Non-resident buyers of residential property are looking at significantly higher stamp duty costs across most of Eastern Australia in the very near future.
Following yesterday’s announcement by the Queensland Treasurer and media speculation in New South Wales, it is widely expected that both of these States will follow the lead of Victoria and introduce some form of stamp duty surcharge for foreign buyers of residential real estate when the State budgets are handed down (14 June for Queensland and 21 June for New South Wales).
While the ostensible aim of these surcharges is to provide Australian residents an advantage in entering the booming housing market, the temptation to raise state revenue by extending the scope of these laws can be almost irresistible. The current bill before the Victorian parliament is a case in point.
The Victorian duty surcharge applies to 'residential land' – this includes not only land that is currently used for 'residential' purposes, but extends to land that can be or is intended to be used for that purpose. There is a separate Victorian land tax surcharge which rises to 1.5 percent from 1 January 2017.
The new Bill defines 'residential land' to include hotels, motels, serviced apartments and similar 'short term accommodation'. This change effectively extends the 'residential property' surcharge to commercial property, putting foreign controlled operators at a disadvantage, and appears to go well beyond the initial policy justifications for introducing the changes.
The current Victorian surcharge is currently 3 percent, and will increase to 7 percent from 1 July 2016 (ie the top duty rate will increase to 12.5 percent) if the Bill is passed by the Victorian parliament.
An ex gratia exemption can be granted, notably where an acquisition will lead to an increase in the stock of residential accommodation, and guidelines have been issued by the Victorian Treasurer to this effect. It remains to be seen how this issue will be dealt with by the Queensland and possible New South Wales regimes – watch this space.