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Australian states impose stamp duty surcharge on foreign property buyers

Thursday, 16 June, 2016

Three Australian states are to introduce extra stamp duty on purchases of residential property by foreigners, starting this year.

The state of Victoria, which includes the city of Melbourne, already has a 3 per cent surcharge for foreign purchasers, introduced in July last year. This is now to be increased to 7 per cent on 1 July 2016, resulting in a net stamp duty rate of 12.5 per cent, compared to 5.5 per cent for Australian buyers, says law firm Baker & McKenzie. Absentee owners will be liable for land tax at rates of up to 3.75 per cent starting in 2017.

New South Wales, which includes Sydney, announced on 14 June that it will charge foreign buyers an extra 4 per cent, starting on Budget Day (21 June). They will also have to pay an extra 0.75 per cent land tax starting in the 2017 land tax year. Moreover, they will not be entitled to a tax-free exemption threshold for the land tax surcharge.

Also, Queensland has now announced it will impose a 3 per cent surcharge for foreign buyers starting on 1 October. Their effective stamp duty rate will thus be 8.75 per cent compared with 5.75 per cent for residents.

There are already stringent federal rules limiting the actions of foreign investors in Australian residential property. It is, for example, illegal for non-resident foreign persons to buy 'established' dwellings in Australia as investment properties or as holiday homes. Furthermore last year the federal government announced plans to force temporary residents to sell a property within three months if it ceases to be their primary residence, even if they remain resident in the country.

Moreover, this year Australia has introduced a non-final 10 per cent withholding tax obligation on the purchase of Australian real property from foreign residents after 1 July 2016, where the sale is worth at least AUD2 million. The charge is intended to help collect foreign residents' capital gains tax liabilities and comes into effect on 1 July 2016.