The Federal government has introduced a bill to overcome the States’ inability to impose foreign stamp duty and land surcharges where it is inconsistent with a Double Tax Agreement.
New amending legislation introduced
On 7 February 2024, the Federal Government introduced Treasury Laws Amendment (Foreign Investment) Bill 2024 (Foreign Investment Bill) into Parliament.
The Foreign Investment Bill amends the International Tax Agreements Act 1953 and purports to clarify the uncertainty associated with the interaction between State and Territory property taxes e.g. foreign purchaser land transfer (stamp) duty surcharge and foreign owner land tax and Australia’s Double Tax Agreements (DTAs).
The Bill will insert a new provision - section 5(3) – into the International Tax Agreements Act 1953 that provides that State based foreign surcharges prevail in the event of any inconsistency with a DTA.
Response to inconsistency between foreign surcharges and DTA non-discrimination clauses
Most Australian States levy additional taxes on the purchase or holding of Australian real property by non-citizens who are not permanent residents. This is up to an 8% stamp duty surcharge on purchase and 4% annual land tax surcharges.
Last year, it became widely known that these foreign surcharges are inconsistent with non-discrimination clauses in 8 DTAs entered into by Australia. New South Wales offered refunds of its surcharges on that basis.
The new provision is a response to this issue, which was raised by the Federal Government on 13 December 2023 in its Mid-Year Economic and Financial Outlook 2023-24 (see article here).
State Revenue Office Victoria has acknowledged the issue but has not publicly announced that it will refrain from imposing foreign surcharges or offer refunds to impacted taxpayers.
Foreign surcharges imposed in Australia
|
State |
Stamp duty surcharge (residential only) |
Land tax surcharge |
|
Victoria |
8% |
4% (all land) |
|
New South Wales |
8% |
4% (residential only) |
|
Queensland |
7% |
2% (all land) |
|
South Australia |
7% |
N/A |
|
Tasmania |
8% |
2% (residential land) |
|
Australian Capital Territory |
N/A |
0.75% (residential land) |
|
Western Australia |
7% |
N/A |
Tasmania also imposes a 1.5% stamp duty surcharge on primary production land.
Date of effect
The new provision has retrospective effect back to 1 January 2018. It is unknown how New South Wales or the other States will respond to the provision.
Action required
Foreign landowners should note this development and consider their options in relation to these foreign surcharges.
Please contact us with any questions or any other State Tax issues.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au
Meera Pillai
Associate
T +61 3 9611 0179
E mpillai@sladen.com.au
