Lawcovernotes March 2017

Understanding the new NSWreal estate surcharges on foreignbuyers 12. Lawcover is receiving claims resulting from the recent introduction of the real estate surcharges on stamp duty and land tax. The NSW government introduced a 4% surcharge on stamp duty for the purchase of residential real estate by foreigners from 21 June 2016 and a land tax surcharge of 0.75% on residential land owned by foreigners from 31 December 2016. In the interest of avoiding further claims, we explain what you need to know about both surcharges and offer claims prevention tips. Purchaser Surcharge duty 1. There is a 4% surcharge on direct and indirect acquisitions of residential land and options to purchase residential land by foreign purchasers 2. The surcharge applies to all contracts entered into on or after 21 June 2016 3. The surcharge is in addition to the stamp duty payable on the purchase of residential property 4. Foreign person means one of the following: a) An individual not ordinarily resident in Australia b) A corporation, trustee of a trust or general partner of a limited partnership in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a “substantial interest” of at least 20% c) A corporation, trustee of a trust or general partner of a limited partnership in which two or more people, each not ordinarily resident in Australia, a foreign corporation or a foreign government holds an “aggregate substantial interest” of at least 40% It does not include an Australian citizen, irrespective of where they live. 5. An individual is “ordinarily resident in Australia” if they have been in Australia for 200 or more days in the 12 months immediately before entering the transaction and are not subject to any limitation on the time they may live here 6. Residential land means one of the following: a) A parcel of land on which there are one or more dwellings, or a parcel of land on which there is a building under construction that, when completed, will constitute one or more dwellings