Gary Chiert and Dorian Beaver discuss an increase in the foreign surcharge duty on residential property acquired by foreign individuals.
In 1765 the Parliament of Great Britain passed the Duties in American Colonies Act 1765, effectively imposing stamp duty in the colonies of British America. This was anathema to the British subjects in those colonies and their slogan 'no taxation without representation' and was a contributing factor to the American Revolution.
In September last year, Western Australia announced a 4 percent foreign purchaser duty surcharge on residential property acquired by foreign individuals, corporations and trusts to be introduced on 1 January 2019. In the State budget delivered on 10 May 2018, Western Australia announced that the rate of the surcharge would be 7 percent. These foreign purchaser duty surcharges are now imposed by all States except Tasmania, although the scope and rates vary.
According to last year’s announcement, the Western Australian surcharge will have the following features:
When the surcharges were first introduced in Victoria and New South Wales they were accompanied by a narrative of housing affordability, although cynics were quick to point out the political tactic of imposing taxes on those who could not vote. With the adoption of the surcharges now almost Australia-wide, the cynics’ argument is gaining weight, with the the Budget Speech specifically pointing out that these measures will come “at no cost to Western Australians”. Whilst stamp duty might be an unpopular tax among economists and, more recently, foreign purchasers of residential property, the risk of revolution is remote and the surcharges are here to stay.
Developers, operators of retirement villages and student accommodation providers looking to purchase land in Western Australia will need to keep an eye on the detail to make sure they understand the exclusions.