Stamp Duty and Land Tax - Absentee and Foreign Owners
The last few years has seen the implementation of a range of new stamp duty and land tax changes in Australia largely focused on foreign investors and, more recently, "absentee" owners. In most situations, Australian citizens working overseas are not caught by the new provisions, although it is important to note that the situation in Queensland with respect to land tax is very different and the associated costs can be substantial.
You need to be broadly aware of these provisions because at least one State appears to have simply invoiced all property owners with an overseas contact address on the basis that they are subject to new land tax provisions - regardless of the owners being Australian citizens. You should seek professional advice confirming any exposure, prior to making or challenging any payment demands.
We've provided a summary of stamp duty and absentee land tax surcharge payments below - payable in addition to standard stamp duty and land tax. Australian citizens working abroad are not liable to pay any stamp duty surcharge but note that if you purchase with a spouse who is not a citizen there may be a liability, even if they are a permanent resident.
|State||Stamp Duty Surcharge
(On property purchase)
|Absentee Land Tax|
|New South Wales||8% from 1/1/18
|2% from 1/1/18
|Queensland||7% from 1/7/18
|1.5% from 1/1/18|
|Western Australia||7% from 1/1/19||Nil|
|South Australia||7% from 1/1/18||Nil|
|Tasmania||3% from 1/7/18||Nil|
|ACT||Nil||0.75% from 1/7/18|
Now, using an example, lets look in more detail at the land tax position in Queensland which represents a particular exposure for Australian expatriates.
From 1 July 2017, Queensland imposed a 1.5% land tax surcharge on absentee land owners. An ‘absentee’ land owner is not just a foreign owner, it can include Australian citizens who do not ordinarily live or reside in Australia. There are some limited exemptions in this regard - Commonwealth and State public servants posted overseas and also expatriates posted overseas by their (Australian) employer. Note that in addition to the surcharge absentees are taxed at the (higher) rate applying to companies and trustees, with a lower starting threshold of $350,000.
Say you own an investment property in QLD with an assessed land value of $600,000 on 1/7/18 - no land tax applies if you are resident in Australia as this is the lower threshold from which land tax applies in QLD. But if you were an expatriate your exposure would look like this:
Land Tax = $1,450 plus 1.7c per dollar above $350,000 = ($600,000 - $350,000 x 0.017) = $5,700
Surcharge = ($600,000 - $349,999) x 1.5% = $3,750
Land Tax + Surcharge = $9,450 per annum
In the 2019 Queensland State Budget, delivered on June 11, a significant change was announced in terms of how the absentee land tax surcharge would apply in future - whilst the rate of tax would increase, it would now cease to apply to Australian citizens and permanent residents. See the Budget quote below and note that we will provide more detail, and update documentation, when more details are available.
"The Government will increase the land tax absentee surcharge rate from 1.5% to 2.0% from 2019-20. The application of the surcharge will also be widened to include foreign corporations and trustees of foreign trusts. These measures are estimated to raise $540 million over four years. The determination of absentee status for land tax purposes will also be adjusted so that Australian citizens and permanent residents are no longer classed as absentees and will be exempt from the absentee surcharge."
A more detailed summary is available for download below of how we believe the stamp duty and land tax provisions apply across Australia in 2019. The situation is complex and the material is intended only as background and is not to be relied upon.