State and territory stamp duty and land tax changes impact property transactions

By Craig Whatman - June 19, 2018

There have been a series of recent changes in the state taxes sphere within the last month or so, following various State and Territory government budgets and new bills to amend existing stamp duty and land tax legislation. We highlight below the key changes that will impact property acquisitions and holdings, and how these changes might affect you.

Queensland

From 1 July 2018, Queensland’s Additional Foreign Acquirer Duty (AFAD) will increase from 3% to 7%, which will more than double the stamp duty cost for acquisitions of interests in residential land by foreign persons.  

This change brings Queensland into line with Victoria, South Australia and New South Wales, all of which currently levy their foreign purchaser duty surcharges at 7% or 8%, and Western Australia, which has announced an increase in its rate to 7% from 1 January 2019.

The Queensland Government has also announced that from the 2018/19 financial year onwards, resident individuals, companies, trustees and absentee owners that hold land with an aggregate taxable value exceeding $10 million will pay an additional 0.5% in land tax per annum.

Western Australia

In its 2017/18 budget, the Western Australian Government had announced the introduction of a foreign purchaser surcharge at a rate of 4% commencing on 1 January 2019. In the 2018/19 budget, the rate of the surcharge has been increased to 7%.  This will lead to a significant increase in the stamp duty cost in Western Australia for those who will be caught by the relevant provisions.

On a more positive note, the Western Australian Government has announced that it will extend the primary production business land tax exemption to include primary producers who rear farm animals owned by secondary producers for the purpose of processing them or their produce for sale, effective from the 2018/19 assessment year. Further, the Government will introduce legislation enabling the exemption to apply retrospectively. This provides an opportunity for qualifying primary producers to obtain a refund in relation to prior land tax payments.

The Government also intends to make changes to the duties legislation in Western Australia to allow transfers of farms to family members without incurring significant transfer duty costs. We expect that this will operate in a similar manner to the family farm exemption currently available in Victoria.

Tasmania

The Tasmanian Government has announced the introduction of a Foreign Investor Duty Surcharge at a rate of 3%, to be imposed on all purchases of residential property by foreign residents. The rate of the surcharge will be an additional 0.5% for purchases of primary production land by foreign residents.

The Tasmanian Government will also introduce a three year land tax exemption for all newly built housing made available for long-term rental, and a one year land tax exemption for short-stay accommodation properties made available for long-term rental accommodation within the Greater Hobart Area.

Australian Capital Territory

As part of the ACT Government’s tax reform program, there are plans to reduce stamp duty for commercial transactions. From 1 July 2018, there will be no stamp duty for commercial property purchases worth $1.5m or less.

In addition, from 1 July 2019, eligible first home buyers will pay no stamp duty, whether they are buying an established property or a newly built home.

However, foreign owners of land in the ACT will pay an additional annual land tax surcharge of 0.75% on their residential properties from 1 July 2018.

Further, from 1 July 2018, land tax will apply to all residential dwellings in the ACT that are not an owner’s principal place of residence or are not otherwise exempt.

Northern Territory

The Northern Territory budget for 2018/19 includes various tax and revenue-related measures. One of these measures is the introduction of a vacant property levy commencing on 1 July 2019 for vacant commercial properties in the Darwin Central Business District, at a rate of 1% of the unimproved capital value for buildings which are 50% or more vacant, and 2% for undeveloped vacant properties.

Another measure is the removal of the stamp duty exemption on the transfer of petroleum and pipeline interests.

Victoria

The State Taxation Acts Amendment Bill 2018 received Royal Assent on 13 June 2018.

As discussed in further detail in our previous bulletin, the changes implemented by this Bill will now impact property developers and investors.

Recommendation

With the numerous changes across most States and all Territories in Australia, it will continue to be as important as ever to seek professional advice prior to signing any agreement for the acquisition of real estate and other dutiable assets in Australia, to minimise any potentially adverse stamp duty and land tax consequences, and to maximise any available opportunities for stamp duty and land tax savings.

With all States having now introduced their own foreign purchaser additional duty or surcharge regimes, each with differing manners of application, it is even more important to properly consider the potential application of the surcharges which could significantly increase transaction and property holding costs.

If you have any queries in respect of these changes or any other stamp duty or land tax issues, please contact your Pitcher Partners expert to discuss.


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