NSW backflips on duty and land tax surcharges for certain foreign citizens
Update – 30 May 2023
Further to our update of 22 February 2023, Revenue NSW have now also identified India, Japan, Norway and Switzerland as nations that have international tax treaties with the Federal Government which are inconsistent with NSW surcharge purchaser duty and foreign owner surcharge land tax provisions.
This means that individuals who purchase residential land or property in their own capacity will not be required to pay surcharge purchaser duty or surcharge land tax if they are a citizen of any of the following nations:
- Finland
- Germany
- India
- Japan
- New Zealand
- Norway
- South Africa
- Switzerland
Surcharge purchaser duty or surcharge land tax for non-individuals (i.e. corporations, partnerships and trusts) that arise due to their affiliation with these nations may also be affected by the change.
The refund period has also been extended from 1 July 2021 to 1 January 2021. Refunds are available to purchasers/transferees and landowners from the abovementioned nations who paid surcharge purchaser duty or surcharge land tax on or after 1 January 2021.
We will provide further updates as this matter progresses.
Update – 16 March 2023
The Victorian State Revenue Office announced on 15 March 2023 that its position on the Victorian ‘foreign purchaser additional duty’ and ‘absentee owner surcharge’ rules has not changed. It will continue to apply these rules to all foreign purchasers and absentee owners.
Watch this space. It will be interesting to understand the reasons why Victoria has taken a fundamentally different approach to New South Wales.
Update – 22 February 2023
Revenue NSW has taken an extraordinary step this week, conceding that New South Wales surcharge purchaser duty and foreign owner surcharge land tax provisions are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany and South Africa.
What we know
Certain international tax treaties entered into by Australia contain a non-discrimination provision. In general terms, these non-discrimination provisions provide that a national of the other country that is a party to the treaty, shall not be subjected in Australia to any tax which is more burdensome than that imposed on an Australian resident. This is typically limited to the taxes expressly subject to the treaty (most commonly, income tax and fringe benefits tax).
However, the treaties entered into between Australia and each of New Zealand, Finland, Germany and South Africa, go further. They provide that the non-discrimination provision applies to ‘taxes of every kind and description’ (or similar wording) imposed by Australia – relevantly including land tax and duty.
As a result, effective immediately, individual citizens of these specific countries that purchase or own New South Wales residential-related property or land in their own right will no longer be required to pay surcharge purchaser duty or foreign owner surcharge land tax. Non-individuals (that is, corporations, trusts or partnerships) may also be affected by this change if they are affiliated with these countries.
Importantly, refunds may be available for eligible purchasers and landowners who paid surcharge purchaser duty or foreign owner surcharge land tax on or after 1 July 2021.
What we don’t know (yet)
Revenue NSW has made no comment on whether citizens of other treaty countries – particularly those with broader non-discrimination provisions, such as India – may be affected. It will also be interesting to see what flow-on effect this has on Australia’s tax treaty negotiation processes.
While this is an important development, there is no word yet on how Revenue NSW will practically determine whether a purchaser or landowner is covered by a relevant international tax treaty, as there is no ‘register’ of these entities and coverage must be determined on a case-by-case basis. Revenue NSW has stated they will proactively identify customers and transactions that may be eligible for the removal of the surcharges, and contact impacted taxpayers directly.
At the time of writing, there is also no word yet on whether the other states and territories will follow suit, although we expect they will shortly, although the Victorian State Revenue Office has announced that they are actively considering the issue. The following states and territories currently have surcharge purchaser duty and foreign owner surcharge land tax rules for foreign persons.
| Surcharge purchaser duty | Foreign owner surcharge land tax | |
|---|---|---|
| Australian Capital Territory | ✓ | |
| New South Wales | ✓ | ✓ |
| Queensland | ✓ | ✓ |
| Tasmania | ✓ | ✓ |
| Victoria | ✓ | ✓ |
| Western Australia | ✓ | |
| South Australia | ✓ |
If you have purchased or are planning to purchase a New South Wales property and believe this change affects you, please contact a member of our Tax team below.