Non-resident buyers of residential property may encounter significantly higher stamp duty (tax) costs across most of eastern Australia in the very near future.
Following a June 2016 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 later this month).
The aim of the stamp duty surcharges imposed on foreign buyers of residential real estate is to provide Australian residents an advantage in entering the booming housing market. However, some see there would be a temptation to raise state revenue by extending the scope of these laws.
The bill currently before the Victorian parliament is a case in point. The Victorian duty surcharge would apply 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 that increases to 1.5% 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. The Victorian surcharge is currently 3%, but would increase to 7% from 1 July 2016 (the top duty rate would increase to 12.5%) if the legislation is passed by the parliament.
An ex gratia exemption can be granted, notably when an acquisition would lead to an increase in the stock of residential accommodation, and guidelines have been issued by the Victorian Treasurer to this effect.
Read a June 2016 report prepared by the KPMG member firm in Australia
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