Stamp Duty, Land Tax and Vacancy Fee - Foreign Owners of Australian Property
The last few years has seen the implementation of a range of new stamp duty and tax changes in Australia largely focused on foreign investors and, more recently, "absentee" owners. Currently, Australian citizens working overseas are not caught by the new provisions, following the repeal of some particularly harsh provisions in Queensland in 2019.
Australian expats still need to be broadly aware of these provisions because at least one State appears to have simply invoiced all property owners with an overseas contact address on the basis that they are subject to the "foreigner" absentee land tax provisions - regardless of the owners being Australian citizens or permanent residents. Additionally, many expats buy Australian property with foreign spouses and consequently there may be a partial exposure. You should seek professional advice confirming any exposure, prior to making or challenging any payment demands.
Stamp Duty and Land Tax
We have provided a summary of stamp duty and absentee land tax surcharge payments below - these are payable in addition to standard stamp duty and land tax. To stress, Australian citizens working abroad are currently not liable to pay any stamp duty or absentee land tax surcharges.
Stamp Duty Surcharge
Absentee Land Tax Surcharge
|New South Wales
|8% from 1/7/17
|4% from 1/1/23
|8% from 1/7/19
|2% from 1/1/20
4% from 1/1/24
|7% from 1/7/18
|2% from 30/6/19
|7% from 1/1/19
|7% from 1/1/18
|8% from 1/4/20
|0.75% surcharge from 1/7/18
A more detailed summary is available for download below of how we believe the stamp duty and land tax provisions apply across Australia in 2023. The situation is complex and dynamic, changing regularly, and the material is intended only as general background and is not to be relied upon - professional advice is strongly recommended.
On May 23, 2023 the Victorian State Treasurer unveiled a "COVID Debt Levy". This levy includes a reduction in the threshold for Victoria's land tax - which doesn't apply to main residences - from $300,000 to $50,000. An annual charge of $500 will apply to affected properties between $50,000 and $100,000 as part of the 10-year levy, and a charge of $975 for property landholdings worth between $100,000 and $300,000. In tandem, land tax rates for properties above $300,000 will rise by $975 plus 0.1 per cent of the land's value and the absentee owner surcharge rate will increase from 2 per cent to 4 per cent.
The NSW Government announced in February 2023 that, "Foreign persons from New Zealand, Finland, Germany and South Africa may no longer be required to pay surcharge purchaser duty or surcharge land tax." This is a very significant change, based on a specific provision in the double tax treaties with these countries, and one that other states have not indicated they will follow. While the State Revenue Office (SRO) will have sought senior legal advice the approach has not been followed by other State offices.
ATO: Annual Vacancy Fee and Return applicable to Foreign Owners
An annual Vacancy Fee is payable by foreign owners of residential property if their Australian property is not "residentially occupied or genuinely available on the rental market" for at least 183 days in a 12 month period. The vacancy fee applies to foreign persons who made a foreign investment application to purchase residential property on or after on May 9, 2017 and owners must lodge an annual vacancy fee return, whether the property in question has been occupied or genuinely made available for rent.
For the purpose of the vacancy fee, foreign owned residential property is considered, "residentially occupied, or genuinely available on the rental market", if:
- the property owner, or a relative of the owner, genuinely occupied the property as a place of residence; or
- the property was genuinely occupied as a place of residence subject to a lease or licence with a term of at least 30 days; or
- the property was made genuinely available as a place of residence on the rental market, with a contract term of at least 30 days.
Note that properties made available for short-term leases of less than 30 days (including via web-based vacation rental sites such as AirBnb) do not meet the above criteria.
There are a number of situations where a foreign person may be exempt from being liable for a vacancy fee, including where legal ownership of the property has changed during the year, property has been undergoing substantial repairs or renovation, the property is part of an estate being administered, etc., and, should a property cease to be owned by a foreign person during the course of a vacancy, the vacancy fee obligation will cease to apply.
As regards the amount of the fee, it will generally be equivalent to the residential land application fee that was paid by the foreign person at the time the application for FIRB approval to purchase the property was made. The current minimum (July 2023) fee is $14,100 for applications involving the purchase of property valued at $1million or less.
We believe there may be a significant under-reporting in this area and non-compliant foreign owners are risking very substantial penalties. Compliance activities in this area are also likely to increase with the implementation of the Register of Foreign Ownership of Australian Assets from July 1, 2023 and rising concerns regarding accommodation shortages.
STOP PRESS: As predicted above, the Government announced in early December 2023 an intention to substantially increase the penalties applying to foreign investors leaving properties vacant in 2024 - tripling taxes for foreigners who buy existing houses in Australia and doubling fees for those who leave dwellings vacant. The resultant effect could be a six fold increase in the penalties for leaving a property vacant. Compliance activities in this area will also be substantially increased - with the ATO having (implausibly) only identified 23 breaches in the past financial year.
If you would like to arrange professional advice please complete the Inquiry form below providing details and you will be contacted promptly.