The last thing you really want to read about on New Year’s Day is a new Real Estate surcharge but South Australia now has one for foreign persons.
Last year, I wrote about the Federal Government’s Foreign Resident Capital Gains Withholding Tax in the article, How will changes to the Foreign Resident Capital Gains Withholding Tax affect you?
However, today’s new surcharge is a State Government fee resulting from a recent Bill which deemed that all Foreign persons (which includes natural persons and corporations) or foreign trusts that acquire an interest in residential land in South Australia are required to pay a foreign ownership surcharge (the “surcharge”) of 7% of the value of the interest in residential land.
This brief overview will give you the key information you need so you can better understand the issue when your conveyancer raises it with you.
When does it apply?
The new surcharge applies to instruments liable to stamp duty, excuted on or after 1 January 2018.
It’s important to note that this new surcharge is payable in addition to the stamp duty.
However, if the interest in land acquired by a foreign person or trust is not liable to stamp duty, then there will be NO surcharge to pay.
An example of this exception would be transfer pursuant to a will.
Who is a foreign person or trust liable for this new real estate surcharge?
Because this surcharge uses the term, foreign’, there are some definitions that help clarify who qualifies as a ‘foreign person’ (this can include natural persons and corporations) or what is deemed to be a ‘foreign trust’.
Foreign Natural Person
A foreign natural person is any individual who is NOT:
- an Australian citizen within the meaning of the Australian Citizenship Act 2007 (Cwlth);
- the holder of a permanent visa within the meaning of Section 30(1) of the Migration Act 1958 (Cwlth); or a
- New Zealand citizen who is the holder of a special category visa within the meaning of Section 32(1) of the Migration Act 1958 (Cwlth).
A corporation is foreign where it is either:
- incorporated in a jurisdiction that is not an Australian jurisdiction; or
- a person who is a foreign person or a trustee for a foreign trust, or a number of such persons in combination:
- hold(s) 50% or more of the corporation’s shares; or
- is or are entitled to cast, or control the casting of, 50% or more of the maximum number of votes at a general meeting of the corporation.
How is the surcharge calculated?
The surcharge is calculated based on the value of the interest in residential land, being the value used for stamp duty purposes.
And because this surcharge is in addition to any stamp duty payable, it helps to look at an example.
Imagine Peter, a foreign person under the legislation, acquires residential land valued at $600 000. The total stamp duty payable would be as follows.
|Stamp Duty on $600,000||$26 830|
|Surcharge (7% of $600 000)||$42 000|
|TOTAL PAYABLE||$68 830|
Payment of the surcharge
Within the team at Eckermann Conveyancers, we have already established systems, protocols, and notifications, for making sure we are aware of the new real estate surcharge and that we check with clients to make sure it is paid when it needs to be.
You are welcome to follow this link to read the government’s bulletin on the Foreign Ownership Surcharge, or you can just raise the issue with your Eckermann Conveyancers file manager.
From all of us, we wish you a happy and prosperous New Year, and we’re here to make sure your conveyancing needs are fulfilled with accuracy and on time, every time.