Land Tax Surcharge on Foreign Persons (broader than you may realise)
Overview
The NSW government has introduced a surcharge on residential land held by or associated with a ‘foreign person’ from the 2017 land tax year. This applies to land held on and after 31 December 2016. From March 2017, the Office of State Revenue will calculate the land tax surcharge of 0.75% and issue assessment notices. The surcharge will be included as part of your land tax assessment after this date.
The land tax surcharge of 0.75% applies to land held by a ‘foreign person’. A ‘foreign person’ includes a trust (including a family or discretionary trust) where the beneficiaries or potential beneficiaries of that trust live overseas. We note that Australian citizens are not considered to be ‘foreign persons’ even if they reside overseas.
The surcharge is in addition to any land tax you may already pay. You may be required to pay the surcharge even if you do not currently pay land tax.
A ‘foreign person’ can be:
- An individual
- A corporation
- A trustee of a trust
- A beneficiary of a land tax fixed trust
- A government
- A government investor
- A partner in a limited partnership
For special trusts (e.g. discretionary trusts), beneficiaries are not treated as owners and therefore they will not have to pay the surcharge. However, if any one or more of the potential beneficiaries of the trust are foreign persons, the trustee will be liable for the land tax surcharge on the trust’s interest in the property. It is possible to amend the trust deed to specifically exclude foreign persons from being a beneficiary and thus avoid the surcharge.
The surcharge is assessed in relation to each parcel of land, and is proportional to ownership. There are no joint assessments and secondary deductions do not apply. There is no tax-free threshold applicable to the surcharge.
What you need to do
If you are a foreign person, and:
- already pay land tax, use your Client ID and correspondence ID to update your foreign status and residential land details (click on this link).
- have not previously paid land tax, call the Office of State Revenue on 1300 139 816; they will arrange your login details over the phone so that you can inform them of your foreign status and residential land details.
If you require further assistance with this matter please do not hesitate to contact us on 02 9264 6733.
