Revenue NSW announced this week that the duty and land tax surcharges imposed on foreign owners of land in NSW is inconsistent with the international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany and South Africa.
Effective immediately, individuals who are citizens of these countries and who hold residential related property in NSW in their own capacity will no longer be required to pay the 8% surcharge purchaser duty or the 4% surcharge land tax. This is because the international tax treaties with these countries contain a non-discrimination clause, which provides that a citizen of another country that is party to the treaty shall not be subjected to any tax which is more burdensome than that imposed on an Australian resident. The clause applies to ‘taxes of every kind and description’ imposed by Australia and therefore includes taxes imposed by the states.
What if the property is held by a company or trust?
Both individuals and non-individuals, namely trusts, corporations and partnerships are covered by international tax treaties. Revenue NSW has indicated that companies and trusts may also be affected by this change if they are affiliated with the specified countries. We are awaiting further announcements from Revenue NSW regarding the status of company and trust owners of residential land in NSW and the eligibility rules that will be applied to property owners that are not natural persons.
Can I get a refund?
Revenue NSW has announced that refunds will be available for purchasers/transferees and land owners from the listed countries who paid the surcharge on or after 1 July 2021. Although Revenue NSW has stated it will actively identify customers and transactions that may be eligible for a refund, they have not yet issued any guidance as to how they will determine who is eligible. Please speak to your Pitcher Partners contact if you have purchased property in NSW, have paid surcharge purchaser duty and/or surcharge land tax in respect of that property and believe you may be eligible for a refund.
What if I have paid a foreign surcharge in other states?
The Victorian State Revenue Office has released a short statement confirming that it is considering the issue, but the other states that have these surcharges have remained silent to date. Our initial view is that this issue extends across all of the states that have a foreign person surcharge regime and taxpayers who have paid a duty or land tax surcharge in another state may also be entitled to a refund.
What if I am not a citizen of one of the listed countries?
It is not yet clear why Revenue NSW has limited its announcement to the four countries referred to above. The Federal Government has entered into treaties with other countries which include a broad non-discrimination clause for tax purposes. We anticipate that as more tax treaties are reviewed, individuals and entities affiliated with other countries may also be excluded from the surcharges and entitled to refunds for past payments.
What are the next steps?
Pitcher Partners will continue to engage with the relevant revenue authorities in each jurisdiction to seek further clarity in relation to the imposition of duty and land tax surcharges on foreign persons and the eligibility requirements for refunds. In the meantime, we recommend our clients contact their Pitcher Partners representative to review their existing land holdings and determine what action should be taken as a result of this announcement.