Duty and Land Tax Surcharge.
Ruling – The meaning of foreign person for Surcharge Purchaser Duty and the Land Tax Surcharge is taken from s4 of the Foreign Acquisitions and Takeovers Act 1975. That definition includes ‘any other person, or any other person that meets the conditions, prescribed by the regulations’.
- Under the Foreign Acquisitions and Takeovers Regulation 2015, the meaning of foreign person is modified under clauses 18, 46 and 47.
- In assessing the liability to Surcharge Purchaser Duty and Surcharge Land Tax the foreign person meaning is considered to cover those persons included or excluded by clauses 18, 46 and 47 of the Foreign Acquisitions and Takeovers Regulation 2015.
[OSR website – Revenue Ruling No. G 008] [LTN 196, 11/10/16]
‘Foreign person’ per s4 of the FAaT Act
“foreign person” means:
(a) an individual not ordinarily resident in Australia; or
(b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
(c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
(d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
(e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
(f) a foreign government; or
(g) any other person, or any other person that meets the conditions, prescribed by the regulations.
Regulation 18 ‘foreign person’
General partners of limited partnerships
(1) For paragraph (g) of the definition of foreign person in section 4 of the Act, a person is a foreign person if:
(a) the person is a general partner of a limited partnership; and
(b) either:
(i) an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an interest of at least 20% in the limited partnership; or
(ii) 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government hold an aggregate interest of at least 40% in the limited partnership.
Certain foreign government investors
(2) For paragraph (g) of the definition of foreign person in section 4 of the Act, a person is a foreign person if:
(a) the person is a foreign government investor; and
(b) apart from this subsection, the person would not be a foreign person.
Regulation 46 ‘foreign person’ – Meaning of foreign person–potential voting power and future rights
(1) This section applies for paragraphs (b), (c), (d) and (e) of the definition of foreign person in section 4 of the Act, to the extent that that definition applies for the purposes of the following:
(a) item 8 of the table in subsection 67(2) of the Act (orders prohibiting proposed significant action);
(b) item 3 of the table in subsection 67(3) of the Act (additional orders);
(c) item 7 of the table in subsection 69(2) of the Act (disposal orders);
(d) Part 4 of the Act (notice of notifiable actions and significant actions).
Note 1: Paragraphs (b), (c), (d) and (e) of the definition of foreign person cover corporations and trustees of trusts in which foreign persons hold substantial interests or aggregate substantial interests.
Note 2: The items mentioned in paragraphs (a) to (c) of this subsection relate to acquisitions of interests in Australian land.
(2) The provisions specified in subsection (1) of this section do not apply in relation to an interest in a security that a person holds that is part of a substantial interest or an aggregate substantial interest in an entity because:
(a) the person is in a position to control a specified percentage of the potential voting power of the entity; or
(b) the person would hold at least a specified percentage of the issued securities in the entity if securities in the entity were issued as a result of the exercise of some or all rights of a kind mentioned in paragraph 15(1)(b) or (c) of the Act.
Regulation 47 – disregarding small holdings of securities in primary listed entities
(1) Paragraphs (c) and (e) of the definition of foreign person in section 4 of the Act do not apply in relation to an interest in securities in an entity if:
(a) the entity is listed for quotation in the official list of a stock exchange in Australia; and
(b) that listing is the entity’s primary listing in an official list of a stock exchange; and
(c) the interest, together with any interests held by any associates of the person, is not a substantial holding (within the meaning of the Corporations Act 2001 ).
Note 1: Paragraphs (c) and (e) of the definition of foreign person cover corporations and trustees of trusts in which foreign persons hold aggregate substantial interests.
Note 2: The interests that are taken into account in working out whether a person has a substantial holding may be modified by ASIC under the Corporations Act 2001 (see for example section 601QA of that Act).
(2) However, an interest mentioned in subsection (1) is to be taken into account for the purposes of working out the percentage of that or any other interest in the entity.
Note: The effect of this section is that an interest of, for example, 2% held by a foreign person is to be disregarded for the purposes of determining whether 2 or more foreign persons hold an aggregate substantial interest in an entity. However, the interest is to be taken into account in working out the percentage of any interest in the entity.