Foreign Owner Surcharge

On 1 January 2018 the foreign ownership surcharge will take effect in South Australia. This is very important for any foreign people or entities looking to purchase residential land in South Australia. The surcharge is an additional fee that foreign purchasers must pay to Revenue SA in addition to the stamp duty they would ordinarily pay on the land.

The surcharge is calculated at 7% of the purchase price of the land which is then added to the stamp duty. This can have the effect of causing the payment to Revenue SA to be significantly larger than for a domestic purchaser. Where a stamp duty exemption applies to the purchase then the surcharge will also not be applied.

A refund of the surcharge is possible where the foreign person or entity ceases to be a foreign person within 12 months of the purchase. An important point to note is that the surcharge can be retrospectively applied should the purchaser become a foreign person or entity within 3 years of the purchase.

A person will be considered to be a foreign person for Revenue SA purposes if they are not an Australian citizen or the holder of an Australian permanent visa.  A company will be considered foreign where it was incorporated in a jurisdiction outside of Australia or where a foreign person holds 50% or more of the company’s shares. A discretionary trust holding the property will be considered to be a foreign entity where any trustee or appointor is a foreign person. Discretionary trusts can also be considered foreign in other circumstances. Please contact your legal advisor for further information to determine whether your discretionary trust would be considered a foreign entity.   

The practical effect of the surcharge on the conveyancing sector is that for instruments that will be entered into after 1 January 2018 solicitors and conveyancers working in this area will be required to confirm the citizenship and visa status of any purchaser who presents a foreign passport for verification of identity purposes. Determining a purchaser’s liability for the surcharge requires a higher level of citizenship and/or visa detail than an ordinary verification of identity.

If you have a foreign passport and are purchasing residential property in South Australia you will be required to provide further details of your citizenship status to your representative in order for them to determine your liability to pay the surcharge.

 

Tim von Einem

18 December 2017