Revenue NSW: Foreign Purchaser Surcharge Duty and Surcharge Land Tax not payable by citizens of New Zealand, Finland, Germany or South Africa
On 21 February 2023 Revenue NSW announced that effective immediately citizens of New Zealand, Finland, Germany, or South Africa are no longer liable to pay foreign purchaser surcharge duty or surcharge land tax on residential land in NSW, because of inconsistencies between Australia’s international tax treaties and the NSW surcharge provisions. It is yet to be confirmed if this position will be extended to investors from any other countries, but there are certainly other countries with bilateral tax treaties with Australia that contain similar non-discrimination clauses to those contained in the treaties with New Zealand, Finland, Germany and South Africa.
Individual purchasers and transferees
Individual citizens of these nations purchasing residential-related property in their personal capacity are no longer required to pay surcharge purchaser duty.
Non-individual purchasers and transferees
Non-individuals such as corporations, partnerships or trusts are not subject to surcharge purchase duty if they are foreign persons solely by reason of a substantial or aggregate substantial interest that is held by a ‘national’ of New Zealand, Finland, Germany, or South Africa.
Revenue NSW has clearly stated that a non-individual purchaser (or owner) of residential land in New South Wales will be liable to surcharge purchaser duty (or land tax) if a foreign person, other than a national of New Zealand, Finland, Germany or South Africa, directly or indirectly holds a substantial or aggregate substantial interest in the entity.
Eligibility for refund
Individuals and entities that are identified as not being liable to surcharge purchaser duty or surcharge land tax may be eligible for a refund of surcharge purchaser duty or surcharge land tax payments made on or after 1 July 2021. There is no explanation as to why such refunds are limited to 1 July 2021 onwards, as the relevant non-discrimination clauses in Australia’s international tax treaties certainly pre-date 2021. Relevant taxpayers with liabilities pre-dating 1 July 2021 are encouraged to seek advice if they are denied a refund.
Following the Revenue NSW announcement, it is reasonable to conclude that similar surcharges in the other States will likely also be in breach of Australia’s international tax treaty obligations and if the respective revenue offices don’t reach that conclusion voluntarily, it may be up to affected taxpayers to seek recourse through the courts. The State Revenue Office of Victoria has acknowledged the New South Wales announcement and will provide an update on their position in due course. The Queensland Revenue Office has not yet made any announcement.
If you require assistance with a refund or have any questions in relation to a pending assessment, please reach out to our Tax Team.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.