This article serves as a timely reminder for foreign persons purchasing residential-related property in NSW as Revenue NSW seem to be doing an audit of property transactions for outstanding liabilities for surcharge purchaser duty.
It is important to note that while buying a residential property, there is a distinction between a “permanent resident” and “ordinarily resident”. You will be regarded as a foreign person if you have not lived in Australia for at least 200 days in the 365 days prior to the date of the contract for purchase of the property, even if your visa grants you a permanent resident status.
What is surcharge purchaser duty?
If you acquire an interest in land in NSW, you are usually required to pay an amount of tax on the purchase known as ‘transfer duty’ (formerly known as stamp duty).
If you are considered a ‘foreign person’ for the purposes of the Duties Act 1997 (NSW) (“Duties Act”), you are also required to pay surcharge duty on the dutiable value of the property you are purchasing (known as surcharge purchaser duty). This is in addition to the amount of transfer duty calculated on the acquisition. The rate of duty charged will depend on when the Contract was entered into, but is currently charged at 8%.
Foreign person
You’re generally considered a foreign person, unless:
- you’re an Australian citizen
- you’ve lived in Australia for more than 200 days in the 12 months before the purchase date
- you’re a New Zealand Citizen, who holds a subclass 444 visa
- a permanent resident of Australia.
Post-settlement audit by Revenue NSW
At some point in the future, the transaction may be audited by Revenue NSW, who cross-check the information in the Form against various other state and federal government databases. In particular, the information will be checked against the Department of Home Affairs.
If Revenue NSW identify anything that leads them to believe you might be liable for surcharge purchaser duty which has not been paid, they will commence an investigation under Part 9 of the Taxation Administration Act 1996 (NSW). If it is determined that you are liable for surcharge purchaser duty, Revenue NSW may issue a Notice of Assessment for payment of the surcharge duty, plus interest and possible penalty tax. You will be required to pay this extra amount, though Revenue NSW do have discretion to offer payment plans, stop interest accruing or reduce the amount of interest payable if you respond quickly to their notices.
In order to prove that you are ordinarily resident in Australia, you have to provide movement records from the Department of Home Affairs for the 12 month period before the contract date. The movement records can be requested from the Department by submitting a Form 1359. This document, along with your passport, visa grant, and signed and completed Purchaser Declaration Form have to be submitted to Revenue NSW upon its request.
