Recently, the NSW government has announced that the surcharge purchaser duty and land tax surcharge will be raised again to foreign person investing in residential real estate from 1 July 2017. The Surcharge Purchaser Duty will be doubled from 4% to 8% and the Land Tax Surcharge will be increased from 0.75% to 2%. NSW government also stated that the raised revenue will be used to help the first home buyer in Australia.
Firstly, let’s take a look at the difference of the stamp duty, surcharge purchaser duty, land tax and land tax surcharge prior and after the change.
| Current rate | Future rate | |
| Stamp Duty*+ Surcharge Purchaser Duty | ≈5%+4%=9% | ≈5%+8%=13% |
| Land Tax*+ Land Tax Surcharge | 1.6%+0.75%=2.35% | 1.6%+2%=3.6% |
* the stamp duty is about 5% when the transaction price is under 3million. However, when the transaction price is over 3 million, the premium duty rate will be 7% for the over portion. The overall stamp duty and surcharge purchaser duty will be as high as 15% for foreign person. Likewise, when the land value is over 3.357 million dollars, the rate will be 2% for the over portion. At this instance, the land tax and land tax surcharge rate will be 4% for foreign person.
The above shows the difference prior and after the change. Now let’s see what’s the difference between the local ordinary resident and foreign person in terms of the stamp duty and land tax payment after the change.
Assume the residential real estate is 2 million dollars, the land value is 1 million dollars and not qualify for the land tax premium threshold.
| Stamp Duty | Surcharge Purchaser Duty | Land Tax（first year） | Land Tax Surcharge（first year） | Payment | |
| Ordinary resident | $95,490 | 0 | $16,100 | 0 | $111,590 |
| Foreign person | $95,490 | $160,000 | $16,100 | $20,000 | $291,590 |
| Discrepancy | $180,000 |
As you can see, the stamp duty, surcharge purchaser duty, land tax and land tax surcharge payment will be almost tripled paid by foreign person compared to the local ordinary resident. The difference will be further increased along the future years’ land tax and land tax surcharge.
Here, we have to address that Australia permanent resident, New Zealand citizen, Australia setup companies, most family trust, etc can be treated as foreign person for the surcharge purpose. In terms of the definition of foreign person, please refer to our earlier article Land Tax Surcharge.
Need Help?
If you are unsure whether you will be treated as a foreign person, or whether the higher surcharge rates affect a property you plan to buy, Pitt Martin Group can help you review and document your circumstances, weigh up stamp duty, land tax and surcharges, and prepare for the rules that will apply.
As Sydney tax accountants, we assist investors with duty planning, land tax reviews and practical surcharge advice.
Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
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