From 1st January 2017, if you or your family and associates are a foreign person, your NSW residential land might be subject to 0.75% land tax surcharge charged by Office of State Revenue. For example, if your land value is $1 million, the surcharge will be $7,500. This is on top of the land tax if applicable which is charged $100 plus 1.6% over the threshold $549,000 and up to the premium threshold $ 3,357,000 or $45,028 plus 2% over the premium threshold. Unlike land tax, land tax surcharge is applicable even the land related dwelling is used for main residence.
A foreign person could be an individual, company, trust , foreign government, foreign government investor and partners in limited partnerships. For individual, if you are not an Australian citizen and stayed in Australia for the year less than 200 days or your visa subject to any limitation to stay in Australia, your land could be caught up with land tax surcharge. Be careful here, even you are a permanent residence in Australia and you spend less than 200 days in Australia, your property might still be subject to land tax surcharge.
If a company own the residential land and you as a foreign person together with any one or more associates hold at least 20% interests in the company or you as foreign persons together with any one or more associates hold an aggregate of at least 40% interests in the company, the company will be treated as foreign person.
If a trust own the residential land, the surcharge will be different depends on whether it is fixed trust or special trust. For fixed trust, land tax surcharge will be liable to the beneficiary who are foreign person at their proportion of the land value. For special trust including Family Trust, if any of one or more potential beneficiaries are foreign persons, the trustee is liable to the land tax surcharge on the whole value of the land held by the trust. This is mostly the case for the Family Trust whose beneficiary has foreign family member or relatives since they are the default beneficiaries in most Family Trust. To avoid the land tax surcharge because of this, you can contact Pitt Martin Accountants & Tax Advisers to amend your trust deed and you will have to make this amendment before 31 Dec 2016.
Pitt Martin Accountants & Tax Advisers is located at Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.
Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.
Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.