NSW removes foreign owner property taxes for certain countries
Welcome news for foreign property investors in NSW as Revenue NSW removes foreign owner surcharge land tax and surcharge purchaser duty effective immediately, with refunds backdated to 1 January 2021.
UPDATE – 29/05/23
On 29 May, Revenue NSW released an update on the foreign owner surcharge, following their announcement on 21 February. Revenue NSW identified four furthe countries as additional nations that have international tax treaties with the Federal Government: India, Japan, Norway, and Switzerland.
Citizens from these countries will no longer be required to pay surcharged purchaser duty or surcharge land tax. The refund period has been extended for purchasers/transferees and landowners from these countries who paid surcharge duty or surcharge land tax on or after 1 January 2021 (previously 1 July 2021).
SW previously noted that other states may follow the NSW lead. At this time, the Victorian State Revenue Office has advised that it will continue to apply the surcharge to all foreign purchasers and absentee owners, and Queensland has taken no action.
ORIGINAL – 24/02/23
Revenue NSW has identified that the 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.
Effective immediately, citizens of these countries purchasing residential-related property (in their own capacity) will no longer be required to pay NSW foreign owner surcharge duty or foreign owner land tax surcharges on those properties. Foreign owner surcharges are significant – currently the stamp duty surcharge is 8% of dutiable value and the land tax surcharge is 4% from the 2023 land tax year onwards.
Surcharge tax liabilities for non-individuals, such as corporations, trusts or partnerships that arise because of an entity’s affiliation with these nations may also be affected by the international tax treaties.
Refunds may be available where surcharge taxes have been paid by investors from these countries from 1 July 2021 onwards.
Surcharge taxes and International Tax treaties
Certain international tax treaties entered into between Australia and other relevant countries contain a non-discrimination provision. Broadly, the intent of these provisions is to ensure that a resident of the other treaty country is not subjected in Australia to any tax which is more burdensome than that imposed on an Australian resident. This is typically limited to federal taxes, such as income tax and fringe benefits tax.
However, the treaties entered into between Australia and the now exempted countries (New Zealand, Finland, Germany and South Africa) provide a more encompassing non-discrimination provision which broadly applies to taxes of every kind imposed by Australia – which would include state taxes such as land tax and duty.
In this regard, Revenue NSW have conceded that the current NSW surcharge provisions are contradictory to the tax treaty applying to these countries.
Implications for other nations
It is not yet known how the recent changes will impact on residents from other countries. There may be other international treaties with non-discrimination provisions which may also need to now be considered in light of these changes.
Application for refunds
Revenue NSW have stated that they will proactively identify customers and transactions that may be eligible for the removal of surcharge purchaser duty and surcharge land tax. Where a transaction has been identified for the removal of surcharge taxes, a Revenue NSW representative will contact the relevant person to make arrangements for the payments to be refunded.
To ensure you are eligible for the refund, Revenue NSW will require a certified copy of your current passport or citizenship certificate. Once this information has been received, refunds will be processed within 28 days.
If Revenue NSW does not contact you and you believe that you may be eligible for a refund, you can contact Revenue NSW directly in relation to the matter. If you require assistance with the application for a refund, please reach out to us at SW.
Action from other states
At the time of writing no other revenue office has commented on this matter, however, the relevant DTAs would potentially apply to surcharges imposed by all Australia States, and further announcements may follow.
How SW can help
In some cases, property owned by a Trust or company may be considered for the refund where the foreign citizen of these countries has a substantial interest in the entity.
If you need any assistance determining whether you are eligible for a refund or how the surcharge taxes will apply to you going forward, please reach out to us.